UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ
|
|
Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the quarterly period ended
September 30, 2008
|
|
|
o
|
|
Transition report under Section 13 or 15(d) of the Exchange Act
|
For the transition period from
to
Commission File Number
001-33855
Global Brands Acquisition Corp.
(Exact Name of Issuer as Specified in Its Charter)
|
|
|
Delaware
|
|
26-0482599
|
|
|
|
(State or other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
11 West 42
nd
Street, 21
st
Floor, New York, New York 10036
(Address of Principal Executive Office)
(212) 201-8118
(Issuers Telephone Number, Including Area Code)
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
þ
No
o
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
o
|
|
Accelerated filer
o
|
|
Non-accelerated filer
þ
(Do not check if a smaller reporting company)
|
|
Smaller Reporting Company
o
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes
þ
No
o
As of November 13, 2008, 35,937,500 shares of common stock, par value $.0001 per share, were
issued and outstanding.
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Table of Contents
2
Part I: Financial Information
Item 1 Financial Statements (Unaudited)
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Condensed Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
220,643
|
|
|
$
|
219,001
|
|
Cash held in trust fund
|
|
|
288,464,538
|
|
|
|
287,574,981
|
|
Prepaid expense
|
|
|
52,650
|
|
|
|
97,300
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
288,737,831
|
|
|
|
287,891,282
|
|
Deferred tax asset
|
|
|
|
|
|
|
93,538
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
288,737,831
|
|
|
$
|
287,984,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accrued accounting fees payable
|
|
$
|
14,500
|
|
|
$
|
20,000
|
|
Income tax payable
|
|
|
561,711
|
|
|
|
857,881
|
|
Deferred offering costs
|
|
|
14,375,000
|
|
|
|
14,375,000
|
|
Accrued payable, stockholders
|
|
|
31,980
|
|
|
|
33,816
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
14,983,191
|
|
|
$
|
15,286,697
|
|
|
|
|
|
|
|
|
|
|
Common stock, subject to possible conversion, 8,624,999
shares at conversion value at initial public offering
|
|
|
85,837,490
|
|
|
|
85,837,490
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock; $.0001 par value; 1,000,000 shares
authorized; none issued
|
|
|
|
|
|
|
|
|
Common stock; $.0001 par value; authorized 90,000,000
shares; 35,937,500 (less 8,624,999 shares subject
to possible conversion) shares issued and
outstanding
|
|
|
2,732
|
|
|
|
2,732
|
|
Additional paid-in capital
|
|
|
185,962,851
|
|
|
|
185,962,851
|
|
Earnings accumulated during the development stage
|
|
|
1,951,567
|
|
|
|
895,050
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
187,917,150
|
|
|
|
186,860,633
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
288,737,831
|
|
|
$
|
287,984,820
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed financial statements (unaudited).
3
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Condensed Statements of Operations
(unaudited)
For the Three and Six Months Ended September 30, 2008,
the Period July 3, 2007 (inception) to September 30, 2007,
And the Period July 3, 2007 (inception) to September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
July 3, 2007
|
|
|
For the period
|
|
|
|
|
|
|
July 3, 2007
|
|
|
|
(inception) to
|
|
|
from July 1,
|
|
|
For the period from
|
|
|
(inception) to
|
|
|
|
September 30,
|
|
|
2008 to Sept. 30,
|
|
|
April 1, 2008 to
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
Sept. 30, 2008
|
|
|
2008
|
|
Formation and operating costs
|
|
$
|
300
|
|
|
$
|
76,740
|
|
|
$
|
168,203
|
|
|
$
|
345,012
|
|
Accounting fees
|
|
|
17,500
|
|
|
|
9,724
|
|
|
|
84,224
|
|
|
|
149,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(17,800
|
)
|
|
|
(86,464
|
)
|
|
|
(252,427
|
)
|
|
|
(494,236
|
)
|
Interest income
|
|
|
|
|
|
|
1,130,171
|
|
|
|
2,319,292
|
|
|
|
4,220,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(17,800
|
)
|
|
|
1,043,707
|
|
|
|
2,066,865
|
|
|
|
3,726,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
505,707
|
|
|
|
1,010,348
|
|
|
|
1,774,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(17,800
|
)
|
|
$
|
538,000
|
|
|
$
|
1,056,517
|
|
|
$
|
1,951,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
7,187,500
|
|
|
|
35,937,500
|
|
|
|
35,937,500
|
|
|
|
25,385,302
|
|
Diluted
|
|
|
7,187,500
|
|
|
|
46,338,074
|
|
|
|
46,052,229
|
|
|
|
31,679,517
|
|
Net income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
|
|
|
$
|
.01
|
|
|
$
|
.03
|
|
|
$
|
.08
|
|
Diluted
|
|
$
|
|
|
|
$
|
.01
|
|
|
$
|
.02
|
|
|
$
|
.06
|
|
The accompanying notes are an integral part of these condensed financial statements (unaudited).
4
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Condensed Statement of Stockholders Equity
(unaudited)
For the Period July 3, 2007 (inception) to September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
accumulated
|
|
Total
|
|
|
Common Stock
|
|
paid-in
|
|
during
|
|
stockholders
|
|
|
Shares
|
|
Amount
|
|
capital
|
|
development stage
|
|
equity
|
Common shares issued at inception
|
|
|
7,187,500
|
|
|
$
|
719
|
|
|
$
|
24,281
|
|
|
$
|
|
|
|
$
|
25,000
|
|
Sale of 28,750,000 units, net of underwriters discount and offering
expenses (includes 8,624,999 shares subject to possible conversion)
|
|
|
28,750,000
|
|
|
|
2,875
|
|
|
|
266,775,198
|
|
|
|
|
|
|
|
266,778,073
|
|
Proceeds subject to possible conversion of 8,624,999 shares
|
|
|
|
|
|
|
(862
|
)
|
|
|
(85,836,628
|
)
|
|
|
|
|
|
|
(85,837,490
|
)
|
Proceeds from issuance of founders warrants
|
|
|
|
|
|
|
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
5,000,000
|
|
Net income for the period from July 3, 2007 (inception) to March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
895,050
|
|
|
|
895,050
|
|
|
|
|
Balances, at March 31, 2008
|
|
|
35,937,500
|
|
|
|
2,732
|
|
|
|
185,962,851
|
|
|
|
895,050
|
|
|
|
186,860,633
|
|
Net income for the period from April 1, 2008 to September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,056,517
|
|
|
|
1,056,517
|
|
|
|
|
Balances, at September 30, 2008 (unaudited)
|
|
|
35,937,500
|
|
|
$
|
2,732
|
|
|
$
|
185,962,851
|
|
|
$
|
1,951,567
|
|
|
$
|
187,917,150
|
|
|
|
|
The accompanying notes are an integral part of these condensed financial statements (unaudited).
5
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Condensed Statements of Cash Flows
(unaudited)
For the Six Months Ended September 30, 2008,
for the period from July 3, 2007 (inception) to September 30, 2007
and for the period from July 3, 2007 (inception) to September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
For the period
|
|
|
|
July 3, 2007
|
|
|
For the period from
|
|
|
July 3, 2007
|
|
|
|
(inception) to
|
|
|
April 1, 2008 to
|
|
|
(inception) to
|
|
|
|
September 30, 2007
|
|
|
Sept. 30, 2008
|
|
|
September 30, 2008
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(17,800
|
)
|
|
$
|
1,056,517
|
|
|
$
|
1,951,567
|
|
Adjustment to reconcile net income to net cash
provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
|
|
|
|
44,650
|
|
|
|
(52,650
|
)
|
Deferred tax asset
|
|
|
|
|
|
|
93,538
|
|
|
|
|
|
Accrued expenses
|
|
|
17,800
|
|
|
|
(5,500
|
)
|
|
|
14,500
|
|
Accrued filing fees payable
|
|
|
(83,758
|
)
|
|
|
|
|
|
|
|
|
Accrued payable, stockholders
|
|
|
(12,500
|
)
|
|
|
(1,836
|
)
|
|
|
31,980
|
|
Income tax payable
|
|
|
|
|
|
|
(296,170
|
)
|
|
|
561,711
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
(96,258
|
)
|
|
|
891,199
|
|
|
|
2,507,108
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash held in trust fund
|
|
|
|
|
|
|
(889,557
|
)
|
|
|
(288,464,538
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(889,557
|
)
|
|
|
(288,464,538
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds from initial public offering
|
|
|
|
|
|
|
|
|
|
|
287,500,000
|
|
Proceeds from notes payable, stockholders
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
25,000
|
|
|
|
|
|
|
|
25,000
|
|
Proceeds from issuance of founders warrants
|
|
|
|
|
|
|
|
|
|
|
5,000,000
|
|
Payment of offering costs
|
|
|
|
|
|
|
|
|
|
|
(6,346,927
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
125,000
|
|
|
|
|
|
|
|
286,178,073
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
28,742
|
|
|
|
1,642
|
|
|
|
220,643
|
|
Cash, beginning of period
|
|
|
|
|
|
|
219,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
28,742
|
|
|
$
|
220,643
|
|
|
$
|
220,643
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed financial statements (unaudited).
6
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Notes to Financial Statements
A. Description of Organization and Business Operations
Global Brands Acquisition Corp. (a corporation in the development stage) (the Company) was
incorporated in Delaware on July 3, 2007. The Company was formed to acquire an operating business
or asset or several operating businesses or assets (a Business Combination) through a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business
combination. All activity through September 30, 2008 relates to the formation of the Company and
its initial public offering described below in Note E. The Company has neither engaged in any
operations nor generated revenue to date and will not until completion of its business combination.
The Company is considered to be in the development stage as defined in Statement of Financial
Accounting Standards (SFAS) No. 7,
Accounting and Reporting By Development Stage Enterprises,
and
is subject to the risks associated with activities of development stage companies. The Company has
selected March 31
st
as its fiscal year end.
The registration statement for the Companys initial public offering of Units (as defined in Note E
below) (Offering) was declared effective December 6, 2007. The Company consummated the Offering on
December 12, 2007 and received net proceeds of $281.2 million (see Note E). An amount of $286.1
million of the net proceeds from the Offering, including $14.4 million of deferred offering costs
and the $5.0 million of proceeds relating to the private placement of the sponsors warrants (see
Note F), was placed in a trust account (Trust Account) and invested in JPMorgan 100% U.S. Treasury
Securities Money Market Fund, a money market fund meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act of 1940. The funds in the Trust Account must be
invested in United States government securities within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940 having a maturity of 180 days or less, or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940
until the earlier of (i) the consummation of its initial Business Combination or (ii) the
liquidation of the Company as described below. The remaining proceeds may be used to pay for
business, legal and accounting due diligence on prospective target businesses and continuing
general and administrative expenses.
The Companys management has broad discretion with respect to the specific application of the net
proceeds of the Offering, although substantially all of the net proceeds of the Offering are
intended to be generally applied toward consummating a Business Combination. Furthermore, there is
no assurance that the Company will be able to successfully effect a Business Combination. The
Company, after signing a definitive agreement for the acquisition of a target business, will submit
such transaction for stockholder approval. In the event that stockholders owning 30% or more of the
shares of common stock sold in the Offering vote against the Business Combination and exercise
their conversion rights described below, the Business Combination will not be consummated. If the
Companys initial Business Combination is approved and completed, public stockholders voting
against the initial Business Combination will be entitled to convert their shares of common stock
into a pro rata share of the aggregate amount then on deposit in the Trust Account, before payment
of deferred offering costs and including interest earned on their pro rata portion of the trust
account, net of interest income on the Trust Account balance previously
7
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Notes to Financial Statements
released to the Company to pay its tax obligations and net of interest income of up to $2.9 million
on the Trust Account balance previously released to the Company to fund its working capital
requirements.
However, voting against the Business Combination alone will not result in an election to exercise a
stockholders conversion rights. A stockholder must also affirmatively exercise such conversion
rights at or prior to the time the Business Combination is voted upon by the stockholders. All of
the Companys stockholders prior to the Offering (Initial Stockholders), including all of the
officers and directors of the Company, have agreed to vote all of the shares of common stock held
by them prior to the Offering in accordance with the vote of the majority in interest of all other
stockholders of the Company. They have also agreed to vote any shares acquired by them in the
Offering or in the aftermarket in favor of the Business Combination.
In the event that the Company does not consummate a Business Combination by December 6, 2009, the
corporate existence of the Company will cease except for purposes of winding up and liquidating.
The amounts held in the Trust Account will be distributed to the Companys public stockholders,
excluding the Initial Stockholders to the extent of their stock holdings prior to the Offering.
In the event of such distribution, it is likely that the per share value of the residual assets
remaining available for distribution (including Trust Account assets) will be less than the initial
public offering price per Unit in the Offering (assuming no value is attributed to the warrants
contained in the Units sold in the Offering discussed in Note E), and that the distribution will be
less than investors initial contributions.
B. Summary of Significant Accounting Policies
Development Stage Company
The Company complies with the reporting requirements of SFAS No. 7,
Accounting and Reporting by
Development Stage Enterprises.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with U.S.
generally accepted accounting principles. Accordingly, they do not include all the information and
footnotes required by U.S. generally accepted accounting principles for complete financial
statements. The accompanying unaudited interim financial statements should be read in conjunction
with the financial statements for the period ended March 31, 2008. In our opinion, all adjustments
(consisting only of normal recurring accruals) considered necessary for fair presentation have been
included. The results of operations for the period from April 1, 2008 to September 30, 2008 are
not necessarily indicative of the results that may be expected for the full year ending March 31,
2009.
8
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Notes to Financial Statements
Comprehensive Income
Comprehensive income is equal to net income.
Net Income per Common Share
Income per common share is based on the weighted average number of common shares outstanding. The
Company complies with SFAS No. 128,
Earnings Per Share,
which requires dual presentation of basic
and diluted earnings per share on the face of the statements of operations, which the Company has
adopted. Basic loss per share excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average common shares outstanding for the period. Diluted loss
per share reflects the potential dilution that could occur if convertible debentures, options and
warrants were to be exercised or converted or otherwise resulted in the issuance of common stock
that then shared in the earnings of the entity.
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, exceeds the Federal depository
insurance coverage of $100,000. The Company has not experienced losses on these accounts and
management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the companys assets and liabilities, which qualify as financial instruments
under SFAS No. 107,
Disclosure About Fair Value of Financial Instruments,
approximates the carrying
amounts represented in the balance sheet.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States 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 revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
9
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Notes to Financial Statements
Cash Held in Trust Fund
Cash held in trust consists of investments in government securities having a maturity of 180 days
or less and are classified as current in the Companys balance sheet.
Deferred Offering Costs
Deferred offering costs of $14.4 million consist of underwriting fees that are payable upon the
Companys consummation of a Business Combination. This amount has been recorded as a reduction of
additional paid in capital.
Income Tax
The Company complies with SFAS 109,
Accounting for Income Taxes
which requires an asset and
liability approach to financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the financial statement and tax bases
of assets and liabilities that will result in future taxable or deductible amounts, based on
enacted tax laws and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
Significant judgment is required in assessing the timing and amount of deductible and taxable
items, evaluating tax positions and in determining the income tax provision. In accordance with
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB
Statement No. 109, (FIN 48), the Company recognizes tax benefits only when it is more likely
than not that the tax position will be fully sustained upon review by taxing authorities. If the
recognition threshold is met, the Company measures the tax benefit at the largest amount that is
greater than 50 percent likely to be realized. When the outcome of these tax matters changes, the
change in estimate impacts the provision for income taxes in the period that such a determination
is made. The Company recognizes interest and penalties related to unrecognized tax benefits in the
Companys income tax provision.
Recently Issued Accounting Standards
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 157,
Fair Value Measurements
. SFAS No. 157 defines fair value,
provides a framework for measuring fair value under current standards in GAAP, and requires
additional disclosure about fair value measurements. In accordance with the Statement, the
definition of fair value retains the exchange price notion, and exchange price is defined as the
price in an orderly transaction between market participants to sell an asset or transfer a
liability. If there is a principal market for the asset or liability, the fair value measurement
should reflect that price, whether that price is directly observable or otherwise used in a
valuation technique. Depending on the asset or liability being valued, the inputs used to determine
fair value
10
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Notes to Financial Statements
can range from observable inputs (i.e. prices based on market data independent from the entity) and
unobservable inputs (i.e. entitys own assumptions about the assumptions that market participants
would use). The adoption of FAS 157 by the Company on April 1, 2008 had no material impact to its
financial statements given the development stage nature of the Company. The Company has no
investment assets or liabilities that would be classified as Level II or Level III. The Companys
investment in a money market fund amounting to $288,464,538 as of September 30, 2008 which invests
exclusively in 100% U.S. Treasury Securities is considered a Level I asset.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and
Financial Liabilities
. SFAS No. 159 permits entities to voluntarily choose to measure many
financial assets and financial liabilities at fair value. The election is made on an
instrument-by-instrument basis and is irrevocable. Unrealized gains and losses on items for which
the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company has elected not to adopt SFAS No. 159.
On December 4, 2007, the FASB issued SFAS No. 141 (R),
Business Combinations
, and SFAS No. 160,
Noncontrolling interests in Consolidated Financial Statements, an amendment of ARB No. 51
. The new
standards require that a noncontrolling interest in a consolidated subsidiary be displayed in the
consolidated statement of financial position as a separate component of equity. The new standards
also indicate gains and losses should not be recognized on sales of noncontrolling interests in
subsidiaries but that differences between sale proceeds and the consolidated basis of accounting
should be accounted for as charges or credits to consolidated additional paid-in-capital. However,
in a sale of a subsidiarys shares that results in the deconsolidation of the subsidiary, a gain or
loss would be recognized for the difference between the proceeds of that sale and the carrying
amount of the interest sold. Also, a new fair value in any remaining noncontrolling ownership
interest is established. These statements are effective for the first annual reporting period on
or after December 15, 2008. The Company is currently evaluating the provisions of SFAS 141 (R) and
SFAS 160 and does not expect there to be an impact to the Companys financial statements.
C. Common Stock, Subject to Possible Conversion
The Company is required to convert to cash up to 8,624,999 of the shares of common stock sold in
the Offering should those shareholders vote against an initial Business Combination and convert
their shares of common stock into a pro rata share of the aggregate amount then on deposit in the
Trust Account. An amount of $85.8 million has been classified as common stock, subject to possible
conversion representing the initial per-share conversion price.
D. Stockholders Equity
The Companys capital stock consists of common stock and preferred stock. The Company is authorized
to issue 90,000,000 shares of common stock, of which 35,937,500 (including 8,624,999 shares subject
to possible conversion) are outstanding as of September 30, 2008. The Company is
11
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Notes to Financial Statements
authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other
rights and preferences as may be determined from time to time by the board of directors.
E. Initial Public Offering
On December 12, 2007, the Company sold 28,750,000 units (Units) to the public at a price of $10.00
per Unit. Each Unit consists of one share of the Companys common stock, $0.0001 par value, and one
redeemable common stock purchase warrant (Warrant). Each Warrant entitles the holder to purchase
from the Company one share of common stock at an exercise price of $7.00 commencing on the later of
(i) December 6, 2008 or (ii) the completion of a Business Combination with a target business, and
will expire December 5, 2012, unless earlier redeemed. The Warrants will be redeemable, in whole
and not in part, at a price of $0.01 per Warrant upon 30 days prior written notice of redemption,
only in the event that the last sales price of the common stock is at least $14.25 per share for
any 20 trading days within a 30 trading day period ending on the third business day prior to the
date on which notice of redemption is sent to the holders of Warrants. The Warrants may not be
redeemed unless an effective and current registration statement covering the shares of common stock
issuable upon exercise of the Warrants is available throughout the redemption period.
The Company paid an underwriting discount of 2.0% of the public unit offering price to the
underwriters at the closing of the Initial Public Offering, with an additional 5.0% fee of the
gross offering proceeds payable upon the Companys consummation of a Business Combination. The
additional 5% fee, amounting to $14.4 million, has been placed in the Trust Account.
F. Related Party Transactions
The Initial Stockholders purchased an aggregate of 7,187,500 of the Companys founders units, each
consisting of one share of founders common stock and one founders warrant each to purchase one
share of common stock, for an aggregate price of $25,000 in a private placement. Each of the
Initial Stockholders has agreed to vote its founders common stock in the same manner as holders of
a majority of the shares of the Companys common stock voted by the public stockholders at the
special or annual meeting called for the purpose of approving the Companys initial Business
Combination. As a result, none of the founders will be able to exercise conversion rights with
respect to the founders common stock. In addition, the Initial Stockholders have agreed to waive
their rights to participate in any liquidation distribution with respect to the founders common
stock if the Company fails to consummate an initial Business Combination. All of the founders
units have been placed in escrow, and subject to limited exceptions, the founders common stock
will be held in escrow until 180 days after the consummation of the Companys initial Business
Combination and the founders warrants will remain in escrow until they become exercisable. The
founders common stock will be released from escrow earlier than as described above if, subsequent
to an initial Business Combination, (i) the last sales price of the Companys common stock equals
or exceeds $14.25 per share for any 20 trading days within any 30-trading day period beginning 90
days after an initial Business Combination or (ii) the Company
12
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Notes to Financial Statements
consummates a subsequent liquidation, merger, stock exchange or other similar transaction which
results in all of its security holders having the right to exchange their for cash, securities or
other property; provided further that the founders warrants will be released from escrow in
connection with (ii) but only to the extent necessary to participate in such exchange.
In addition, JLJ Partners, LLC (JLJ Partners) purchased an aggregate of 5,000,000 warrants
(sponsors warrants) from the Company at a price of $1.00 per Warrant ($5.0 million in the
aggregate) in a private placement that occurred simultaneously with the consummation of the
Offering. The $5.0 million was placed in the Trust Account until a successful completion of an
initial Business Combination. If the Company does not complete an initial Business Combination,
the $5.0 million will be part of the liquidating distribution to the public stockholders, and the
sponsors warrants will expire worthless. The sponsors warrants will not be transferable or
salable by JLJ Partners (subject to limited exceptions) until after the Company completes an
initial Business Combination, and will be exercisable on a cashless basis and will be
non-redeemable by the Company, in each case, so long as they are held by JLJ Partners or its
permitted transferees. In addition, commencing 30 days after the consummation of an initial
Business Combination, the sponsors warrants and the underlying shares of common stock are entitled
to registration rights. With the exception of the terms noted above, the sponsors warrants have
terms and provisions that are identical to those of the Warrants. The Company believes the
purchase price of the sponsors warrants approximates the fair value of such warrants.
In addition, JLJ Partners and Sportswear Holdings Limited, an affiliate of the Companys chairman
of the board, have agreed to purchase 2,500,000 Units at a price of $10.00 per Unit (an aggregate
price of $25.0 million) from the Company in a private placement that would occur upon the Companys
consummation of a Business Combination. These private placement units will be identical to the
Units sold in the Offering, except that, subject to certain exceptions, these Units and underlying
securities will not be sold, assigned or transferred for a period of 180 days from the date of the
consummation of the Business Combination.
The Company presently occupies office space provided by JLJ Partners. JLJ Partners has agreed that,
until the consummation of 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 JLJ Partners $10,000 per month for such
services.
G. Income Taxes
The Company is subject to U.S. Federal, state and local income taxes. The components of the
Companys income tax provision by taxing jurisdiction for the period ended September 30, 2008 are
as follows:
13
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Notes to Financial Statements
|
|
|
|
|
Current:
|
|
|
|
|
Federal
|
|
$
|
620,013
|
|
State & Local
|
|
|
390,335
|
|
|
|
|
|
Current provision for income taxes
|
|
$
|
1,010,348
|
|
|
|
|
|
The Companys effective tax rate of 48.88% differs from the federal statutory rate of 34.0% mainly
due to certain differences including state and local income taxes.
14
|
|
|
ITEM 2.
|
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion should be read in conjunction with our Condensed Financial Statements
and footnotes thereto contained in this report.
Forward Looking Statements
All statements other than statements of historical fact included in this Form 10-Q including,
without limitation, statements under Managements Discussion and Analysis of Financial Condition
and Results of Operations regarding our financial position, business strategy and the plans and
objectives of management for future operations, are forward looking statements. When used in this
Form 10-Q, words such as anticipate, believe, estimate, expect, intend and similar
expressions, as they relate to us or our management, identify forward looking statements. Such
forward looking statements are based on the beliefs of management, as well as assumptions made by,
and information currently available to, our management. Actual results could differ materially
from those contemplated by the forward looking statements as a result of certain factors detailed
in our filings with the Securities and Exchange Commission. All subsequent written or oral forward
looking statements attributable to us or persons acting on our behalf are qualified in their
entirety by this paragraph.
Overview
We were formed on July 3, 2007, to serve as a vehicle to effect a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar business combination
with one or more operating businesses or assets. Our efforts in identifying a prospective target
business will not be limited to a particular industry, although we initially intend to focus our
search on U.S. as well as foreign companies in the branded consumer sector, including apparel,
specialty retail, footwear and accessories. We will also explore opportunities in other
consumer-focused and other sectors that are attractive to us. We intend to utilize cash derived
from the proceeds of our recently completed public offering, our capital stock, debt or a
combination of cash, capital stock and debt, in effecting a business combination.
Results of Operations
For the period from July 3, 2007 (inception) to September 30, 2008, we had a net income of
$1,951,567 consisting of $4,220,494 of interest income offset by $345,012 of formation and
operating costs, $149,224 of accounting fees and $1,740,691 of income tax provision.
For the six months ended September 30, 2008, we had a net income of $1,056,517 consisting of
$2,319,292 of interest income offset by $168,203 of formation and operating costs, $84,224 of
accounting fees and $1,010,348 of income tax provision.
For the three months ended September 30, 2008, we had a net income of $538,000 consisting of
$1,130,171 of interest income offset by $76,740 of formation and operating costs, $9,724 of
accounting fees and $505,707 of income tax provision.
For the period from July 3, 2007 (inception) to September 30, 2007, we had a net loss of
$17,800 consisting of $300 of formation and operating costs and $17,500 of accounting fees.
Income Taxes
15
Income taxes for the for the period from July 3, 2007 (inception) to September 30, 2008 and
for the six months and three months ended September 30, 2008 were provided for at a rate of 47.6%,
48.9% and 48.5%, respectively. We currently anticipate that our tax expense for the full year
ending March 31, 2009 as a percentage of pre-tax income will be between 47.0% and 49.0%. It is
possible that our estimated full year rate could change from discrete items or the receipt of new
information. Under Financial Accounting Standard Board Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, additional volatility
in our tax rate may occur in the future, either from quarter to quarter, or from year to year, due
to events or new information that causes us to re-evaluate any unrecognized tax benefits.
Financial Condition and Liquidity
We consummated our initial public offering of 28,750,000 units, including 3,750,000 units
subject to the underwriters over-allotment option, on December 12, 2007. Gross proceeds from our
initial public offering were $287,500,000. We paid a total of $5,750,000 in underwriting discounts
and commissions and $359,142 for other costs and expenses related to the offering and the
over-allotment option. An additional $14,375,000 of offering costs have been deferred by the
underwriters and placed in our trust account and will be released to the underwriters only on
completion of our initial business combination. After deducting the underwriting discounts and
commissions and the offering expenses, the total net proceeds, including $5,000,000 from the
private sale of warrants (the Sponsors Warrants) to JLJ Partners, LLC (JLJ Partners), an
entity beneficially owned approximately one-third each by Joel J. Horowitz, our chief executive
officer, treasurer and director, Lawrence S. Stroll, our chairman of the board, and John D. Idol,
our president, secretary and director, either directly or through entities of which they or their
family members are owners and beneficiaries, from the offering were $ 286,390,858, of which
$286,125,000 was deposited into the trust account. We intend to use substantially all of the net
proceeds of this offering to effect a business combination. To the extent that our capital stock is
used in whole or in part as consideration to effect a business combination, the proceeds held in
the trust account as well as any other net proceeds not expended will be used to finance the
operations of the target business. We believe we will have sufficient available funds outside of
the trust fund to operate through December 6, 2009, assuming that a business combination is not
consummated during that time.
We expect our primary liquidity requirements during this period to include approximately
$1,000,000 for expenses for the due diligence and investigation of a target business or businesses;
approximately $1,000,000 for legal, accounting and other expenses associated with structuring,
negotiating and documenting an initial business combination; an aggregate of $240,000 for office
space, administrative services and support payable to JLJ Partners representing $10,000 per month
for up to 24 months; $150,000 for legal and accounting fees relating to our SEC reporting
obligations; and approximately $535,000 for general working capital that will be used for
miscellaneous expenses and reserves. We do not believe we will need to raise additional funds
following this offering in order to meet the expenditures required for operating our business.
However, we may need to raise additional funds through a private offering of debt or equity
securities if such funds are required to consummate a business combination that is presented to us.
We would only consummate such a financing simultaneously with the consummation of a business
combination.
Commencing on December 6, 2007 and ending upon the consummation of a business combination or
our liquidation, we began incurring a fee from JLJ Partners of $10,000 per month for providing us
with office space and certain general and administrative services.
In the event that the Company does not consummate a Business Combination by December 6, 2009,
the corporate existence of the Company will cease except for purposes of winding up and
liquidating. The amounts held in the Trust Account will be distributed to the Companys public
stockholders, excluding the
16
Initial Stockholders to the extent of their stock holdings prior to the Offering. In the
event of such distribution, it is likely that the distribution will be less than investors initial
contributions.
|
|
|
ITEM 4.
|
|
CONTROLS AND PROCEDURES.
|
Disclosure controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in company reports filed or submitted under the
Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange Commissions rules and
forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in company reports filed or submitted
under the Exchange Act is accumulated and communicated to management, including our chief executive
officer and treasurer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and
treasurer carried out an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of September 30, 2008. Based upon his evaluation, he
concluded that our disclosure controls and procedures were effective.
Our internal control over financial reporting is a process designed by, or under the
supervision of, our president and treasurer and effected by our board of directors, management and
other personnel, to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of our financial statements for external purposes in accordance with
generally accepted accounting principles (United States). Internal control over financial reporting
includes policies and procedures that pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of our assets; provide
reasonable assurance that transactions are recorded as necessary to permit preparation of our
financial statements in accordance with generally accepted accounting principles (United States),
and that our receipts and expenditures are being made only in accordance with the authorization of
our board of directors and management; and provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on our financial statements.
During the most recently completed fiscal quarter, there has been no change in our internal
control over financial reporting that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been detected. Our
disclosure controls and procedures are designed to provide reasonable assurance of achieving its
objectives. Our principal executive officer and principal financial officer concluded that our
disclosure controls and procedures are effective at that reasonable assurance level.
17
PART II
OTHER INFORMATION
ITEM 1A. RISK FACTORS
Our Annual Report on Form 10-K for the fiscal year ended March 31, 2008 filed with the
Securities and Exchange Commission on June 12, 2008 contains a detailed discussion of certain risk
factors that could materially adversely affect our business, our operating results, or our
financial condition. The following is an additional risk factor that we have recently identified
that could materially adversely affect our business, our operating results, and our financial
condition.
The current global credit crisis could make it more difficult for us to obtain additional
financing, if required, to complete an initial business combination or to fund the operations and
growth of the target business.
The current global credit crisis is making it difficult, if not impossible, for companies to
obtain financing for acquisitions and operational growth. There is no indication when this credit
crisis will abate. If we need to obtain financing to consummate our initial business combination
or to fund the operations of the target business we seek to acquire after our initial business
combination, we cannot assure you that such financing will be available on acceptable terms, if at
all. To the extent that additional financing proves to be unavailable when needed to consummate a
particular business combination, we would be compelled to either restructure the transaction or
abandon that particular business combination and seek an alternative target business candidate.
Alternatively, we may require such financing to fund the operations or growth of the target
business. The failure to secure additional financing could have a material adverse effect on the
continued development or growth of the target business.
|
|
|
ITEM 2.
|
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
On December 12, 2007, we closed our initial public offering of 28,750,000 units, including
3,750,000 units subject to the underwriters over-allotment option, with each unit consisting of
one share of our common stock and one warrant to purchase one share of our common stock at an
exercise price of $7.00 per share. 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 $287,500,000. Citigroup Global Markets Inc. acted as the sole bookrunning manager and
Ladenburg Thalmann & Co. Inc. and I-Bankers Securities, Inc. acted as co-managers of the initial
public offering. The securities sold in the offering were registered under the Securities Act of
1933 on a registration statement on Form S-1 (No. 333-145684). The Securities and Exchange
Commission declared the registration statement effective on December 6, 2007.
We paid a total of $5,750,000 in underwriting discounts and commissions and $359,142 for other
costs and expenses related to the offering and the over-allotment option. An additional
$14,375,000 of underwriting discounts and commissions has been deferred by the underwriters and
placed in our trust account and will be released to the underwriters only on completion of our
initial business combination.
We also consummated the simultaneous private sale of 5,000,000 Sponsors Warrants at
18
a price of $1.00 per warrant, generating total proceeds of approximately $5,000,000. The
Sponsors Warrants were purchased by JLJ Partners. The Sponsors Warrants are identical to the
warrants included in the units sold in the initial public offering except that the Sponsors
Warrants are exercisable on a cashless basis and if we call the warrants for redemption, the
Sponsors Warrants will not be redeemable by us so long as they are held by JLJ Partners or its
permitted transferees. JLJ Partners has agreed that the warrants will not be transferred, assigned
or sold by it until after we have completed a business combination.
After deducting the underwriting discounts and commissions and the offering expenses, the
total net proceeds to us from the offering and the private sale of Sponsors Warrants were
$286,390,858, of which $286,125,000 was deposited into the trust account.
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
(a) Exhibits:
|
31
|
|
Section 302 Certification by Chief Executive Officer and Treasurer
|
|
|
32
|
|
Section 906 Certification by Chief Executive Officer and
Treasurer
|
19
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.
|
|
|
|
|
|
GLOBAL BRANDS ACQUISITION CORP.
|
|
Dated: November 13, 2008
|
|
|
|
/s/ Joel J. Horowitz
|
|
|
Chief Executive Officer and Treasurer (Principal
|
|
|
Executive Officer and Principal Financial and
Accounting Officer)
|
|
|
20