References in this quarterly report on Form 10-Q (the "Quarterly Report") to
"we," "us" or the "Company" refer to Globis Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsors" refer to Up and Up Capital, LLC and Globis SPAC
LLC. The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
consolidated financial statements and the notes thereto contained elsewhere in
this Quarterly Report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements." These
forward-looking statements relate to expectations for future financial
performance, business strategies or expectations for our business, and the
timing and ability for the Company and FAHL to complete the Business
Combination. Forward-looking statements are not historical facts, and involve
known and unknow 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 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 "expect,"
"believe," "anticipate," "intend," "estimate," "seek" and variations and similar
words and 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 section of the
Company's Annual Report on Form 10-K filed with the SEC on February 11, 2022 and
any other filings we make with the SEC. 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 formed under the laws of the State of Delaware on
August 21, 2020, for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses. We intend to effectuate our Business
Combination (as defined below) using cash from the proceeds of our initial
public offering (the "Initial Public Offering") of 11,500,000 units (the
"Units," which included the full exercise by the underwriter of its
over-allotment option in the amount of 1,500,000 Units, at $10.00 per Unit) and
the sale of 4,188,889 warrants (the "Private Warrants") at a price of $0.75 per
Private Warrant and 100,833 units (the "Placement Units" and, together with the
Private Warrants, the "Private Securities"), our capital stock, debt or a
combination of cash, stock and debt. Each Unit consists of one share of common
stock and one Public Warrant. Each whole Public Warrant and each whole Private
Warrant entitles the holder to purchase one share of common stock at an exercise
price of $11.50 per share, subject to adjustment.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to raise capital or to
complete our initial Business Combination will be successful.
Recent Developments
Proposed Business Combination
On December 19, 2021, the Company, entered into a securities purchase agreement
(the "Business Combination Agreement"), by and among the Company, Forafric Agro
Holdings Limited, a Gibraltar private company limited by shares ("FAHL") and
Lighthouse Capital Limited, a Gibraltar private company limited by shares (the
"Seller"). On April 20, 2022, the Company entered into Amendment No. 1 to the
Business Combination Agreement, with FAHL, the Seller and Globis NV Merger
Corp., a Nevada corporation ("Globis Nevada"), which provides for the
consummation of the following series of separate transactions (collectively, the
"Business Combination"): (i) Globis Nevada will change its jurisdiction of
incorporation by transferring by way of a redomiciliation and domesticating as a
Gibraltar private limited company known as "Forafric Global Limited" (the
"Redomiciliation") and, following the Redomiciliation, altering its authorized
and issued share capital and thereafter re-registering as a Gibraltar public
company limited by shares and changing its name to "Forafric Global PLC"
(referred to herein as "New Forafric"); (ii) New Forafric will form a new
wholly-owned subsidiary, Globis NV Merger 2 Corp., a Nevada corporation ("Merger
Sub"); (iii) the Company will merge with and into Merger Sub, with Merger Sub
surviving (the "Merger"); (iv) immediately following the effectiveness of the
Merger, all of the common stock of Merger Sub issued pursuant to the Merger
shall be contributed to New Forafric; and (v) as soon as practicable thereafter
New Forafric will acquire 100% of the equity interests in FAHL from the Seller
and FAHL will become a direct subsidiary of New Forafric.
As a result of the Merger prior to the consummation of the Business Combination
(i) the Company's issued and outstanding shares of common stock will be
exchanged, on a one-for-one basis, into Ordinary Shares, nominal value $0.001
per share of New Forafric (the "Ordinary Shares"); (ii) the Company's issued and
outstanding redeemable warrants that were registered pursuant to the Company's
registration statement on Form S-1 (SEC File No. 333-250939) will automatically
become redeemable warrants to acquire Ordinary Shares at an exercise price of
$11.50 per share; (iii) each issued and outstanding warrant of the Company
issued in a private placement will automatically become warrants to acquire
Ordinary Shares at an exercise price of $11.50 per share on the terms and
subject to the conditions set forth in the applicable warrant agreement (no
other changes will be made to the terms of any issued and outstanding private
placement warrants as a result of the Merger); and (iv) each of the Company's
issued and outstanding Units that has not been previously separated into the
underlying common stock and underlying warrant upon the request of the holder
thereof, will be cancelled and will entitle the holder thereof to one Ordinary
Share and one redeemable warrant to acquire one Ordinary Share at an exercise
price of $11.50 per share.
The total consideration to be paid to the Seller in the Business Combination
will be (i) 15,100,000 Ordinary Shares, subject to reduction to the extent that
the Closing Payment (as defined below) is less than $0, provided that Seller may
be issued up to 1,904,762 additional Ordinary Shares determined based on the
amount of Remaining Cash (as defined in the Business Combination Agreement) at
the Closing; plus (ii) the Closing Payment equal to $20,000,000 minus the
outstanding amount of all Funded Debt (as defined in the Business Combination
Agreement) as of the Closing (other than Permitted Debt); provided that Seller
may receive up to an additional $20,000,000 determined based on the amount of
Remaining Cash at the Closing. The Closing Payment will be funded by remaining
funds in the Trust Account after giving effect to any Buyer Share Redemptions
(as defined in the Business Combination Agreement) and the proceeds of any
potential private placement financing.
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In addition, the Seller is also entitled to receive, up to 2,000,000 Ordinary
Shares (the "Earnout Shares"), subject to New Forafric achieving certain
performance and share price thresholds prior to certain future dates, in each
case as described in the Business Combination Agreement. The Seller will also be
entitled to receive, as additional consideration, 20% of any cash proceeds
received by New Forafric from the exercise of outstanding warrants.
PIPE Subscription Agreement
In connection with the Business Combination, on December 31, 2021, the Company
entered into a subscription agreement (the "PIPE Subscription Agreement") with
an accredited investor (the "PIPE Investor") pursuant to which the PIPE Investor
will purchase ordinary shares of New Forafric in a private placement following
the Redomiciliation and the Merger and prior to the closing of the Business
Combination. Pursuant to the PIPE Subscription Agreement, the PIPE Investor will
purchase, at a purchase price of $10.50 per share, a number of Ordinary Shares
(the "PIPE Shares") that will be equal to the lesser of (i) 4.99% of all issued
and outstanding Ordinary Shares, after taking into account the completion of the
Business Combination and all Ordinary Shares issued pursuant to the FAHL Bonds
(defined below) and other related subscription agreements, if any, and (ii)
1,904,761 Ordinary Shares (the "PIPE Investment"); accordingly, the maximum
aggregate amount to be paid by the PIPE Investor for the PIPE Shares is
approximately $20 million. The purpose of the sale of the PIPE Shares is to
raise additional capital for use in connection with the Business Combination.
The closing of the sale of the PIPE Investment is contingent upon, among other
things, the substantially concurrent consummation of the Business Combination.
Convertible Bonds Offering
In connection with the proposed Business Combination, between December 31, 2021
and January 19, 2022, investors (each, a "Bond Investor") subscribed for
convertible bonds of FAHL in an aggregate principal amount of $12 million in
private offerings, and issued pursuant to a bond subscription deed among FAHL,
the Seller and the Bond Investors. The FAHL Bonds are unsecured obligations of
FAHL and are not transferable without the consent of FAHL. Unless earlier
converted or redeemed in accordance with the terms of the FAHL Bonds, the FAHL
Bonds will mature and be redeemed on June 15, 2026. Interest accrues on the FAHL
Bonds at a rate of 6% per annum and the Bond Investors are entitled to certain
customary information rights. Pursuant to the current terms of the FAHL Bonds,
upon consummation of the Business Combination, the FAHL Bonds will automatically
convert into ordinary shares of New Forafric at a price per share that is a 10%
discount to the PIPE Investment, subject to certain adjustments. The number of
Ordinary Shares will be equal to the quotient that results from dividing the
aggregate principal amount of the respective FAHL Bond by $9.45, subject to
certain adjustments. The Bond Investors include affiliates Up and Up Capital,
LLC and Globis SPAC LLC, the Sponsors of the Company, who have subscribed for an
aggregate principal amount of $9.5 million of the FAHL Bonds, convertible into
approximately one million ordinary shares of New Forafric.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through December 31, 2021 were
organizational activities and those necessary to prepare for the Initial Public
Offering, described below, and to search for a Business Combination and
activities in connection with the proposed acquisition of FAHL. We do not expect
to generate any operating revenues until after the completion of our initial
Business Combination. We generate non-operating income in the form of interest
income on marketable securities held in the Trust Account. We incur expenses as
a result of being a public company (for legal, financial reporting, accounting
and auditing compliance), as well as for due diligence expenses in connection
with searching for, and completing, a Business Combination.
For the three months ended March 31, 2022, we had a net loss of $1,056,171,
which consisted of general and administrative expenses of $1,065,825, offset by
interest earned on marketable securities held in the Trust Account of $9,654.
The increase in general and administrative expenses was a result of an increase
in legal fees incurred in connection with our proposed Business Combination.
For the three months ended March 31, 2021, we had a net loss of $363,959, which
consisted of general and administrative expenses of $366,035, offset by interest
earned on marketable securities held in the Trust Account of $2,076.
Liquidity and Capital Resources
On December 15, 2020, we consummated the Initial Public Offering of 11,500,000
Units, which included the full exercise by the underwriters of their
over-allotment option in the amount of 1,500,000 Units, at a price of $10.00 per
Unit, generating gross proceeds of $115,000,000. Simultaneously with the closing
of the Initial Public Offering, we consummated the sale of 4,188,889 Private
Warrants to the Sponsors at a price of $0.75 per Private Warrant and 100,833
Placement Units to the Sponsors at a price of $10.00 per Placement Units,
generating gross proceeds of $4,150,000.
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Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Securities, a total of $116,150,000 was
placed in the Trust Account. We incurred $6,541,841 in transaction costs,
including $2,300,000 of underwriting fees, $4,025,000 representing 402,500
shares of common stock issued, which the underwriters are entitled to receive
upon the consummation of a Business Combination (the "equity participation
shares") and $216,841 of other offering costs.
For the three months ended March 31, 2022, cash used in operating activities was
$606,598. Net loss of $1,056,171 was impacted by interest earned on marketable
securities held in the Trust Account of $9,654. Changes in operating assets and
liabilities provided $459,227 of cash from operating activities.
For the three months ended March 31, 2021, cash used in operating activities was
$273,968. Net loss of $363,959 was impacted by interest earned on marketable
securities held in the Trust Account of $2,076. Changes in operating assets and
liabilities provided $92,067 of cash from operating activities.
As of March 31, 2022, we had marketable securities held in the Trust Account of
$118,467,492. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust
Account, which interest shall be net of taxes payable, to complete our Business
Combination. We may withdraw interest from the Trust Account to pay taxes and up
to $150,000 of dissolution expenses, if any. To the extent that our share
capital or debt is used, in whole or in part, as consideration to complete a
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.
As of March 31, 2022, we had cash of $210. We intend to use the funds held
outside the Trust Account primarily to 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, structure, negotiate and complete a Business
Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsors or an affiliate of our
Sponsors or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required ("Working Capital Loans"). Such Working Capital
Loans would be evidenced by promissory notes. If we complete a Business
Combination, we may repay the notes out of the proceeds of the Trust Account
released to us. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay the
notes, but no proceeds from our Trust Account would be used for such repayment.
On January 11, 2021, we issued an unsecured promissory note (the "Note") to
Globis SPAC LLC that permits us to borrow from time to time up to $1,000,000
from Globis SPAC LLC or its assignees or successors. On various dates throughout
the year ended December 31, 2021, the Note was amended to allow borrowings of up
to $5,000,000 and in January 2022, the Note was further amended to increase the
principal amount to $7,000,000. The Note is non-interest bearing and payable
upon the consummation of a Business Combination. As of March 31, 2022, the total
amount outstanding under the Working Capital Loans was $4,327,300.
We currently do not believe we will need to raise additional funds in order to
meet the expenditures required for operating our business. However, if our
estimate of the costs of undertaking in-depth due diligence and consummating a
Business Combination are less than the actual amount necessary to do so, we may
have insufficient funds available to operate our business prior to our initial
Business Combination. Moreover, we may need to obtain additional financing
either to complete our Business Combination or because we become obligated to
redeem a significant number of our public shares upon completion of our Business
Combination, in which case we may issue additional securities or incur debt in
connection with such Business Combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of Globis SPAC LLC a monthly fee of $10,000 for office space,
secretarial, and administrative support services provided to the Company. We
began incurring these fees on December 15, 2020 and will continue to incur these
fees monthly until the earlier of the completion of a Business Combination and
the Company's liquidation.
The underwriters are entitled to receive 402,500 equity participation shares
upon the consummation of a Business Combination. The equity participation shares
have been placed in escrow until the consummation of a Business Combination. If
a Business Combination is not consummated, the equity participation shares will
be forfeited by the underwriters. The fair value of the equity participation
shares is estimated to be $4,025,000, based upon the offering price of the Units
of $10.00 per Unit.
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Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the condensed consolidated financial statements, and
income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical
accounting policies:
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and measured at fair value.
Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed consolidated
balance sheets.
We recognize changes in redemption value as they occur and adjust the carrying
value of redeemable common stock to equal the redemption value at the end of
each reporting period. Immediately upon the closing of the Initial Public
Offering, we recognized the accretion from initial book value to redemption
amount value of $3,666,841. Subsequently, we recognized accretion from adjusted
book value to redemption amount value of $2,300,000. The change in the carrying
value of redeemable common stock resulted in charges against additional paid-in
capital and accumulated deficit.
Net Loss Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share". Net loss per share of common stock is computed by dividing
net loss by the weighted average number of shares of common stock outstanding
for the period. Accretion associated with the redeemable shares of common stock
is excluded from earnings per share as the redemption value approximates fair
value.
The calculation of diluted loss per share does not consider the effect of the
warrants issued in connection with the (i) Initial Public Offering, and (ii) the
Private Placement since the exercise of the warrants is contingent upon the
occurrence of future events. The warrants are exercisable to purchase 15,789,722
shares of common stock in the aggregate. As of March 31, 2022 and 2021, we did
not have any other dilutive securities or other agreements that could,
potentially, be exercised or converted into shares of common stock and then
share in the earnings of the Company. As a result, diluted net loss per share of
common stock is the same as basic net loss per share of common stock for the
periods presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed consolidated financial statements.
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