Business context and reporting period
Important identity discrepancy: The supplied filing is Global Partner Acquisition Corp.’s Form 10-Q for the quarter ended June 30, 2017—not a Purple Innovation, Inc. filing. Global Partner was a blank-check company seeking a business combination and had not commenced operations.
After quarter-end, on July 24, 2017, Global Partner signed a non-binding letter of intent to acquire Purple Innovation, LLC. The proposed transaction contemplated a $1.1 billion enterprise value, with approximately $90 million of cash consideration and the remainder in rollover equity, subject to customary adjustments and a definitive agreement.
Financial results and liquidity
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| General and administrative expense | $246,000 | $560,000 | $121,000 and $259,000, respectively |
| Interest income from Trust Account | $261,000 | $440,000 | $65,000 and $165,000, respectively |
| Net loss | $57,000 | $260,000 | $56,000 and $94,000, respectively |
| Basic and diluted loss per share | $0.01 | $0.05 | $0.01 and $0.02, respectively |
- At June 30, 2017, cash outside the Trust Account was $188,000; Trust Account assets were $155.781 million, largely U.S. Treasury bills. Total assets were $156.002 million.
- Current liabilities were $2.316 million, including $1.240 million due under a related-party note and accrued interest. Working capital was negative by approximately $2.095 million. Total liabilities were $6.974 million, including $4.658 million of deferred underwriting compensation payable only upon a completed business combination.
- Six-month operating cash use was $1.249 million, compared with $273,000 in 2016. The company received $1.2 million from Sponsor financing; cash declined by $49,000 to $188,000.
- No operating margins are meaningful because the company reported no revenue or operating business. Management reported no material interest-rate risk given the Trust Account’s permitted investments.
Material changes, outlook, and risks
- General and administrative expense increased year over year, including costs associated with the proposed Sequel Youth and Family Services transaction. Sequel terminated that merger agreement on May 19, 2017 after the transaction was not completed by the required date.
- On August 3, 2017, stockholders approved an extension of the business-combination deadline from August 4, 2017 to November 6, 2017, or February 5, 2018 if a definitive agreement was signed by November 6. Holders of 3,416,480 shares elected redemption, removing approximately $34.269 million from the Trust Account; approximately $121.563 million remained afterward.
- The Purple proposal was only a non-binding letter of intent as of the filing. The company gave no assurance that it would complete a business combination and had limited time to do so.
- The filing states that the impending liquidation deadline raised substantial doubt about the company’s ability to continue as a going concern. Management expected it could fund operations through the deadline assuming additional Sponsor financing of up to $1.0 million, but no such financing agreement was in place. Trust funds were generally unavailable for operating expenses.
- If no business combination is completed by the extended deadline, the company must wind up and redeem public shares under the terms described in the filing. Potential dilution from issuing equity and risks associated with taking on debt were also noted. No material changes to the previously disclosed risk factors were reported.
Investor facts to verify
- Confirm the issuer: this 10-Q is for Global Partner Acquisition Corp., while Purple appears only as a proposed post-quarter-end transaction target.
- Check whether the non-binding Purple letter of intent became a definitive agreement or transaction, and review its final valuation, consideration, and financing terms.
- Verify the post-quarter-end share redemptions, remaining Trust Account balance, and applicable business-combination deadline.
- Determine whether the contemplated additional Sponsor financing was obtained and whether the company resolved the liquidity and going-concern concerns.