BUSINESS
Overview
We
are an early-stage blank check company incorporated as a Delaware corporation formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, which
we refer to throughout this report as our initial business combination or our business combination.
On April 27, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blue Water Merger Sub Corp.,
a Delaware corporation (the “Merger Sub”) and wholly-owned subsidiary of the Company, and Clarus Therapeutics, Inc. a Delaware
corporation (“Clarus”).
Consummation of the transactions contemplated by the Merger Agreement (the “Merger”) is
subject to customary conditions of the respective parties, including the approval of the Merger by our stockholders in accordance with
our amended and restated certificate of incorporation and the completion of a redemption offer whereby we will be providing our public
stockholders with the opportunity to redeem their shares of our common stock for cash equal to their pro rata share of the aggregate amount
on deposit in our trust account.
The Merger Agreement and related agreements are further described in the Form 8-K, filed by us on May
3, 2021. The Company intends to file with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement
on Form S-4 (as amended, the “Form S-4”), which will include a preliminary proxy statement of the Company, and a prospectus
in connection with the proposed Merger. For additional information regarding the Merger Agreement and the transactions contemplated therein,
including a discussion of risks and uncertainties associated with the Merger and Clarus, please see the Form S-4 which the company intends
to file after the filing of this Annual Report.
Other than as specifically discussed, this Annual Report does not assume that the closing
of the Merger will occur.
Initial
Public Offering
On
December 17, 2020, we consummated our initial public offering of 5,750,000 units (the “units”), which
included 750,000 units issued pursuant to the full exercise by the underwriters of their overallotment option. Each unit consists
of one share of Class A common stock of the Company, par value $0.0001 per share (the “Class A Common Stock”),
and one redeemable warrant of the Company (“warrant”), with each whole warrant entitling the holder thereof
to purchase one share of Class A Common Stock for $11.50 per share. The units were sold at a price of $10.00 per unit, generating
gross proceeds to the Company of $57,500,000.
Simultaneously
with the closing of the initial public offering, we completed the private sale of an aggregate of 3,445,000 warrants (the “private
placement warrants”) to Blue Water Sponsor LLC (our “sponsor”) at a purchase price of $1.00 per private
placement warrant, generating gross proceeds of $3,445,000.
A
total of $58,650,000, comprised of $55,205,000 of the proceeds from the initial public offering (which amount includes $2,012,500
of the underwriter’s deferred discount) and $3,445,000 of the proceeds of the sale of the private placement warrants, was
placed in a U.S.-based trust account (the “trust account”) maintained by Continental Stock Transfer & Trust Company,
acting as trustee.
Our
management team is led by Joseph Hernandez, our Chief Executive Officer and Chairman, who has decades of experience in growing
and developing areas of the healthcare industry. We must complete our initial business combination by December 17, 2021 (or June
17, 2022 if we extend the period of time to consummate a business combination, as described in more detail in this report). If
our initial business combination is not consummated by such time, then our existence will terminate, and we will distribute all
amounts in the trust account.
Our
Business
To date, our efforts have
been limited to organizational activities as well as activities related to our initial public offering and investigating potential business
combinations. While we have entered into a Merger Agreement with Clarus, in the event we are unable to consummate the Merger we will continue
to pursue an acquisition opportunity in any business, industry, sector or geographical location, we will focus on industries that complement
our management team’s background, and we intend to capitalize on the ability of our management team to identify and acquire a business,
focusing on the healthcare or healthcare related industries in the United States and Europe. In particular, we will prioritize companies
in the life sciences and pharmaceutical services sectors where our management team has extensive experience.
Our Board of Directors, led
by our founder, Joseph Hernandez, has decades of experience in growing and developing areas of the healthcare industry. The team consists
of Joseph Hernandez, who is also our Chairman and Chief Executive Officer, Jon Garfield, our Chief Financial Officer, along with James
Sapirstein, Kimberly Murphy, Michael Lerner and Yvonne McBurney as directors. We believe that the strong scientific background of our
management and directors, combined with their financial and entrepreneurial expertise, has propelled the company to identify Clarus as
a valuable acquisition target that can thrive in a public-listing environment.
Industry
Opportunity
In the event the Merger is
not consummated, while we may acquire a business in any industry, our focus is on the healthcare industry in the U.S. and other developed
countries. We believe the healthcare industry, particularly the life sciences and medical technology sectors, represents an attractive
target market with a large number of potential acquisition opportunities. We are focusing on companies that have excellent management
teams, strong growth potential, and that would benefit from access to capital to fund acquisitions or working capital for clinical development
and/or organic growth.
We
draw significantly from our team’s experience in the healthcare and healthcare related industries in the United States.
We believe the healthcare industry, particularly the life sciences and pharmaceutical services sectors, are attractive for a number
of reasons:
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Overall
healthcare spending. In 2019, spending on healthcare reached 18.4% of the total GDP in the United States,
and is expected to rise. With increased spending comes increased opportunities for competition and increased value in new innovations.
We believe the current trajectories of healthcare spending will expose groundbreaking technologies and valuable opportunities
for growth in the healthcare space.
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Increased
attention to pipeline products. In 2000, there were about 2,100 registered clinical trials. By the
end of 2019, that number had increased to over 300,000. While many clinical trials are performed outside the United States, increased
spending and attention on life science innovation are key drivers for future US growth. We believe that this increase in pipeline
attention will draw investors and businesses into the healthcare industry in the coming months and years.
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Increased risk
of infectious diseases. The Coronavirus (COVID-19) pandemic, the swine flu (H1N1) pandemic of 2009, SARS outbreak of
2002, and yearly influenza seasons are only a few examples of devastating diseases that have come to the world’s
attention over the last 20 years. The COVID-19 pandemic alone has taken nearly 110,000 lives in the United States alone and
it is estimated that it will cost the US at least $8 trillion over the next 10 years.
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Increased
attention to precision-based medicine. In 2015, President Obama launched
the Precision Medicine Initiative; one where personalized medicine dominates, and treatment
is individualized to each patient. Dedicating $130 million in funding to the initiative
opened the space for advances, and the demand for such approaches has only increased
since its 2015 inception. Providing hope for both the rare disease and oncology spaces,
precision medicine has the potential to significantly increase positive patient outcomes
and treatment experiences.
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Shift
from volume-based care to value-based care. In traditional volume-based care, or fee-for-service,
healthcare providers are reimbursed for the number of services ordered. In these models, neither quality of care nor necessity
of individual services (tests, procedures, etc.) are considered. The recent shift to performance-based care, or a more holistic
approach to treatment, maximizes cost efficiency while holding providers accountable for the quality of services they offer. This
change will significantly alter the dynamics of the US healthcare system and will undoubtedly create opportunities for businesses
to enter the healthcare space and make a difference in patient care.
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Technological
advances and spread of social media. Recent years have seen great advances in electronic healthcare services (e.g.
electronic medical records, telehealth, awareness of mental health on social media, etc.). Combined with shifts in the
methods of healthcare delivery in the US (e.g. value-based care), there are attractive opportunities for
development and flagship products or services.
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Acquisition
Strategy
Although our management team
has extensive experience in the healthcare industry, in the event the Merger is not consummated, we will not restrict our proposition
search to this field. Over the course of their careers, the members of our management team and board of directors have developed a broad
network of contacts and corporate relationships that we believe will be useful for sourcing investment opportunities. Our management team
has sought and, in the event the Merger is not consummated, will continue to seek an acquisition target with strong management and a strong
business track record, to match that of our own executives. We intend to be involved with the acquisition target’s existing executives
following the business combination, supporting the company’s success and growth with the help of our Management and Board of Directors.
The acquisition selection process will be at the intersection of Management and the Board of Directors, and decisions will be made collaboratively
and due diligence on all prospects and opportunities will be conducted thoroughly. We have focused on target businesses with valuations
of $80 to $200 million or more. We may use other criteria as well. Any evaluation relating to the merits of a particular initial
business combination may be based on these general criteria as well as other considerations, factors and criteria that our management
may deem relevant.
Acquisition
Criteria
In the event the Merger is
not consummated, we believe the majority of the transactions we will review and consider will continue to fall into the following categories,
although we may decide to enter into a business combination with a target that falls outside of these categories:
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Strong
Management Team. We will seek to acquire businesses or companies with seasoned and strong management
teams. Our team brings a wealth of knowledge and will focus on assets that represent the same values, proven track records, and
work ethic.
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Growth
Potential. We seek to target propositions with significant growth potential with the addition
of our management team and resources.
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Business
Model Alignment. We will seek acquisitions with margins and cost structure receptive
to and supportive of additional investment and will likely be well received by public
investors.
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Value
Proposition. We will seek businesses or companies with clear value proposition, including how success
will be measured & demonstrated to investors and offer attractive risk-adjusted equity returns for our shareholders.
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These
criteria listed above are not an exhaustive list. The above guidelines are meant to guide management in acquisition searches and
compare qualities of considered businesses. However, we may choose to engage a target business that does not meet these criteria
or guidelines.
In the event the Merger is
not consummated, in evaluating a prospective acquisition candidate, we expect to conduct a thorough due diligence review which will encompass,
among other things, meetings with incumbent management, investors and employees, document reviews, inspection of facilities, as well as
a review of scientific, regulatory, operational, financial, legal and other information which will be made available to us. We are not
prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors and
their respective affiliates. In the event the Merger is not consummated and we seek to complete our initial business combination with
a company that is affiliated with our sponsor, officers or directors and their respective affiliates, we, or a committee of independent
directors, will obtain an opinion from an independent investment banking firm which is a member of the Financial Industry Regulatory Authority,
or FINRA, or a qualified independent accounting firm that our initial business combination is fair to our company from a financial point
of view.
Initial
Business Combination
Our
initial business combination must occur with one or more target businesses that together have an aggregate fair market value of
at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable and interest
previously released for working capital purposes on the income earned on the trust account) at the time of the agreement to enter
into the initial business combination. If our Board of Directors is not able to independently determine the fair market value
of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of
FINRA, or an independent accounting firm with respect to the satisfaction of such criteria. Our stockholders may not be provided
with a copy of such opinion, nor will they be able to rely on such opinion.
The
net proceeds of our initial public offering and the sale of the private placement warrants released to us from the trust account
upon the closing of our initial business combination may be used as consideration to pay the sellers of a target business with
which we complete our initial business combination. If our initial business combination is paid for using equity or debt securities,
or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial
business combination or used for redemption of our public shares, we may use the balance of the cash released to us from the trust
account following the closing for general corporate purposes, including for maintenance or expansion of operations of the post-transaction businesses,
the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the
purchase of other companies or for working capital.
In the event the Merger and
the related financing arrangement to be described in the Form S-4 are not consummated, we may be required to obtain additional financing
in connection with the closing of our initial business combination to be used following the closing for general corporate purposes as
described above. There is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities
or through loans, advances or other indebtedness in connection with our initial business combination, including pursuant to forward purchase
agreements or backstop agreements we may enter into following consummation of our initial public offering. Subject to compliance with
applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination.
At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds
through the sale of securities or otherwise. None of our sponsors, officers, directors or stockholders is required to provide any financing
to us in connection with or after our initial business combination. We may also obtain financing prior to the closing of our initial business
combination to fund our working capital needs and transaction costs in connection with our search for and completion of our initial business
combination. Our amended and restated certificate of incorporation provides that, following our initial public offering and prior to the
consummation of our initial business combination, we will be prohibited from issuing additional securities that would entitle the holders
thereof to (i) receive funds from the trust account or (ii) vote as a class with our public shares (a) on any initial business combination
or (b) to approve an amendment to our amended and restated certificate of incorporation to (x) extend the time we have to consummate a
business combination by December 17, 2021 (or June 17, 2022 if we extend the period of time to consummate a business combination, as described
in more detail in this report) or (y) amend the foregoing provisions, unless (in connection with any such amendment to our amended and
restated certificate of incorporation) we offer our public stockholders the opportunity to redeem their public shares.
Our Acquisition Process
We believe that conducting
comprehensive due diligence on prospective investments is particularly important within the healthcare industry. We have and, in the event
the Merger is not consummated, will continue to utilize the diligence, rigor, and expertise of our managements’ respective platforms
to evaluate potential targets’ strengths, weaknesses, and opportunities to identify the relative risk and return profile of any
potential target for our initial business combination. Given our management team and advisors’ extensive tenure investing in the
healthcare industry, we will often be familiar with a prospective target’s end-market, competitive landscape and business model.
Each
of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations
to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity.
Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an
entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary
or contractual obligations to present such opportunity to such entity. Our management team is continuously made aware of potential
investment opportunities, one or more of which we may desire to pursue for a business combination. Our amended and restated certificate
of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless
such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and
such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Our
officers have agreed not to become an officer or director of any other special purpose acquisition company with a class of securities
registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, until we have entered into a definitive
agreement regarding our initial business combination or we have failed to complete our initial business combination by December
17, 2021 (or June 17, 2022 if we extend the period of time to consummate a business combination, as described in more detail in
this report).
Status
as a Public Company
We
believe our structure as a public company makes us an attractive business combination partner to target businesses. As an existing
public company, we offer a target business an alternative to the traditional initial public offering through a merger or other
business combination. In this situation, the owners of the target business would exchange their shares of stock in the target
business for shares of our stock or for a combination of shares of our stock and cash, allowing us to tailor the consideration
to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company,
we believe target businesses will find this method a more certain and cost effective method to becoming a public company than
the typical initial public offering. In a typical initial public offering, there are additional expenses incurred in marketing,
road show and public reporting efforts that may not be present to the same extent in connection with a business combination with
us.
Furthermore,
once a proposed business combination is completed, the target business will have effectively become public, whereas an initial
public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions,
which could delay or prevent the offering from occurring or could have negative valuation consequences. Once public, we believe
the target business would then have greater access to capital and an additional means of providing management incentives consistent
with stockholders’ interests. It can offer further benefits by augmenting a company’s profile among potential new
customers and vendors and aid in attracting talented employees.
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As
such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other
public companies that are not “emerging growth companies” including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory
vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors
find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of
our securities may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We are taking advantage of the benefits of this extended transition period.
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following December 17, 2025,
(b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated
filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million
as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt
securities during the prior three-year period.
Financial
Position
With funds in the
trust account available for a business combination in the amount of $58,650,000, as of December 31, 2020, in each case before fees
and expenses associated with our initial business combination, we offer a target business a variety of options such as creating
a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its
balance sheet by reducing its debt or leverage ratio. Because we are able to complete our business combination using our cash,
debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that
will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not
taken any steps to secure third party financing and there can be no assurance it will be available to us.
Effecting
our Initial Business Combination
We
are not presently engaged in, and we will not engage in, any operations until we consummate our initial business combination.
We intend to complete our initial business combination using cash from the proceeds of our initial public offering and the private
placement of the private placement warrants, our capital stock, debt or a combination of these as the consideration to be paid
in our initial business combination. We may seek to complete our initial business combination with a company or business that
may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent
in such companies and businesses.
We have until December
17, 2021 to consummate an initial business combination. However, if we anticipate that we may not be able to consummate our initial
business combination by December 17, 2021, we may, by resolution of our board if requested by our sponsor, extend the period of
time to consummate a business combination up to two times, each by an additional three months (for a total of up to 18 months
to complete a business combination), subject to the sponsor depositing additional funds into the trust account as set out below.
Pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement entered into between us
and Continental Stock Transfer & Trust Company on the date of our initial public offering, in order for the time available
for us to consummate our initial business combination to be extended, our sponsor or its affiliates or designees, upon five business
days advance notice prior to the applicable deadline, must deposit into the trust account $575,000 ($0.10 per unit) on or prior
to the date of the applicable deadline, for each three month extension, providing a total possible business combination period
of 18 months at a total payment value of $1,150,000. Any such payments would be made in the form of non-interest bearing
loans. If we complete our initial business combination, we will, at the option of our sponsor, repay such loaned amounts out of
the proceeds of the trust account released to us or convert a portion or all of the total loan amount into warrants at a price
of $1.00 per warrant, which warrants will be identical to the private warrants. If we do not complete a business combination,
we will repay such loans only from funds held outside of the trust account. In the event that we receive notice from our sponsor
five business days prior to the applicable deadline of its wish for us to effect an extension, we will issue a press release announcing
such intention at least three days prior to the applicable deadline. In addition, we will issue a press release the day after
the applicable deadline announcing whether or not the funds had been timely deposited. Our sponsor and its affiliates or designees
are not obligated to fund the trust account to extend the time for us to complete our initial business combination. If we are
unable to consummate an initial business combination within such time period, we will redeem 100% of our issued and outstanding
public shares for a pro rata portion of the funds held in the trust account, equal to the aggregate amount then on deposit in
the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our
taxes, divided by the number of then outstanding public shares, subject to applicable law and as further described herein, and
then seek to dissolve and liquidate. Assuming no extensions we expect, the pro rata redemption price to be approximately $10.20
per public share, without taking into account any interest earned on such funds. However, we cannot assure you that we will in
fact be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public
stockholders.
If
our initial business combination is paid for using equity or debt instruments, or not all of the funds released from the trust
account are used for payment of the consideration in connection with our business combination or used for redemptions of our Class
A common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including
for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness
incurred in completing our initial business combination, to fund the purchase of other assets, companies or for working capital.
We
may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of
our initial business combination, and we may complete our initial business combination using the proceeds of such offering rather
than using the amounts raised in our initial public offering and held in the trust account. Subject to compliance with applicable
securities laws, we would expect to complete such financing only simultaneously with the completion of our business combination.
In the case of an initial business combination funded with assets other than the trust account assets, our tender offer documents
or proxy materials disclosing the business combination would disclose the terms of the financing and, only if required by law,
we would seek shareholder approval of such financing. There is no limitation on our ability to raise funds through the issuance
of equity or equity-linked securities or through loans, advances or other indebtedness in connection with our initial business
combination, including pursuant to forward purchase agreements or backstop agreements we may enter into following consummation
of our initial public offering. At this time, we are not a party to any arrangement or understanding with any third party with
respect to raising any additional funds through the sale of securities or otherwise. None of our sponsor, officers, directors
or stockholders is required to provide any financing to us in connection with or after our initial business combination. Our amended
and restated certificate of incorporation provides that, following our initial public offering and prior to the consummation of
our initial business combination, we will be prohibited from issuing additional securities that would entitle the holders thereof
to (i) receive funds from the trust account or (ii) vote as a class with our public shares (a) on any initial business combination
or (b) to approve an amendment to our amended and restated certificate of incorporation to (x) extend the time we have to
consummate a business combination beyond December 17, 2021 (or up to June 17, 2022 if we extend the period of time to consummate
a business combination, as described in more detail in this report) or (y) amend the foregoing provisions, unless (in connection
with any such amendment to our amended and restated certificate of incorporation) we offer our public stockholders the opportunity
to redeem their public shares.
The
time required to select and evaluate a target business and to structure and complete our initial business combination, and the
costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect
to the identification and evaluation of a prospective target business with which our business combination is not ultimately completed
will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Sources
of Target Businesses
We have received a number
of proprietary transaction opportunities as a result of the business relationships, direct outreach, and deal sourcing activities of our
management team. In the event the Merger is not consummated, in addition to the proprietary deal flow, target business candidates may
be brought to our attention from various unaffiliated sources, including investment banking firms, consultants, accounting firms, private
equity groups, large business enterprises, and other market participants. These sources may also introduce us to target businesses in
which they think we may be interested on an unsolicited basis, since many of these sources will have read this report and know what types
of businesses we are targeting. Our management team and our sponsor, as well as its affiliates, may also bring to our attention target
business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions
they may have, as well as attending trade shows or conventions. Some of our officers, directors and advisors may enter into employment
or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of
any such fees or arrangements will not be used as a criterion in our selection process of an acquisition candidate. In no event will our
sponsor or any of our existing officers, directors or advisors, or any entity with which they are affiliated, be paid any finder’s
fee, consulting fee, advisory fee or other compensation prior to, or for any services they render in order to effectuate, the completion
of our initial business combination (regardless of the type of transaction that it is) although we may consider cash or other compensation
to officers or advisors we may hire subsequent to our initial public offering to be paid either prior to or in connection with our initial
business combination. We have agreed to reimburse our sponsor for any out-of-pocket expenses related to identifying, investigating
and completing an initial business combination.
We are not prohibited from
pursuing an initial business combination with a business combination target that is affiliated with our sponsor, officers, directors or
advisors or making the acquisition through a joint venture or other form of shared ownership with our officers, directors or advisors.
In the event the Merger is not consummated and we seek to complete our initial business combination with a business combination target
that is affiliated with our sponsor, officers, directors or advisors, we, or a committee of independent directors, would obtain an opinion
from an independent investment banking firm which is a member of FINRA or an independent accounting firm that such an initial business
combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
If any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any
entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business
combination opportunity to such entity prior to presenting such business combination opportunity to us.
Lack of Business Diversification
For an indefinite period
of time after the completion of our initial business combination, the prospects for our success may depend entirely on the performance
of a single business. Upon consummation of the Merger, the prospects of our success will depend entirely on Clarus. Unlike other entities
that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we
will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, we
are focusing our search for an initial business combination in a single industry. By completing our business combination with only a single
entity, our lack of diversification may:
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subject
us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on
the particular industry in which we operate after our initial business combination, and
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cause
us to depend on the marketing and sale of a single product or limited number of products or services.
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Limited
Ability to Evaluate the Target’s Management Team
Although we will closely
scrutinize the management of a prospective target business when evaluating the desirability of effecting our business combination with
that business, our assessment of the target business’ management may not prove to be correct. In addition, the future management
may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of
our management team or of our board, if any, in the target business cannot presently be stated with any certainty. While it is possible
that one or more of our directors will remain associated in some capacity with us following our business combination, it is presently
unknown if any of them will devote their full efforts to our affairs subsequent to our business combination. Moreover, we cannot assure
you that members of our management team will have significant experience or knowledge relating to the operations of the particular target
business. In the event the Merger is consummated, Ms. Murphy and one other member of our board will serve as directors of the combined
company following the Merger.
Following a business combination,
to the extent that we deem it necessary, we may seek to recruit additional managers to supplement the incumbent management team of the
target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have
the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve
our Initial Business Combination
The Merger requires the approval
of our stockholders. However, in the event the Merger is not consummated, in connection with any alternative proposed business combination,
we may conduct redemptions without a shareholder vote pursuant to the tender offer rules of the SEC. However, we will seek shareholder
approval if it is required by law or applicable stock exchange rule, or we may decide to seek shareholder approval for business or other
legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider in
the event the Merger is not consummated and whether shareholder approval is currently required under Delaware law for each such transaction.
Type of Transaction
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Whether
Shareholder
Approval is
Required
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Purchase of assets
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No
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Purchase of stock of target not involving a merger with the company
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No
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Merger of target into a subsidiary of the company
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No
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Merger of the company with a target
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Yes
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Under NASDAQ’s listing
rules, in the event the Merger is not consummated shareholder approval would be required for our initial business combination if, for
example:
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we
issue shares of Class A common stock that will be equal to or in excess of 20% of the number of shares of our common stock then
outstanding;
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any
of our directors, officers or substantial stockholders (as defined by NASDAQ rules) has a 5% or greater interest (or such persons
collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise
and the present or potential issuance of common stock could result in an increase in outstanding common shares or voting power
of 5% or more; or
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●
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the
issuance or potential issuance of common stock will result in our undergoing a change of control.
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The
decision as to whether we will seek shareholder approval of a proposed business combination in those instances in which shareholder
approval is not required by applicable law or stock exchange listing requirements will be made by us, solely in our discretion,
and will be based on business and legal reasons, which include a variety of factors, including, but not limited to: (i) the timing
of the transaction, including in the event we determine shareholder approval would require additional time and there is either
not enough time to seek shareholder approval or doing so would place the company at a disadvantage in the transaction or result
in other additional burdens on the company; (ii) the expected cost of holding a shareholder vote; (iii) the risk that the stockholders
would fail to approve the proposed business combination; (iv) other time and budget constraints of the company; and (v) additional
legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.
Permitted
Purchases of our Securities
In
the event we seek shareholder approval of our business combination and we do not conduct redemptions in connection with our business
combination pursuant to the tender offer rules, our sponsor, directors, officers, advisors or their affiliates may purchase shares
in privately negotiated transactions or in the open market either prior to or following the completion of our initial business
combination. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated
any terms or conditions for any such transactions.
None
of the funds in the trust account will be used to purchase shares in such transactions. They will not make any such purchases
when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited
by Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such shareholder, although
still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption
rights. In the event that our sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated
transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders
would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases,
if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction
subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases
that the purchases are subject to such rules, the purchasers will comply with such rules.
The purpose of such purchases
would be to (i) vote such shares in favor of the business combination in the event the Merger is not consummated and thereby increase
the likelihood of obtaining shareholder approval of the business combination or (ii) to satisfy a closing condition in an agreement with
a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our business combination, where it
appears that such requirement would otherwise not be met. This may result in the completion of our business combination that may not otherwise
have been possible.
In addition, if such purchases
are made, the public “float” of our common stock may be reduced and the number of beneficial holders of our securities may
be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities
exchange.
Our sponsor, officers, directors,
advisors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors, advisors
or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption
requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination in connection
with the Merger or an alternative initial business combination in the event the Merger is not consummated. To the extent that our sponsor,
officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling
stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against the business
combination. Our sponsor, officers, directors, advisors or their affiliates will only purchase shares if such purchases comply with Regulation
M under the Exchange Act and the other federal securities laws.
Any
purchases by our sponsor, officers, directors, advisors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under
the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a
safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has
certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor,
officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2)
or Rule 10b-5 of the Exchange Act.
Redemption
Rights for Public Stockholders upon Completion of our Initial Business Combination
We
will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon
the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the trust account as of two business days prior to the consummation of the initial business combination including
interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number
of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated
to be approximately $10.20 per public share. The per-share amount we will distribute to investors who properly redeem their
shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor, officers and
directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with
respect to any founder shares and any public shares held by them in connection with the completion of our business combination.
Manner
of Conducting Redemptions
In connection with the Merger,
we will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of
the Merger in connection with a stockholder meeting called to approve the Merger. In the event the Merger is not consummated, in connection
with an alternative proposed initial business combination, we will provide our
public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our
initial business combination either (i) in connection with a shareholder meeting called to approve the business combination or (ii) by
means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed business combination or conduct a
tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction
and whether the terms of the transaction would require us to seek shareholder approval under the law or stock exchange listing requirement.
Asset acquisitions and stock purchases would not typically require shareholder approval while direct mergers with our company where we
do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated
certificate of incorporation would require shareholder approval.
If
the Merger is not consummated and we structure an alternative business
combination transaction with a target company in a manner that requires shareholder approval, we will not have discretion as to whether
to seek a shareholder vote to approve the proposed business combination. We may conduct
redemptions without a shareholder vote pursuant to the tender offer rules of the SEC unless shareholder approval is required by law or
stock exchange listing requirements or we choose to seek shareholder approval for business or other legal reasons. So long as we obtain
and maintain a listing for our securities on NASDAQ, we will be required to comply with such rules.
If the Merger is not consummated
and if a stockholder vote is not required in connection with a proposed alternative initial business combination and we do not decide
to hold a shareholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
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conduct
the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and
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file
tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same
financial and other information about the initial business combination and the redemption rights as is required under Regulation
14A of the Exchange Act, which regulates the solicitation of proxies.
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If the Merger is not consummated
and upon the public announcement of our business combination, we or our sponsor will terminate any plan established in accordance with
Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender
offer, to comply with Rule 14e-5 under the Exchange Act.
In
the event that we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least
20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our
initial business combination until the expiration of the tender offer period. In addition, the tender offer will be
conditioned on public stockholders not tendering more than a specified number of public shares which are not purchased by our
sponsor, which number will be based on the requirement that we will only redeem our public shares so long as (after such
redemption) our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our
initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the
SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in
the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to
purchase, we will withdraw the tender offer and not complete the initial business combination.
If,
however, shareholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain
shareholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
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conduct
the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation
of proxies, and not pursuant to the tender offer rules, and
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●
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file
proxy materials with the SEC.
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In the Merger is not consummated
and we seek shareholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith,
provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If
we seek shareholder approval, we will complete our initial business combination only if a majority of the outstanding shares of
common stock voted are voted in favor of the business combination. A quorum for such meeting will consist of the holders present
in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all
outstanding shares of capital stock of the company entitled to vote at such meeting. Our sponsor, officers and directors will
count toward this quorum and have agreed to vote their founder shares and any public shares purchased during or after our initial
public offering in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding
shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum
is obtained. As a result, in addition to our sponsor, officers and directors’ founder shares, we would need 2,185,001, or
38.0%, of the 5,750,000 public shares sold in our initial public offering to be voted in favor of a transaction (assuming all
outstanding shares are voted) in order to have our initial business combination approved (assuming the over-allotment option
is not exercised). We will give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of
any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting
thresholds, and the voting agreements of our sponsor, officers and directors, may make it more likely that we will consummate
our initial business combination. Each public shareholder may elect to redeem its public shares irrespective of whether they vote
for or against the proposed transaction.
Our amended and restated
certificate of incorporation provides that we will only redeem our public shares so long as (after such redemption) our net tangible assets
will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of
underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater
net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example,
the proposed business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred
to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance
with the terms of the proposed business combination. In addition, pursuant to the Merger Agreement, the parties’ obligation to consummate
the Merger is subject to, among other things, the amount of available cash in (i) the trust account, after deducting the amount required
to satisfy obligations to public stockholders that exercise their redemption rights, and (ii) Clarus having consummated a permitted financing
(as described in the Merger Agreement) with gross proceeds to Clarus of at least $15 million. In the event the aggregate cash consideration
we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required
to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to
us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption
will be returned to the holders thereof.
Limitation on Redemption
upon Completion of Initial Business Combination if we Seek Shareholder Approval
Notwithstanding the foregoing,
if we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our business
combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public shareholder,
together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group”
(as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate
of 20% of the shares sold in our initial public offering, which we refer to as the “Excess Shares.” We believe this restriction
will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to
exercise their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares
at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public shareholder
holding more than an aggregate of 20% of the shares sold in our initial public offering could threaten to exercise its redemption rights
if such holder’s shares are not purchased by us or our management at a premium to the then-current market price or on other
undesirable terms. By limiting our stockholders’ ability to redeem no more than 20% of the shares sold in our initial public offering,
we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our business
combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a
minimum net worth or a certain amount of cash. However, our amended and restated certificate of incorporation does not restrict our stockholders’
ability to vote all of their shares (including Excess Shares) for or against our business combination.
Tendering
Stock Certificates in Connection with a Tender Offer or Redemption Rights
We
may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their
shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in
the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve the
business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically
using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. The tender
offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business
combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public
shareholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up
to two days prior to the vote on the business combination if we distribute proxy materials, as applicable, to tender its shares
if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders
to use electronic delivery of their public shares.
There
is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering
them through the DWAC System. The transfer agent will typically charge the tendering broker $100.00 and it would be up to the
broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether
or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement
of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The
foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection
with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote
on an initial business combination, and a holder could simply vote against a proposed business combination and check a box on
the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the business combination was
approved, the company would contact such shareholder to arrange for him or her to deliver his or her certificate to verify ownership.
As a result, the shareholder then had an “option window” after the completion of the business combination during which
he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he
or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation.
As a result, the redemption rights, to which stockholders were aware they needed to commit before the shareholder meeting, would
become “option” rights surviving past the completion of the business combination until the redeeming holder delivered
its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s
election to redeem is irrevocable once the business combination is approved.
Any
request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials
or the date of the shareholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share
delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable
date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically
or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their
shares will be distributed promptly after the completion of our business combination.
If
our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise
their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In
such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If
our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different
target until 12 months from the closing of our initial public offering (or up to 18 months from the consummation of
our initial public offering if we extend the period of time to consummate a business combination, as described in more detail
in this report).
Redemption
of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated
certificate of incorporation provides that we will have until December 17, 2021 (or up to June 17, 2022 if we extend the period
of time to consummate a business combination, as described in more detail in this report) to complete our initial business combination.
If we are unable to complete our business combination by December 17, 2021 (or June 17, 2022 if we extend the period of time to consummate
a business combination, as described in more detail in this report), we will: (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the
trust account and not previously released to us to pay our taxes or for working capital purposes (less up to $50,000 of interest to pay
dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors,
dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire
worthless if we fail to complete our business combination within the applicable time period.
Our sponsor, officers and
directors have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them
if we fail to complete our initial business combination by December 17, 2021 (or June 17, 2022 if we extend the period of time to consummate
a business combination, as described in more detail in this report). However, if our sponsor, officers or directors acquire public shares
in or after our initial public offering, they will be entitled to liquidating distributions from the trust account with respect to such
public shares if we fail to complete our initial business combination within the allotted time period.
Our
sponsor, officers and directors have agreed, pursuant to a letter agreement with us (filed as an exhibit to the registration
statement of which this report forms a part), that they will not propose any amendment to our amended and restated
certificate of incorporation (i) that would modify the substance or timing of our obligation to allow redemption in
connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial
business combination by December 17, 2021 (or June 17, 2022 if we extend the period of time to consummate a business
combination, as described in more detail in this report), or (ii) with respect to any other material provision relating to
stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with
the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds
held in the trust account and not previously released to us to pay our taxes divided by the number of then outstanding public
shares. However, we will only redeem our public shares so long as (after such redemption) our net tangible assets will be at
least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of
underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If
this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy
the net tangible asset requirement (described above) we would not proceed with the amendment or the related redemption of our
public shares.
We
expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors,
will be funded from amounts remaining out of the approximately $655,000 of proceeds held outside the trust account, although we
cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the
costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the
trust account not required to pay taxes on interest income earned on the trust account balance, we may request the trustee to
release to us an additional amount of up to $50,000 of such accrued interest to pay those costs and expenses.
If we were to expend all
of the net proceeds of our initial public offering and the sale of the private placement warrants, other than the proceeds deposited
in the trust account, and without taking into account interest, if any, earned on the trust account, or additional funds deposited in
the trust account in order to extend the period of time we have to consummate our initial business combination, the per-share redemption
amount received by stockholders upon our dissolution would be approximately $10.20. The proceeds deposited in the trust account could,
however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We
cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.20.
Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision
for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make
any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that
we will have funds sufficient to pay or provide for all creditors’ claims.
Although
we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business
execute agreements with us waiving any right, title, interest and claim of any kind in or to any monies held in the trust account
for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute
such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent
inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the
waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the
trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account,
our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third
party that has not executed a waiver if management believes that such third party’s engagement would be significantly more
beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute
a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to
be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable
to find a service provider willing to execute a waiver. Marcum, LLP, our independent registered public accounting firm will not
execute agreements with us waiving such claims to the monies held in the trust account.
In addition, there is no
guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations,
contracts or agreements with us and will not seek recourse against the trust account for any reason. Our sponsor has agreed that it will
be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target
business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below
(i) $10.20 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of
the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn
to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account
and except as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including
liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, then
our sponsor will not be responsible to the extent of any liability for such third party claims We have not independently verified whether
our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities
of our company. We have not asked our sponsor to reserve for such indemnification obligations. Therefore, we cannot assure you that our
sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the trust account,
the funds available for our initial business combination and redemptions could be reduced to less than $10.20 per public share. In such
event, we may not be able to complete our initial business combination, and you would receive such lesser amount per share in connection
with any redemption of your public shares. None of our officers will indemnify us for claims by third parties including, without limitation,
claims by vendors and prospective target businesses.
In
the event that the proceeds in the trust account are reduced below (i) $10.20 per public share or (ii) such lesser amount per
public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of
the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts
that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a
particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its
indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf
against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in
exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the
independent directors to be too high relative to the amount recoverable or if the independent directors determine that a
favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot
assure you that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure you that due to claims
of creditors the actual value of the per-share redemption price will not be less than $10.20 per public
share.
We
will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring
to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements
with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also
not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities,
including liabilities under the Securities Act. As of December 31, 2020, we have access to up to approximately $655,000 from
the proceeds of our initial public offering with which to pay any such potential claims. In the event that we liquidate and it
is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our
trust account could be liable for claims made by creditors.
Under
the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received
by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption
of our public shares in the event we do not complete our business combination by December 17, 2021 (or June 17, 2022 if we extend
the period of time to consummate a business combination, as described in more detail in this report) may be considered a liquidating
distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended
to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any
third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any
claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any
liability of stockholders with respect to a liquidating distribution is limited to the lesser of such shareholder’s pro
rata share of the claim or the amount distributed to the shareholder, and any liability of the shareholder would be barred after
the third anniversary of the dissolution.
Furthermore,
if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in
the event we do not complete our business combination by December 17, 2021 (or June 17, 2022 if we extend the period of time to
consummate a business combination, as described in more detail in this report), is not considered a liquidating distribution under
Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute
of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years,
as in the case of a liquidating distribution. If we are unable to complete our business combination by December 17, 2021 (or June
17, 2022 if we extend the period of time to consummate a business combination, as described in more detail in this report), we
will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than
ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released
to us to pay our taxes or for working capital purposes (less up to $50,000 of interest to pay dissolution expenses), divided by
the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly
as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors,
dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible
following our 12th month (or 18th month on maximum extension) and, therefore, we do not intend
to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions
received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because
we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us
at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against
us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations
will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors
(such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained
in our underwriting agreement, we will seek to have all vendors, service providers, prospective target businesses or other entities
with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies
held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited
and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor
may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.20 per
public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust
account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and
will not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities,
including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third
party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If
we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held
in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to
the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the
trust account, we cannot assure you we will be able to return $10.20 per share to our public stockholders. Additionally, if we
file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions
received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential
transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts
received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors
and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying public stockholders
from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against
us for these reasons.
Our public stockholders
will be entitled to receive funds from the trust account only (i) in the event of the redemption of our public shares if we do not complete
our business combination by December 17, 2021 (or June 17, 2022 if we extend the period of time to consummate a business combination,
as described in more detail in this report), subject to applicable law, (ii) (a) in connection with a shareholder vote to approve an
amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to allow redemption
in connection with our initial business combination or to redeem 100% of our public shares if we have not consummated an initial business
combination by December 17, 2021 (or June 17, 2022 if we extend the period of time to consummate a business combination, as described
in more detail in this report) or (b) with respect to any other provision relating to stockholders’ rights or pre-initial business
combination activity or (iii) our completion of an initial business combination, and then only in connection with those public shares
that such shareholder properly elected to redeem, subject to the limitations described in this report. In no other circumstances will
a shareholder have any right or interest of any kind to or in the trust account. In the event the Merger is not consummated and we seek
shareholder approval in connection with an alternative initial business combination, a shareholder’s voting in connection with
the business combination alone will not result in a shareholder’s redeeming its shares to us for an applicable pro rata share of
the trust account. Such shareholder must have also exercised its redemption rights as described above.
Competition
In the event the Merger
is not consummated, in identifying, evaluating and selecting an alternative target business for our business combination, we may encounter
intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity
groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established
and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these
competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses
will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition
of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption
rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution
they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive
disadvantage in successfully negotiating an initial business combination.
Facilities
Our
executive offices are located at 15 East Putnam Ave, Suite 363, Greenwich, CT 06830. We pay our sponsor a $10,000 per month fee
for office space, administrative and support services. We consider our current office space adequate for our current operations.
Employees
We
currently have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters but
they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business
combination. The amount of time they devote in any time period varies based on the stage of the initial business combination process
we are in. We do not intend to have any full-time employees prior to the completion of our initial business combination.
Periodic
Reporting and Financial Information
Our
units, Class A common stock, and warrants are registered under the Exchange Act, and we have reporting obligations, including
the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange
Act, our annual reports will contain financial statements audited and reported on by our independent registered public accountants.
We
have filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the
Exchange Act. As a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current
intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the
consummation of our business combination.
We
will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials
or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these
financial statements will need to be prepared in accordance with GAAP. We cannot assure you that any particular target business
selected by us as a potential acquisition candidate will have financial statements prepared in accordance with GAAP or that the
potential target business will be able to prepare its financial statements in accordance with GAAP. To the extent that this requirement
cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition
candidates, we do not believe that this limitation will be material.
We
will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2021 as required by
the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be
required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the
Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity
to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.