UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

☒      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the period ended September 30, 2015

 

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to

 

Commission file number: 001-36482

 

GARNERO GROUP ACQUISITION COMPANY

(Exact Name of Registrant as Specified in Its Charter)

 

Cayman Islands		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

Av. Brig. Faria Lima

1485-19 Andar

Brasilinvest Plaza CEP 01452-002

Sao Paulo, Brazil

(Address of principal executive offices)

 

(55) 1130947970

(Issuer’s telephone number)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and  (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ('232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒  No ☐

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

 

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
(Do not check if smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☒  No ☐

 

As of November 12, 2015, 18,602,813 ordinary shares, par value $0.0001 per share were issued and outstanding. 

 

 

 

GARNERO GROUP ACQUISITION COMPANY

 

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2015

 

TABLE OF CONTENTS

 

	Page
Part I. Financial Information
Item 1. Financial Statements	1
Condensed Balance Sheets	1
Condensed Statements of Operations	2
Condensed Statements of Cash Flows	3
Notes to Condensed Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk	17
Item 4. Controls and Procedures	17
Part II. Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 6. Exhibits	19
Signatures	20

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Garnero Group Acquisition Company

Condensed Balance Sheets

 

		As of
		September 30, 2015				June 30, 2015
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	20,283			$	278
Prepaid expenses			39,667				48,667
Total current assets			59,950				48,945
Restricted cash and cash equivalents held in trust			144,621,160				144,551,737
Total assets		$	144,681,110			$	144,600,682
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued expenses		$	144,438			$	93,943
Advances from related party			1,078,750				725,878
Total liabilities			1,223,188				819,821
Commitments
Ordinary shares subject to possible conversion (13,762,388 and 13,809,040 shares at conversion value)			138,457,915				138,780,852
Shareholders’ Equity:
Preferred shares, $.0001 par value; 1,000,000 shares authorized; none issued and outstanding			-				-
Ordinary shares, $.0001 par value; 120,000,000 shares authorized;4,840,425 and 4,793,773 shares issued and outstanding (excluding 13,762,388 and 13,809,040 shares subject to possible conversion) at September 30, 2015 and June 30, 2015			484				479
Additional paid-in capital			6,423,047				6,100,114
Accumulated deficit			(1,423,524	)			(1,100,584	)
Total Shareholders' Equity			5,000,007				5,000,009
Total Liabilities and Shareholders' Equity		$	144,681,110			$	144,600,682

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

Garnero Group Acquisition Company

Condensed Statements of Operations

(Unaudited)

 

		For the Three Months Ended September 30, 2015				For the Three Months Ended September 30, 2014
Formation and operating costs
Legal and professional fees		$	343,819			$	141,217
General and administrative			18,544				75,578
Office expense – related party			30,000				30,270
Loss from operations			(392,363	)			(247,065	)
Interest income			69,423				25,129
Net loss		$	(322,940	)		$	(221,936	)
Weighted average shares outstanding, basic and diluted (1)			4,794,280				3,696,113
Basic and diluted net loss per ordinary share		$	(0.07	)		$	(0.06	)

 

(1)	For the three months ended September 30, 2015 and 2014, weighted average shares outstanding excluded 13,762,388 and 13,895,577 shares subject to possible conversion.

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

Garnero Group Acquisition Company

Condensed Statements of Cash Flows

(Unaudited)

 

		For the Three Months Ended September 30,				For the Three Months Ended September 30,
		2015				2014
Operating Activities
Net loss		$	(322,940	)		$	(221,936	)
Adjustments to reconcile net loss to net cash used in operating activities:
Expenses paid by related party on behalf of the Company			123,072				-
Interest income in restricted cash and cash equivalents held in trust			(69,423	)			(25,129	)
Changes in operating assets and liabilities:
Prepaid expenses			9,000				(131,368	)
Accounts payable and accrued expenses			50,496				(12,656	)
Net Cash Used in Operating Activities			(209,795	)			(391,089	)
Investing Activities
Purchase of restricted cash and cash equivalents held in trust			-				(144,468,775	)
Net Cash Used in Investing Activities			-				(144,468,775	)
Financing Activities
Proceeds from advances from related party			229,800				-
Proceeds from public offering, net of costs			-				145,139,559
Repayments of notes payable to related party			-				(125,000	)
Repayments of advances from related party			-				(87,500	)
Net Cash Provided by Financing Activities			229,800				144,927,059
Net increase in cash and cash equivalents			20,005				67,215
Cash and cash equivalents - beginning			278				160
Cash and  cash equivalents - ending		$	20,283			$	67,375

 

Supplemental disclosure of noncash investing and financing activities:

 

Three Months Ended September 30, 2014

 

$283,114 of deferred offering costs was recorded to additional paid-in capital upon completion of the Company’s public offering.

 

$139,650,549 of proceeds from the Company’s public offering was recorded as ordinary shares subject to possible conversion.

 

The accompanying notes are an integral part of these condensed financial statements.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

Note 1 — Organization and Plan of Business Operations

 

Garnero Group Acquisition Company (the “Company”) was incorporated in the Cayman Islands on February 11, 2014 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a “Business Combination”). The Company’s efforts to identify a prospective target business will not be limited to a particular industry or geographic region of the world although the Company is currently focusing on target businesses located in Latin America or Europe operating in the energy (including renewables) and biotechnology industries or target businesses in such industries operating outside of those geographic locations which the Company believes would benefit from expanding their operations to such locations.

 

All activity through September 30, 2015 relates to the Company’s formation, issuance of ordinary shares to the initial shareholders of the Company (“Initial Shareholders”), the offering described below and identification and due diligence related to a potential target business.

 

The registration statement for the Company’s initial public offering (“Initial Public Offering”) was declared effective on June 25, 2014. The Company consummated the Initial Public Offering of 12,500,000 units on July 1, 2014 at an offering price of $10 per unit, generating gross proceeds of $125,000,000 and net proceeds of $120,375,090 after deducting $4,624,910 of transaction costs, which is discussed in Note 5. Simultaneously with the consummation of the Initial Public Offering, the Company consummated a private placement of 563,750 units (“Private Units”) generating gross proceeds of $5,637,500 to an affiliate of one of the Initial Shareholders and the underwriters which is described in Note 6.

 

On July 1, 2014, the underwriters exercised their full over-allotment option to the extent of 1,875,000 units and on July 7, 2014, the Company consummated the closing of the overallotment option (“Overallotment”). The Initial Public Offering and the Overallotment are collectively referred to as the “Offering.” The 1,875,000 units sold pursuant to the Overallotment were sold at an offering price of $10.00 per Unit, generating gross proceeds of $18,750,000 and net proceeds of $18,140,625 after deducting the underwriter’s discount of $609,375. In a private placement that took place simultaneously with the consummation of the exercise of the Overallotment, the affiliate of one of the Initial Shareholders and the underwriters purchased an additional 70,313 Private Units at $10.00 per unit generating gross proceeds of $703,130.

 

Following the closing of the Overallotment on July 7, 2014, an amount of $144,468,755 (or $10.05 per share sold to the public in the Offering) from the sale of the units in the Offering and the Private Units was placed in a trust account (“Trust Account”) and was invested in United States government treasury bills having a maturity of 180 days or less or in money market funds meeting the applicable conditions of Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended. The $144,468,755 placed into the Trust Account may not be released until the earlier of (i) the consummation of the Company’s initial Business Combination and (ii) the Company’s failure to consummate a Business Combination within the prescribed time. Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company has obtained and will continue to seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The Company’s Chief Executive Officer has agreed that he will be liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered, contracted for or products sold to the Company. However, there can be no assurance that he will be able to satisfy those obligations should they arise. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. In addition, (i) interest income on the funds held in the Trust Account can be released to the Company to pay its income and other tax obligations and (ii) interest income on the funds held in the Trust Account of up to $500,000 after payment of taxes can be released to the Company to pay for its working capital requirements in connection with searching for a Business Combination.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering and Private Units, although substantially all of the net proceeds are intended to be generally applied toward consummating a Business Combination. The Company’s Units are listed on the Nasdaq Capital Market (“NASDAQ”). Pursuant to the NASDAQ listing rules, the Company’s initial Business Combination must be with a target business or businesses whose collective fair market value is at least equal to 80% of the balance in the Trust Account at the time of the execution of a definitive agreement for such Business Combination, although this may entail simultaneous acquisitions of several target businesses. There is no assurance that the Company will be able to effect a Business Combination successfully.

 

The Company, after signing a definitive agreement for the acquisition of a target business (see Note 4), is required to provide shareholders who acquired ordinary shares in the Offering (“Public Shareholders”) with the opportunity to convert their shares (“Public Shares”) for a pro rata share of the Trust Account. However, the Company is not permitted to consummate an initial Business Combination unless it has at least $5,000,001 of net tangible assets upon the close of such Business Combination and a majority of the outstanding ordinary shares voted are voted in favor of the business combination. The Initial Shareholders have agreed that they will vote any shares they then hold in favor of any proposed Business Combination and will waive any conversion rights with respect to such shares.

 

In connection with any proposed Business Combination, the Company will seek shareholder approval of an initial Business Combination at a meeting called for such purpose at which shareholders may seek to convert their shares, regardless of whether they vote for or against the proposed Business Combination. If the Company seeks shareholder approval of an initial Business Combination, any Public Shareholder voting either for or against such proposed Business Combination will be entitled to demand that his ordinary shares be converted into a full pro rata portion of the amount then in the Trust Account (initially $10.05 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company or necessary to pay its taxes). The Rights and Warrants (discussed in Note 5 – Initial Public Offering) sold as part of the Units will not be entitled to vote on the proposed Business Combination and will have no conversion or liquidation rights.

 

Notwithstanding the foregoing, a Public Shareholder, together with any affiliate or other person with whom such Public Shareholder is acting in concert or as a “group” (within the meaning of Section 13 of the Securities Act of 1934, as amended), will be restricted from seeking conversion rights with respect to 30% or more of the shares of ordinary shares sold in the Offering. A “group” will be deemed to exist if Public Shareholders (i) file a Schedule 13D or 13G indicated the presence of a group or (ii) acknowledge to the Company that they are acting, or intend to act, as a group.

 

Pursuant to the Company’s amended and restated memorandum and articles of association, if the Company does not consummate a Business Combination by June 25, 2016, it will trigger the Company’s automatic winding up, dissolution and liquidation. As a result, this has the same effect as if the Company had formally gone through a voluntary liquidation procedure under the Companies Law. Accordingly, no vote would be required from the Company’s shareholders to commence such a voluntary winding up, dissolution and liquidation. If the Company is unable to consummate an initial Business Combination, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company or necessary to pay any of its taxes. Holders of Rights, Warrants and unit purchase options will receive no proceeds in connection with the liquidation with respect to such rights. The Initial Shareholders and the holders of Private Units will not participate in any distribution with respect to their initial shares and Private Units, including the ordinary shares included in the Private Units.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

If the Company is unable to conclude its initial Business Combination and expends all of the net proceeds of the Offering not deposited in the Trust Account, without taking into account any interest earned on the Trust Account, the Company expects that the initial per-share liquidation price of ordinary shares will be $10.05. The proceeds deposited in the Trust Account could, however, become subject to claims of the Company’s creditors that are in preference to the claims of the Company’s shareholders. In addition, if the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of the Company’s ordinary shareholders. Therefore, the actual per-share liquidation price may be less than $10.05.

 

The Company has principally financed its operations from inception using proceeds from the sale of its equity securities to its initial shareholders, proceeds from the Offering and loans from a related party. As of September 30, 2015, the Company had $20,283 in its operating account. Interest earned on the Trust Account balance through September 30, 2015 available to be released to the Company amounted to approximately $152,000. Interest to be earned on the Trust Account balance to be released to the Company to fund working capital requirements from October 1, 2015 through June 25, 2016 is estimated to be approximately $208,000. The Company’s Chief Executive Officer, Mario Garnero, has also committed to provide loans to the Company of up to $1,120,000, of which $1,078,750 was loaned to the Company through September 30, 2015. $725,878 of these loans was evidenced by notes entered into on September 28, 2015. All loans will either be repaid upon the consummation of a Business Combination or, at the option of the holder, up to $500,000 may be converted into additional Private Units at a price of $10.00 per Private Unit. Based on the foregoing, the Company believes it will have sufficient cash to meet its needs through the earlier of consummation of a Business Combination or June 26, 2016, the date the Company’s liquidation will be triggered if a Business Combination is not consummated.

 

Note 2 — Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. GAAP for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending June 30, 2016. For further information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2015.

 

Cash and Cash Equivalents

 

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains cash balances that at times may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.

 

Restricted Cash and Cash Equivalents Held in Trust

 

The amounts held in the Trust Account represent substantially all of the proceeds of the Offering and are classified as restricted assets since such amounts can only be used by the Company in connection with the consummation of a Business Combination. As of September 30, 2015, cash and cash equivalents held in the Trust Account consisted of $144,620,876 in United States Treasury Bills and $284 in cash. At September 30, 2015, there was approximately $152,000 of interest income held in the Trust Account available to be released to the Company.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

Ordinary Shares Subject to Possible Conversion

 

The Company accounts for its ordinary shares subject to possible conversion in accordance with the guidance provided in Accounting Standards Codification (“ASC”) 480 “Distinguishing Liabilities from Equity”. Ordinary shares subject to mandatory conversion (if any) are classified as a liability instrument and measured at fair value. Conditionally convertible ordinary shares (including ordinary shares that feature conversion rights that are either within the control of the holder or subject to conversion upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as stockholders’ equity. The Company’s ordinary shares feature certain conversion rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly at September 30, 2015, the ordinary shares subject to possible conversion are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.

 

Loss per Share

 

Loss per share is computed by dividing net loss by the weighted-average number of ordinary shares outstanding during the period. Ordinary shares subject to possible conversion of 13,762,388 and 13,895,577 shares at September 30, 2015 and 2014 have been excluded from the calculation of basic loss per share since such shares, if converted, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of (i) warrants and rights included in the units sold in the Offering to acquire 9,005,438 Ordinary Shares and (ii) 1,250,000 Ordinary Shares and warrants and rights to acquire 750,000 Ordinary Shares included in the unit purchase option sold to the underwriter, in the calculation of diluted loss per share, since the exercise of the warrants and automatic conversion of the rights are contingent on the occurrence of future events.

 

Use of Estimates

 

The preparation of financial statements 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

Income Taxes

 

The Company accounts for income taxes under ASC Topic 740 “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

 

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company determined that the Cayman Islands is its only major tax jurisdiction. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements for the tax periods ended September 30, 2015 and 2014. Since the Company was incorporated on February 11, 2014, the evaluation was performed for the period from February 11, 2014 through September 30, 2015. The Company believes that its income tax positions would be sustained on audit and does not anticipate any adjustments that would result in material changes to its financial position.

 

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the periods ended September 30, 2015 and 2014. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material impact on the accompanying financial statements.

 

Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date through the date which these financial statements were issued. Based upon the review the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.

 

Note 3 —  Shareholder Commitment

 

On October 10, 2014, November 19, 2014, February 16, 2015, May 15, 2015 and September 29, 2015, the Company’s Chief Executive Officer, Mario Garnero, executed five separate commitment letters to provide loans to the Company of up to an aggregate of $1,120,000, of which $1,078,750 was loaned to the Company through September 30, 2015. $725,878 of these loans were evidenced by notes entered into on September 28, 2015. All loans will either be repaid upon the consummation of a Business Combination or, at the option of the holder, up to $500,000 may be converted into additional Private Units at a price of $10.00 per Private Unit.

 

At June 30, 2014, the Company had a $125,000 principal amount unsecured promissory note to an entity controlled by the Company’s Chief Executive Officer (“Affiliate”). The note was non-interest bearing and payable on the earlier of (i) February 18, 2015, (ii) the consummation of the Offering or (iii) the date on which the Company determined not to proceed with the Offering. The Company repaid this note in July 2014.

 

Additionally, prior to June 30, 2014, the Affiliate advanced the Company $87,500 for payment of certain deferred offering costs. These advances were non-interest bearing and due on demand. The Company repaid these advances in July 2014.

 

Note 4 —  Investment Agreement

 

On August 26, 2015, the Company entered into an Investment Agreement (the “Investment Agreement”) with, Q1 Comercial de Roupas S.A., a Brazilian company (“Colombo”), Alvaro Jabur Maluf Junior and Paulo Jabur Maluf (the “Controlling Persons”) and the persons listed under the caption “Optionholder” on the signature pages in the Investment Agreement (the “Optionholders”).

 

Pursuant to the Investment Agreement, (A) the Controlling Persons will contribute all of the issued and outstanding ordinary shares of Colombo (the “Outstanding Shares”) to the Company (the “Share Contribution”) and will receive in consideration an aggregate of 5,460,000 newly issued ordinary shares of the Company (“GGAC Ordinary Shares”) and (B) the Optionholders will exercise certain options held by them, will contribute the underlying ordinary shares of Colombo to the Company (the “Option Contribution,” and together with the Share Contribution, the “Equity Contributions”), and will receive in consideration an aggregate of 540,000 GGAC Ordinary Shares. The number of GGAC Ordinary Shares to be received by the Controlling Persons and the Optionholders is subject to an EBITDA Adjustment, as described in the Investment Agreement. In addition, at the closing of the transactions contemplated by the Investment Agreement (the “Closing”) and immediately after the completion of the Equity Contributions, the Company will contribute to Colombo, as a capital increase, an aggregate of R$120,000,000 (approximately US$29,200,000 as of September 30, 2015) in cash (the “Capital Contribution,” and together with the Equity Contributions, the “Contributions”), which amount shall be used by Colombo to immediately repay certain indebtedness of Colombo and to release certain liens on the Outstanding Shares.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

In connection with the transactions contemplated by the Investment Agreement, the Company and Colombo will use their commercially reasonable best efforts to consummate, simultaneously with the Closing, a private placement of up to US$100,000,000 of equity securities, or securities exercisable or exchangeable for, or convertible into, equity securities, of the Company (the “Private Placement”), with the assistance of a syndicate of financial institutions that have been identified and agreed to by the Company and Colombo. In addition, the Controlling Persons have committed to use their commercially reasonable best efforts to purchase, directly or indirectly, at least US$30,000,000 of the Company’s Ordinary Shares in the open market. To the extent the Controlling Persons make less than US$30,000,000 in open market purchases, the Controlling Persons, directly or indirectly, will purchase an amount of securities in the Private Placement equal to such deficiency.

 

If the Contributions are consummated, Colombo will become a wholly-owned subsidiary of the Company, the Company will change its name to “Garnero Colombo Inc.” and the former stockholders and management of Colombo will own approximately 25% of the outstanding GGAC Ordinary Shares (assuming no holder of GGAC Ordinary Shares exercises his redemption rights as set forth in the Company’s charter documents and the Controlling Persons make the full US$30 million of open market purchases and/or purchases in the Private Placement).

 

The Contributions are subject to approval by the Company’s shareholders and certain other conditions, as described in the Investment Agreement.

 

The GGAC Ordinary Shares payable to the Controlling Persons and Optionholders are subject to adjustment based on Colombo’s future EBITDA performance (the EBITDA Adjustment”). If Colombo’s EBITDA for the twelve months ending December 31, 2016, as determined in accordance with the Investment Agreement, is less than R$155,000,000 (approximately US$37,800,000 as of September 30, 2015), the Controlling Persons and Optionholders have agreed to surrender to the Company for cancellation 50,000 GGAC Ordinary Shares for each R$1,000,000 (approximately US$244,000 as of September 30, 2015) of such deficiency, up to a maximum of 300,000 GGAC Ordinary Shares and pro-rata for partial amounts. If Colombo’s EBITDA for such period is lower than R$149,000,000 (approximately US$36,300,000 as of September 30, 2015), an additional 300,000 GGAC Ordinary Shares will be surrendered to the Company for cancellation. An aggregate of 600,000 GGAC Ordinary Shares will be held in escrow pending calculation and settlement of the EBITDA Adjustment.

 

Note 5 — Initial Public Offering

 

On July 1, 2014, the Company sold 12,500,000 units (“Units”) at a price of $10 per Unit in the Initial Public Offering. Each unit consists of one share of the Company’s ordinary shares, par value $0.0001, one right (“Right”) and one warrant (“Warrant”). Each Right entitles the holder to receive one-tenth (1/10) of a share of ordinary shares on the consummation of an initial business combination. Each Warrant entitles the holder to purchase one-half of one ordinary share at a price of $11.50 per full share. Each Warrant will become exercisable on the later of the completion of an initial business combination or June 25, 2015, and will expire five years after the completion of an initial business combination. The Company will not issue fractional shares.

 

On July 1, 2014, the underwriters exercised their full over-allotment option to the extent of 1,875,000 units and on July 7, 2014, the Company consummated the closing of the Overallotment. The 1,875,000 units sold pursuant to the Overallotment were sold at an offering price of $10.00 per Unit.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

The Company may redeem the Warrants at a price of $0.01 per Warrant upon 30 days’ notice, only in the event that the last sale price of the ordinary shares is at least $21.00 per share for any 20 trading days within a 30-trading day period (“30-Day Trading Period”) ending on the third day prior to the date on which notice of redemption is given, provided there is a current registration statement in effect with respect to the ordinary shares underlying such Warrants commencing five business days prior to the 30-Day Trading Period and continuing each day thereafter until the date of redemption. If the Company redeems the Warrants as described above, management will have the option to require all holders that wish to exercise Warrants to do so on a “cashless basis.” In accordance with the warrant agreement relating to the Warrants sold and issued in the Offering, the Company is only required to use its best efforts to maintain the effectiveness of the registration statement covering the Warrants. If a registration statement is not effective within 90 days following the consummation of a Business Combination, Warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise Warrants on a cashless basis. In the event that a registration statement is not effective at the time of exercise, the holder of such Warrant shall not be entitled to exercise such Warrant for cash and in no event (whether in the case of a registration statement being effective or otherwise) will the Company be required to net cash settle the Warrant exercise.

 

The Company paid the underwriters in the Offering an underwriting discount of 3.25% ($4,671,875) comprised of $4,062,500 of the $125,000,000 of proceeds from the Initial Public Offering and $609,375 of the $18,750,000 of proceeds from the Overallotment. The Company also issued, for $100, a unit purchase option to purchase up to a total of 1,250,000 units exercisable at $10.00 per unit (or an aggregate exercise price of $12,500,000) commencing on the later of the consummation of a Business Combination and June 25, 2015. The unit purchase option expires June 25, 2019. The units issuable upon exercise of this option are identical to the Units in the Offering. Accordingly, after the Business Combination, the purchase option will be to purchase 1,375,000 ordinary shares (which includes 125,000 ordinary shares to be issued for the rights included in the units) and 1,250,000 Warrants to purchase 625,000 ordinary shares. The Company has agreed to grant to the holders of the unit purchase option, demand and “piggy back” registration rights for periods of five and seven years, respectively, from June 25, 2014, including securities directly and indirectly issuable upon exercise of the unit purchase option.

 

The Company accounted for the fair value of the unit purchase option, inclusive of the receipt of a $100 cash payment, as an expense of the Offering resulting in a charge directly to shareholders’ equity. The Company estimated that the fair value of this unit purchase option was approximately $4,175,000 (or $3.34 per unit) using the Black-Scholes option-pricing model. The fair value of the unit purchase option was estimated as of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.70% and (3) expected life of five years. The unit purchase option may be exercised for cash or on a “cashless” basis, at the holder’s option (except in the case of a forced cashless exercise upon the Company’s redemption of the Warrants, as described above), such that the holder may use the appreciated value of the unit purchase option (the difference between the exercise prices of the unit purchase option and the underlying Warrants and the market price of the Units and underlying ordinary shares) to exercise the unit purchase option without the payment of any cash. The Company will have no obligation to net cash settle the exercise of the unit purchase option or the Warrants underlying the unit purchase option. The holder of the unit purchase option will not be entitled to exercise the unit purchase option or the Warrants underlying the unit purchase option unless a registration statement covering the securities underlying the unit purchase option is effective or an exemption from registration is available. If the holder is unable to exercise the unit purchase option or underlying Warrants, the unit purchase option or Warrants, as applicable, will expire worthless.

 

Note 6 — Private Units

 

Simultaneously with the Initial Public Offering, an affiliate of one of the Initial Shareholders of the Company and the underwriters purchased an aggregate of 563,750 Private Units at $10.00 per Private Unit (for an aggregate purchase price of $5,637,500) from the Company. In a private sale that took place simultaneously with the consummation of the Overallotment, an affiliate of one of the Initial Shareholders of the Company and the underwriters purchased an additional 70,313 Private Units at $10.00 per Private Unit for an aggregate purchase price of $703,130. All of the proceeds received from these purchases were placed in the Trust Account.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

The Private Units are identical to the Units sold in the Offering except the Warrants included in the Private Units will be non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees. Additionally, the holders of the Private Units have agreed (A) to vote the shares underlying their Private Units in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, an amendment to the Company’s amended and restated memorandum and articles of association with respect to the Company’s pre-Business Combination activities prior to the consummation of such a Business Combination, (C) not to convert any shares underlying the Private Units into the right to receive cash from the Trust Account in connection with a shareholder vote to approve an initial Business Combination or a vote to amend the provisions of the Company’s amended and restated memorandum and articles of association relating to shareholders’ rights or pre-Business Combination activity and (D) that the shares underlying the Private Units shall not participate in any liquidating distribution upon winding up if a Business Combination is not consummated. The purchasers have also agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to the same permitted transferees as the insider shares and provided the transferees agree to the same terms and restrictions as the permitted transferees of the insider shares must agree to, each as described above) until the completion of an initial Business Combination.

 

Note 7 — Commitments and Contingencies

 

Business Combination Consulting

 

The Company has engaged the representative of the underwriters (“Representative”) to assist the Company with its initial Business Combination. Pursuant to this arrangement, the Company anticipates that the Representative will assist the Company in holding meetings with shareholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities, assist the Company in obtaining shareholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay the Representative a cash fee of $4,600,000 for such services upon the consummation of its initial Business Combination (exclusive of any applicable finders’ fees which might become payable).

 

Registration Rights

 

The Initial Shareholders and the holders of the Private Units (or underlying securities) are entitled to registration rights with respect to their Initial Shares and Private Units (or underlying securities) pursuant to agreements signed on June 25, 2014. The holders of the majority of the Initial Shares are entitled to demand that the Company register these shares at any time commencing three months prior to the first anniversary of the consummation of a Business Combination. The holders of the Private Units (or underlying securities) are entitled to demand that the Company register these securities at any time after the Company consummates a Business Combination. In addition, the Initial Shareholders and holders of the Private Units (or underlying securities) have certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a Business Combination.

 

Office Space

 

The Company presently occupies office space provided by the Affiliate. Such Affiliate has agreed that, until the Company consummates a Business Combination, it will make such office space, as well as certain office and secretarial services, available to the Company, as may be required by the Company from time to time. The Company has agreed to pay such Affiliate $10,000 per month for such services commencing on July 1, 2014. During each of the three month periods ended September 30, 2015 and 2014, the Company incurred approximately $30,000 for such rent and services, which is reflected in the Statement of Operations as Office expense – related party.

 

 

Garnero Group Acquisition Company

Notes to Condensed Financial Statements

(Unaudited)

 

Note 8 — Shareholders’ Equity

 

Preferred Shares

 

The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors.

 

As of September 30, 2015, there are no preferred shares issued or outstanding.

 

Ordinary Shares

 

The Company is authorized to issue 120,000,000 ordinary shares with a par value of $0.0001 per share.

 

 

Item 2. Management’s Discussion and Analysis.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q 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 (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 other Securities and Exchange Commission (“SEC”) filings.  References to “we”, “us”, “our” or the “Company” are to Garnero Group Acquisition Company, except where the context requires otherwise.  The following discussion should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this report.

 

Overview

 

We are a blank check company in the development stage, formed on February 11, 2014 to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more businesses or entities. Since our initial public offering, our activity has been limited to the evaluation of business combination candidates and negotiating, structuring and pursuing the consummation of the business combination with Q1 Comercial de Roupas S.A., a Brazilian company (“Colombo”), and we will not be generating any operating revenues until the closing and completion of our business combination with Colombo or another target business.

 

We presently have no revenue, have had losses since inception from incurring formation costs and have no other operations other than the active solicitation of a target business with which to complete a business combination. We have relied upon the sale of our securities and loans from our officers and directors to fund our operations.

 

On July 1, 2014, we closed our initial public offering of 12,500,000 units with each unit consisting of one Ordinary Share, one Right and one Warrant. Simultaneous with the consummation of the initial public offering, we consummated the private placement of 563,750 Private Placement Units at a price of $10.00 per Private Placement Unit, generating total proceeds of $5,637,500. Of the Private Placement Units, 501,250 were purchased by an affiliate of Mario Garnero, our Chief Executive officer, and 62,500 were purchased by EarlyBirdCapital, Inc., the representative of the underwriters in the initial public offering.

 

On July 7, 2014, we consummated the closing of an additional 1,875,000 units which were subject to the over-allotment option. The units from the initial public offering (including the over-allotment option) were sold at an offering price of $10.00 per unit, generating total gross proceeds of $143,750,000. In a private sale that took place simultaneously with the consummation of the exercise of the over-allotment option, the same affiliate of Mario Garnero and EarlyBirdCapital, Inc. purchased an additional 70,313 Private Placement Units at $10.00 per unit for $703,130.

 

After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the offering (including the over-allotment option) and private placements were $145,144,227, of which $144,468,755 was deposited into the trust account and the remaining proceeds of $675,472 were deposited in our operating account. Approximately $275,000 of this amount was used to repay loans and advances from a related party and pay accounts payable, leaving approximately $400,000 available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses.

 

Our management has broad discretion with respect to the specific application of the net proceeds of the offering and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination successfully.

 

 

On October 30, 2014, we entered into a Share Purchase Agreement (the “SPA”) with WISeKey SA, a Swiss company (“WISeKey”), WISeTrust SA, a Swiss company (“WISeTrust”), and certain shareholders and option holders of WISeKey. Simultaneously with the execution of the SPA, we entered into an Asset Purchase Agreement (the “APA”) with WISeKey and WISeTrust. On February 26, 2015, the parties mutually agreed to terminate the SPA and the APA. We then began the process of searching for an alternative business combination to consummate.

 

On August 26, 2015, we entered into an Investment Agreement with Colombo, the Controlling Persons and the Optionholders. Pursuant to the Investment Agreement, (A) the Controlling Persons will make the Share Contribution and will receive in consideration an aggregate of 5,460,000 newly issued Ordinary Shares and (B) the Optionholders will make the Option Contribution and will receive in consideration an aggregate of 540,000 newly issued Ordinary Shares. The number of Ordinary Shares to be received by the Controlling Persons and the Optionholders is subject to the EBITDA Adjustment as described below. In addition, at the Closing and immediately after the completion of the Equity Contributions, we will make the Capital Contribution to Colombo of an aggregate of R$120,000,000 (approximately US$29,200,000 as of September 30, 2015) in cash, which amount shall be used by Colombo to immediately repay certain indebtedness of Colombo and to release certain liens on the Outstanding Shares.

 

A complete description of the terms related to the transaction with Colombo are set forth in our Current Report on Form 8-K/A dated August 28, 2015 and filed with the Securities and Exchange Commission on such date. Readers are urged to read such Current Report on Form 8-K/A for more information on the transaction.

 

Critical Accounting Policy

 

Ordinary Shares Subject to Possible Conversion

 

The Company accounts for its ordinary shares subject to possible conversion in accordance with the guidance provided in ASC 480 “Distinguishing Liabilities from Equity”. Ordinary shares subject to mandatory conversion (if any) are classified as a liability instrument and measured at fair value. Conditionally convertible ordinary shares (including ordinary shares that feature conversion rights that are either within the control of the holder or subject to conversion upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as stockholders’ equity. The Company’s ordinary shares feature certain conversion rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly at September 30, 2015, the ordinary shares subject to possible conversion are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.

 

Results of Operations

 

We have neither engaged in any business operations nor generated any operating revenues to date. Our entire activity from inception up to the closing of our Offering on July 1, 2014 was in preparation for that event. Subsequent to the Offering, our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial business combination. We have, and expect to continue to generate small amounts of non-operating income in the form of interest income on cash and cash equivalents. Interest income is not expected to be significant in view of current low interest rates on risk-free investments (treasury securities). We expect 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.

 

For the three months ended September 30, 2015, we had net losses of $322,940, which consisted of operating expenses of $392,363 offset by interest income from our trust account of $69,423.

 

For the three months ended September 30, 2014, we had net losses of $221,936, which consisted of operating expenses of $247,065 offset by interest income from our Trust Account of $25,129.

 

Our operating expenses for both periods principally consisted of expenses related to our public filings and listing and identification and due diligence related to a potential target business, and to a lesser extent, general operating expenses including rent, insurance and office expenses. Until we consummate a business combination, we will have no operating revenues.

 

 

Liquidity and Capital Resources

 

As of September 30, 2015, we had cash of $20,283.

 

Through September 30, 2015, our liquidity needs were satisfied through receipt of $25,000 from the sale of the insider shares, approximately $30,000 of interest earned on the Trust Account which was transferred to our operating account, loans and advances from Brasilinvest International LLC, an affiliate of our chief executive officer, and other entities controlled by our chief executive officer in an aggregate amount of $1,303,721 (of which $224,971 was repaid with proceeds of the Offering), and the Offering, which resulted in approximately $400,000 of net proceeds held outside of the trust account (after the payment of all costs related to the offering and the repayment of the loan from Brasilinvest International LLC).

 

We intend to use substantially all of the net proceeds of the Offering, including the funds held in the trust account, to acquire Colombo or another target business or businesses and to pay our expenses relating thereto, including a fee payable to EarlyBirdCapital in an amount equal to $4,600,000 (exclusive of any applicable finders’ fees which might become payable) upon consummation of our initial business combination for assisting us in connection therewith. If the business combination with Colombo is completed, R$120,000,000 (approximately US$29,200,000 as of September 30, 2015) of such funds may be used to pay the Capital Contribution, to pay the holders of the public shares who exercise conversion rights and to pay expenses incurred in connection with the business combination with Colombo. To the extent that the proceeds from the trust account are not used to pay the consideration to effect the business combination with Colombo or another target business or to pay public shareholders or transaction costs, the remaining proceeds held in the trust account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our initial business combination if the funds available to us outside of the trust account were insufficient to cover such expenses.

 

Interest earned on the Trust Account balance through September 30, 2015 available to be released to the Company amounted to approximately $152,000. Interest to be earned on the Trust Account balance to be released to the Company to fund working capital requirements from October 1, 2015 through June 25, 2016 is estimated to be approximately $208,000.

 

Prior to the consummation of our initial business combination, we will have available to us in addition to the $20,283 in our operating account at September 30, 2015, the interest earned on the Trust Account balance (net of income, and other tax obligations) through September 30, 2015 available to be released to the Company of approximately $152,000, and interest expected to be earned in the Trust Account balance (net of income, and other tax obligations) that may be released to us to fund our working capital requirements from October 1, 2015 through June 25, 2016, which we anticipate will be approximately $208,000. Our Chief Executive Officer, Mario Garnero, has also committed to provide loans to us of up to $1,120,000, of which he has already loaned us $1,078,750 through September 30, 2015. $725,878 of these loans were evidenced by notes entered into on September 28, 2015. All loans will either be repaid upon the consummation of a business combination or, at the option of the holder, up to $500,000 may be converted into additional Private Placement Units at a price of $10.00 per Private Placement Unit. Based on the foregoing, we believe we will have sufficient cash to meet our needs through the earlier of consummation of a business combination or June 26, 2016, the date the Company’s liquidation will be triggered if a Business Combination is not consummated. Over this time period, we will be using such funds to pay existing accounts payable and to consummate the business combination with Colombo. If the business combination with Colombo is not completed, we also will be using these funds for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating an alternate business combination.

 

 

We anticipate that our uses of cash through June 25, 2016 will be approximately:

 

●

$144,000 to pay accounts payable existing at September 30, 2015

 

●

$80,000 of expenses for the search for target businesses and for the legal, accounting and other third-party expenses attendant to the due diligence investigations, structuring and negotiating of a business combination;

 

●

$10,000 of expenses for the due diligence and investigation of a target business by our officers, directors and initial shareholders;

 

●

$60,000 of expenses in legal and accounting fees relating to our SEC reporting obligations;

 

●

$90,000 for the administrative fee payable to Brasilinvest Group ($10,000 per month); and

 

●

$10,000 for general working capital that will be used for miscellaneous expenses, including director and officer liability insurance premiums.

 

If our estimates of the costs of undertaking in-depth due diligence and negotiating our initial business combination is less than the actual amount necessary to do so, or the amount of interest available to us from the trust account is less than we expect as a result of the current interest rate environment, 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 consummate our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

 

Contractual Obligations

 

		Payments due by period
		Total				Within 1 year				1+ years
Fee payable to Brasilinvest International LLC for office space and general and administrative services		$	90,000			$	90,000			$	-
TOTAL		$	90,000			$	90,000			$	-

 

 

Off-Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of September 30, 2015.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As of September 30, 2015, we were not subject to any market or interest rate risk.  Following the consummation of the our initial public offering, the net proceeds of our initial public offering, including amounts in the Trust Account, may be invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2015, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the three months ended September 30, 2015 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

 

In February 2014, the Company issued an aggregate of 3,593,750 ordinary shares to Mario Garnero for an aggregate purchase price of $25,000, or approximately $0.01 per share, in connection with our organization pursuant to the exemption from registration contained in Section 4(2) of the Securities Act.

 

On July 1, 2014, we consummated our initial public offering of 12,500,000 units (“Units”). Each unit consisted of one ordinary share, one warrant to purchase one-half of one ordinary share and one right, each to automatically receive one-tenth of one ordinary share upon consummation of a business combination. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $125,000,000. EarlyBirdCapital, Inc. acted as the lead managing underwriter of the initial public offering. The securities in the offering were registered under the Securities Act of 1933 on a registration statement on Form S-1 (No. 333-196117). The Securities and Exchange Commission declared the registration statement effective on June 25, 2014.

 

Simultaneous with the consummation of the initial public offering, we consummated the private placement (“Private Placement”) of 563,750 private Units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit, generating total proceeds of $5,637,500. Of the Private Placement Units, 501,250 were purchased by an affiliate of Mario Garnero, the Company’s Chief Executive officer, and 62,500 were purchased by EarlyBirdCapital, Inc. These issuances were made pursuant to the exemption from registration contained in Section 4(2) of the Securities Act. The Private Placement Units are identical to the Units sold in the initial public offering. However, the holders of the Private Placement Units have agreed (A) to vote their private shares in favor of any proposed business combination, (B) not to propose, or vote in favor of, an amendment to the Company’s amended and restated certificate of incorporation with respect to the Company’s pre-business combination activities prior to the consummation of such a business combination, (C) not to convert any private shares into the right to receive cash from the trust account in connection with a stockholder vote to approve our proposed initial business combination or a vote to amend the provisions of our amended and restated certificate of incorporation relating to stockholders’ rights or pre-business combination activity and (D) that such private shares shall not participate in any liquidating distribution upon winding up if a business combination is not consummated. Additionally, the purchasers have agreed not to transfer, assign or sell any of the Private Placement Units (except to certain permitted transferees) until the completion of our initial business combination.

 

Also on July 1, 2014, EarlyBirdCapital, Inc. notified us that it exercised its over-allotment option to the full extent to purchase an additional 1,875,000 Units. On July 7, 2014, we consummated the closing of the over-allotment option. The units sold pursuant to the over-allotment option were sold at an offering price of $10.00 per Unit, generating gross proceeds of $18,750,000. In a private sale that took place simultaneously with the consummation of the exercise of the over-allotment option, the same affiliate of Mario Garnero and EarlyBirdCapital, Inc. purchased an additional 70,313 units at $10.00 per unit. Of the gross proceeds of the units sold pursuant to the over-allotment option and the additional 70,313 private units, $18,843,755 was placed in trust, for a total of $144,468,755 placed in trust, or approximately $10.05 per share sold in the initial public offering. 

 

We paid a total of $4,671,875 in underwriting discounts and commissions and $274,528 for other costs and expenses related to our formation and the offering.

 

For a description of the use of the proceeds generated in our initial public offering, see Part I, Item 2 of this Form 10-Q.

 

 

Item 6.  Exhibits.

 

Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	GARNERO GROUP ACQUISITION COMPANY
	By:	/s/ Mario Garnero
	Mario Garnero
	Chief Executive Officer (Principal executive officer)
	By:	/s/ Javier Martin Riva
	Javier Martin Riva
	Chief Financial Officer (Principal financial and accounting officer)

 

Date:  November 12, 2015

 

 

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