ITEM 1.
BUSINESS
In
this Annual Report on Form 10-K (the “Form 10-K”), references to the “Company” and
to “we,” “us,” “our” and “Springwater” refer to Springwater Special Situations
Corp.
We
are a blank check company formed under the laws of the State of Delaware on October 2, 2020. We were formed for the purpose of
entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business
combination with one or more businesses or entities, which we refer to as a “target business.” To date, our efforts
have been limited to organizational activities as well as activities related to our initial public offering and searching for
a target business.
We
may pursue a business combination opportunity in any business or industry we choose, although we currently intend to focus on
target businesses in industries that our management team has significant experience with including, but not limited to, media,
engineering construction, engineering services, facility management and services, food and beverages, semiconductor, aerospace,
paper and pulp, logistics and distribution, IT services, software solutions, tourism, hospitality, aviation, retail, precious
metals trading and services, oil and gas, environmental services, steel, household appliances, construction materials and shipping
and cruise industries. In principle, we expect to exclude real estate and infrastructure related sectors.
Springwater
Investment Management LLC and Springwater Capital LLC
Springwater
Investment Management LLC is an investment management firm that controls Springwater Capital. Springwater Capital is a leading
advisor in the special situations investment segment that was formed by Martin Gruschka, our Chief Executive Officer, in 2002.
Through different regional advisory affiliates, Springwater Capital has advised on approximately 50 acquisitions (including add-ons)
consummated in Europe during the last 18 years. Springwater Capital has offices in Madrid, Milan, Luxembourg and Brussels and
currently employs 13 dedicated investment professionals who bring a depth of experience and skills across a broad range of industries
and transaction types.
Our
Target Criteria
We
intend to identify and merge with a sizeable and well-positioned business with operational improvement potential at an undervalued
price, aiming to generate significant returns for shareholders after the capitalization and normalization of the operation. The
current crisis has created many attractive opportunities to acquire well positioned companies at below long-term average valuations
due to some complex and/or special situations, such as overleveraged businesses, out of the money private equity investments and
carve-outs:
| ● | Over
Leveraged Companies. Certain companies are struggling with debt covenants and facing
liquidity issues. In these situations, we believe that a capital increase and potential
equity upside for debt holders and shareholders in a new publicly held entity, could
lead to a successful financial restructuring and strengthening of the target company’s
balance sheet allowing for an attractive upside for the key stakeholders. |
| ● | Out
of the money Private Equity Investments. The valuations of transactions consummated
in 2019 were at all-time highs driven by dry powder in hands of private equity firms,
debt availability and a crowded marketplace. We believe that quite a number of private
equity backed companies will be up for sale at attractive valuations to facilitate a
partial liquidity event for the financial sponsors. |
| ● | Carve-outs.
The current crisis has sharply increased the already high level of corporate indebtedness.
Large corporates will be willing or forced to sell their non-core divisions to generate
liquidity. We believe there is an opportunity to acquire well-positioned divisions from
large corporations and realize their standalone business potential. |
Our
Business Strategy
While
we will not be limited to a particular industry or geographic region, given the experience of our management team, our acquisition
and value creation strategy is to identify, acquire and build a company in the public markets that benefits from the capabilities
of our management team and the wider Springwater Capital platform, and can thus present the best opportunity to create long-term
shareholder value.
Key
components of our business strategy include:
| ● | Solid
European Institutional Network to Source Targets. We have a strong personal and institutional
network built over the past 18 years that provides a growing deal flow, as Springwater
Capital is seen by many Europeans as the “go to” for intermediaries wanting
to introduce a credible and creative partner to their clients. Our sourcing model will
include investment banking firms, private equity groups, consulting firms, accounting
firms, industry experts and large corporations. We also count with operating and sourcing
partners based among the major European cities, that can provide unconventional sources
of acquisition opportunities. |
| ● | Exceptional
Track Record. Acquiring companies with operational improvement potential at an undervalued
price allows us to generate significant return for shareholders after the capitalization
and normalization of the operation of the target business. SWC has a superior track record
generating an average 5.6x2 multiple on invested capital. |
| ● | Pan-European
Execution Experience. SWC team has a broad experience executing deals in European
countries, having successfully executed transactions in Spain, Portugal, Italy, Belgium,
Germany and Switzerland. |
| ● | Multisector
Expertise. Springwater Capital has led 50 transactions (including add-ons) across
many industries including media, engineering construction, engineering services, renewable
energies, facility management & services, food and beverages, semiconductor, aerospace,
paper and pulp, logistics and distribution, IT services, software solutions, tourism,
hospitality, aviation, retail, precious metals trading and services, oil and gas, environmental
services, steel, household appliances, construction materials and shipping and cruise
industries, among others. |
Competitive
Strengths
Alternative
Path to Becoming Public
We
believe our structure will make us an attractive business combination partner to prospective target businesses that desires to
become a publicly listed company. A merger with us will offer a target business an alternative process to a public listing rather
than the traditional initial public offering process. We believe that target businesses may favor this alternative, which we believe
is less expensive and takes less time, while offering greater certainty of execution than the traditional initial public offering.
Furthermore, once a proposed business combination is approved by our shareholders and the transaction is consummated, 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 that could prevent the offering from occurring. Once public,
we believe the target business would have greater access to capital and additional means of creating management incentives that
are better aligned with shareholders’ interests than it would as a private company. A public company can offer further benefits
by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented management. With
public company corporate governance standards, a target business may become attractive to the public investors.
Strong
Financial Position with Flexibility
With
funds in the trust account of approximately $172.9 million available to use for a business combination, we offer a target business
a variety of options such as providing the owners of a target business with shares in a public company and a public means to sell
such shares, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by
reducing its debt ratio. Because we are able to consummate our initial business combination using 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, since we have no specific business
combination under consideration, we have not taken any steps to secure third party financing and there can be no assurance that
it will be available to us.
Effecting
a Business Combination
General
We
are not presently engaged in, and we will not engage in, any substantive commercial business for an indefinite period of time.
The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest.
The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the
proceeds derived from the Initial Public Offering. We intend to utilize cash derived from the proceeds of our initial public offering
and the private placement of Private Placement Units, our capital stock, debt or a combination of these in effecting a business
combination. Although substantially all of the net proceeds of the Initial Public Offering and the Private Placement of Private
Placement Units are intended to be applied generally toward effecting a business combination, the proceeds are not otherwise being
designated for any more specific purposes. A business combination may involve the acquisition of, or merger with, a company which
does not need substantial additional capital but which desires to establish a public trading market for its shares, while avoiding
what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays, significant expense,
loss of voting control and compliance with various Federal and state securities laws. In the alternative, we may seek to consummate
a business combination with a company that may be financially unstable or in its early stages of development or growth. While
we may seek to effect simultaneous business combinations with more than one target business, we will probably have the ability,
as a result of our limited resources, to effect only a single business combination.
Sources
of Target Businesses
We
anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment
bankers and private investment funds. Target businesses may be brought to our attention by such unaffiliated sources as a result
of being solicited by us through calls or mailings. 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 the prospectus for our Initial Public
Offering and know what types of businesses we are targeting. Our officers and directors, as well as their affiliates, and our
other stockholders 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.
In addition, we expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available
to us as a result of the track record and business relationships of our officers and directors. We may also determine to engage
the services of professional firms or other individuals that specialize in business acquisitions on a formal basis, in which event
we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based
on the terms of the transaction. If we decide to enter into a business combination with a target business that is affiliated with
our officers, directors or initial stockholders, we will do so only if we have obtained an opinion from an independent investment
banking firm or another independent entity that commonly renders valuation opinions that the business combination is fair to our
unaffiliated stockholders from a financial point of view.
Selection
of a Target Business and Structuring of a Business Combination
Subject
to the limitations that a target business have a fair market value of at least 80% of the balance in the Trust Account (excluding
taxes payable on the income earned on the trust account) at the time of the execution of a definitive agreement for our initial
business combination, as described below in more detail, our management will have virtually unrestricted flexibility in identifying
and selecting a prospective target business. We have not established any other specific attributes or criteria (financial or otherwise)
for prospective target businesses. In evaluating a prospective target business, our management may consider a variety of factors,
including one or more of the following:
|
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financial
condition and results of operation; |
|
● |
brand
recognition and potential; |
|
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experience
and skill of management and availability of additional personnel; |
|
● |
stage
of development of the products, processes or services; |
|
● |
existing
distribution and potential for expansion; |
|
● |
degree
of current or potential market acceptance of the products, processes or services; |
|
● |
proprietary
aspects of products and the extent of intellectual property or other protection for products or formulas; |
|
● |
impact
of regulation on the business; |
|
● |
regulatory
environment of the industry; |
|
● |
costs
associated with effecting the business combination; |
|
● |
industry
leadership, sustainability of market share and attractiveness of market industries in which a target business participates;
and |
|
● |
macro
competitive dynamics in the industry within which the company competes. |
These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be
based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting
a business combination consistent with our business objective. In evaluating a prospective target business, we will conduct an
extensive due diligence review which will encompass, among other things, meetings with incumbent management and inspection of
facilities, as well as review of financial and other information which is made available to us. This due diligence review will
be conducted either by our management or by unaffiliated third parties we may engage, although we have no current intention to
engage any such third parties.
The
time and costs required to select and evaluate a target business and to structure and complete the business combination cannot
presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of
a prospective target business with which a business combination is not ultimately completed will result in a loss to us and reduce
the amount of capital available to otherwise complete a business combination.
Fair
Market Value of Target Business
Pursuant
to Nasdaq listing rules, the target business or businesses that we acquire must collectively have a fair market value equal to
at least 80% of the balance of the funds in the trust account (excluding taxes payable on the income earned on the trust account)
at the time of the execution of a definitive agreement for our initial business combination, although we may acquire a target
business whose fair market value significantly exceeds 80% of the trust account balance. We currently anticipate structuring a
business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however,
structure a business combination where we merge directly with the target business or where we acquire less than 100% of such interests
or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other
reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the
outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to
be required to register as an investment company under the Investment Company Act of 1940, as amended. Even if the post-transaction
company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination
may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us
in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of
new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling
interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately
prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business
combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the
post-transaction company, only the portion of such business or businesses that is owned or acquired is what will be valued for
purposes of the 80% fair market value test. In order to consummate such an acquisition, we may issue a significant amount of our
debt or equity securities to the sellers of such businesses and/or seek to raise additional funds through a private offering of
debt or equity securities. Since we have no specific business combination under consideration, we have not entered into any such
fund-raising arrangement and have no current intention of doing so. The fair market value of the target will be determined by
our board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential
sales, earnings, cash flow and/or book value). If our board is not able to independently determine that the target business has
a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another
independent entity that commonly renders valuation opinions, with respect to the satisfaction of such criteria. We will not be
required to obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders
valuation opinions, as to the fair market value if our board of directors independently determines that the target business complies
with the 80% threshold.
Lack
of Business Diversification
Our
business combination must be with a target business or businesses that collectively satisfy the minimum valuation standard at
the time of such acquisition, as discussed above, although this process may entail the simultaneous acquisitions of several operating
businesses at the same time. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future
performance of a single business. Unlike other entities which may have the resources to complete several business combinations
of entities operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the
resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. By consummating
a business combination with only a single entity, our lack of diversification may:
|
● |
subject
us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact
upon the particular industry in which we may operate subsequent to a business combination, and |
|
● |
result
in our dependency upon the performance of a single operating business or the development or market acceptance of a single
or limited number of products, processes or services. |
If
we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for
each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other acquisitions,
which may make it more difficult for us, and delay our ability, to complete the business combination. With multiple acquisitions,
we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and
due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation
of the operations and services or products of the acquired companies in a single operating business.
Limited
Ability to Evaluate the Target Business’ Management
Although
we intend to scrutinize the management of a prospective target business when evaluating the desirability of effecting a business
combination, we cannot assure you that our assessment of the target business’ management will prove to be correct. In addition,
we cannot assure you that the future management will have the necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of our officers and directors, if any, in the target business following a business combination
cannot presently be stated with any certainty. While it is possible that some of our key personnel will remain associated in senior
management or advisory positions with us following a business combination, it is unlikely that they will devote their full-time
efforts to our affairs subsequent to a business combination. Moreover, they would only be able to remain with the company after
the consummation of a business combination if they are able to negotiate employment or consulting agreements in connection with
the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and
could provide for them to receive compensation in the form of cash payments and/or our securities for services they would render
to the company after the consummation of the business combination. Additionally, our officers and directors may not have significant
experience or knowledge relating to the operations of the particular target business.
Following
a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business.
We cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers we do
recruit will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders
May Not Have the Ability to Approve an Initial Business Combination
In
connection with any proposed business combination, we will either (1) seek stockholder approval of our initial business combination
at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for
or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit
in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to
us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share
of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described
herein. If we determine to engage in a tender offer, such tender offer will be structured so that each stockholder may tender
all of his, her or its shares rather than some pro rata portion of his, her or its shares. The decision as to
whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to
us in 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 otherwise require us to seek stockholder approval. In the case
of a tender offer, we will file tender offer documents with the SEC which will contain substantially the same financial and other
information about the initial business combination as is required under the SEC’s proxy rules. We will consummate our initial
business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, if we seek stockholder
approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination.
Conversion
Rights
At
any meeting called to approve an initial business combination, public stockholders may seek to convert their shares, regardless
of whether they vote for or against the proposed business combination or do not vote at all, for their pro rata share
of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial
business combination, less any taxes then due but not yet paid. Alternatively, we may provide our public stockholders with the
opportunity to sell their shares of common stock to us through a tender offer (and thereby avoid the need for a stockholder vote)
for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, less
any taxes then due but not yet paid.
Our
initial stockholders, officers and directors will not have conversion rights with respect to any shares of common stock owned
by them, directly or indirectly. Additionally, the holders of the 375,000 shares of common stock issued to EarlyBirdCapital, Inc.
(“EarlyBirdCapital” or “EBC”) and its designees (“EBC founder shares”) do not have conversion
rights with respect to the EBC founder shares.
We
may also require public stockholders, whether they are a record holder or hold their shares in “street name,” to either
tender their certificates to our transfer agent at any time through the vote on the business combination or to deliver their shares
to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at
the holder’s option. Any proxy solicitation materials that we furnish to stockholders in connection with the vote for any
proposed business combination will indicate whether we are requiring stockholders to satisfy such delivery requirements. Accordingly,
a stockholder would have from the time the stockholder received our proxy statement through the vote on the business combination
to deliver his shares if he wishes to seek to exercise his conversion rights. Under Delaware law and our bylaws, we are required
to provide at least 10 days advance notice of any stockholder meeting, which would be the minimum amount of time a stockholder
would have to determine whether to exercise conversion rights.
There
is a nominal cost associated with this 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 $80, and it would be up to the broker whether or not
to pass this cost on to the converting holder. However, this fee would be incurred regardless of whether or not we require holders
seeking to exercise conversion rights to tender their shares prior to a specified date. The need to deliver shares is a requirement
of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event we require
stockholders seeking to exercise conversion rights to tender their shares prior to the consummation of the proposed business combination
and the proposed business combination is not consummated, this may result in an increased cost to stockholders.
Any
request to convert such shares once made, may be withdrawn at any time up to the vote on the proposed business combination. Furthermore,
if a holder of a public share delivers his certificate in connection with an election of their conversion and subsequently decides
prior to the vote on the business combination not to elect to exercise such rights, he may simply request that the transfer agent
return the certificate (physically or electronically).
If
the initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise
their conversion rights would not be entitled to convert their shares for the applicable pro rata share of the
trust account. In such case, we will promptly return any shares delivered by public holders.
Liquidation
if No Business Combination
Our amended and restated
certificate of incorporation provides that we will have only until February 28, 2023 to complete our initial business combination. If
we do not complete a business combination by such date and our stockholders do not otherwise approve an extension of time to consummate
an initial business combination, 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 100% of the outstanding public shares 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 the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. In connection with our redemption of 100% of our outstanding public shares for a portion
of the funds held in the trust account, each holder will receive a full pro rata portion of the amount then in the trust
account, plus any pro rata interest earned on the funds held in the trust account and not previously released to us to
pay our taxes payable on such funds, less up to $100,000 of interest to pay liquidation expenses and which interest shall be net of taxes
payable. At such time, the warrants will expire, holder of warrants will receive nothing upon a liquidation with respect to such warrants
and the warrants will be worthless.
Under
the Delaware General Corporation Law, 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 100% of our outstanding public shares in the event we do not complete our initial
business combination within the required time period may be considered a liquidation distribution under Delaware law. If the corporation
complies with certain procedures set forth in Section 280 of the Delaware General Corporation Law 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 stockholder’s pro rata share
of the claim or the amount distributed to the stockholder, and any liability of the stockholder 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 100%
of our public shares in the event we do not complete our initial business combination within the required time period is not considered
a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174
of the Delaware General Corporation Law, 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 liquidation distribution. If we are unable to complete
a business combination within the prescribed time frame, 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 100% of the outstanding
public shares which redemption will completely extinguish public stockholders’ rights as stockholders (including the right
to receive further liquidation 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 the case of (ii) and (iii) above) 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 deadline 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 of the Delaware General Corporation Law, Section 281(b) of the Delaware General
Corporation Law 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.
We
will seek to have all third parties (including any vendors or other entities we engage) and any prospective target businesses
enter into valid and enforceable agreements with us waiving any right, title, interest or claim of any kind they may have in or
to any monies held in the trust account. As a result, the claims that could be made against us will be limited, thereby lessening
the likelihood that any claim would result in any liability extending to the trust. We therefore believe that any necessary provision
for creditors will be reduced and should not have a significant impact on our ability to distribute the funds in the trust account
to our public stockholders. Nevertheless, there is no guarantee that vendors, service providers and prospective target businesses
will execute such agreements. In the event that a potential contracted party was to refuse to execute such a waiver, we will execute
an agreement with that entity only if our management first determines that we would be unable to obtain, on a reasonable basis,
substantially similar services or opportunities from another entity willing to execute such a waiver. Examples of instances where
we may engage a third party that refused to execute a waiver would be the engagement of a third party consultant who cannot sign
such an agreement due to regulatory restrictions, such as our auditors who are unable to sign due to independence requirements,
the underwriters, who have not waived their rights to indemnification provided by us under the underwriting agreement, or other
third parties whose particular expertise or skills are believed by management to be superior to those of other consultants that
would agree to execute a waiver or a situation in which management does not believe it would be able to find a provider of required
services willing to provide the waiver. There is also no guarantee that, even if they execute such agreements with us, they will
not seek recourse against the trust account. Our Sponsor has agreed that it will be liable to pay debts and obligations to target
businesses or vendors or other entities that are owed money by us for services rendered or contracted for or products sold to
us. However, the agreement entered into by our Sponsor specifically provides for two exceptions to the indemnity given: it will
have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement
with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, or
(2) as to any claims for indemnification by the underwriters of our Initial Public Offering against certain liabilities,
including liabilities under the Securities Act. As a result, we cannot assure you that the per-share distribution from
the trust account, if we liquidate the Trust Account because we have not completed a business combination within the required
time period, will not be less than $10.10.
In
the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.10 per public share and (ii) the
actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.10
per share due to reductions in the value of the trust assets, in each case less taxes payable, 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 such indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf to enforce these indemnification
obligations, it is possible that our independent directors in exercising their business judgment may choose not to do so in any
particular instance. 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 $10.10 per share.
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 shareholders. To the extent any bankruptcy claims deplete the
trust account, we cannot assure you we will be able to return $10.10 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, and 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 initial business combination within the required time period, (ii) in connection
with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our
obligation to redeem 100% of our public shares if we do not complete our initial business combination within the required time
period or in connection with certain amendments to our charter prior thereto or (iii) if they redeem their respective shares
for cash upon the completion of our initial business combination. In no other circumstances will a stockholder have any right
or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business
combination, a stockholder’s voting in connection with the business combination alone will not result in a stockholder’s
converting its shares to us for an applicable pro rata share of the trust account. Such stockholder must have
also exercised its conversion rights and followed the procedures described above and as detailed in the applicable proxy or tender
offer materials.
Competition
In
identifying, evaluating and selecting a target business, we may encounter intense competition from other entities having a business
objective similar to ours. Many of these entities are well established and have extensive experience identifying and effecting
business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources
than us and our financial resources will be relatively limited when contrasted with those of many of these competitors. Our ability
to compete in acquiring certain sizable target businesses may be limited by our available financial resources.
The
following also may not be viewed favorably by certain target businesses:
|
● |
our
obligation to seek stockholder approval of a business combination or engage in a tender offer may delay the completion of
a transaction; |
|
● |
our
obligation to convert or repurchase shares of common stock held by our public stockholders may reduce the resources available
to us for a business combination; |
|
● |
our
outstanding warrants, and the potential future dilution they represent. |
In
recent years, and especially since the fourth quarter of 2020, the number of special purpose acquisition companies that have been
formed has increased substantially. Many potential targets for special purpose acquisition companies have already entered into
an initial business combination, and there are still many special purpose acquisition companies seeking targets for their initial
business combination, as well as many such companies currently in registration. As a result, at times, fewer attractive targets
may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate
an initial business combination.
If
we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the
target business. We cannot assure you that, subsequent to a business combination, we will have the resources or ability to compete
effectively.
Employees
We
have three executive officers. These individuals are not obligated to devote any specific number of hours to our matters and intend
to devote only as much time as they deem necessary to our affairs. The amount of time they will devote in any time period will
vary based on whether a target business has been selected for the business combination and the stage of the business combination
process the company is in. Accordingly, once management locates a suitable target business to acquire, they will spend more time
investigating such target business and negotiating and processing the business combination (and consequently spend more time to
our affairs) than they would prior to locating a suitable target business. We presently expect each of our executive officers
to devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full-time
employees prior to the consummation of a business combination.
Facilities
Our
executive offices are located at c/o Graubard Miller, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174, and
our telephone number is (212) 818-8800. Since inception, the Company has utilized office space provided by its counsel
at no cost. We consider our current office space, combined with the other office space otherwise available to our executive officers,
adequate for our current operations.
ITEM 1A.
RISK FACTORS
An
investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together
with the other information contained in this Annual Report on Form 10-K, the prospectus associated with our Initial
Public Offering and the registration statement of which such prospectus forms a part before making a decision to invest in our
securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely
affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.
The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with
respect to us and our business.
Risks
Relating to Searching for and Consummating a Business Combination
Our
stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete
our initial business combination even though a majority of our stockholders do not support such a combination.
We
may choose not to hold a stockholder vote before we complete our initial business combination if the business combination would
not require stockholder approval under applicable law or stock exchange listing requirement. For instance, if we were seeking
to acquire a target business where the consideration we were paying in the transaction was all cash, we would not be required
to seek stockholder approval to complete such a transaction. Except for as required by applicable law or stock exchange requirement,
the decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to
sell their shares to us in 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 otherwise require us to seek stockholder
approval. Accordingly, we may complete our initial business combination even if holders of a majority of our shares of common
stock do not approve of the business combination we complete. Please see the section of the prospectus associated with our Initial
Public Offering and the registration statement of which such prospectus forms a part entitled “Proposed Business—Stockholders
May Not Have the Ability to Approve Our Initial Business Combination” for additional information.
Your
only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of
your right to convert your shares to cash.
At
the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of our
initial business combination. Since our board of directors may complete a business combination without seeking stockholder approval,
public stockholders may not have the right or opportunity to vote on the business combination, unless we seek such stockholder
vote. Accordingly, your only opportunity to affect the investment decision regarding our initial business combination may be limited
to exercising your conversion rights within the period of time (which will be at least 20 business days) set forth in our tender
offer documents mailed to our public stockholders in which we describe our initial business combination.
If
we seek stockholder approval of our initial business combination, our initial stockholders and management team have agreed to
vote in favor of such initial business combination, regardless of how our public stockholders vote.
Our
Sponsor, initial stockholders, officers and directors have agreed to vote their founder shares, as well as any public shares purchased
during or after our Initial Public Offering (including in open market and privately-negotiated transactions), in favor of our
initial business combination. EarlyBirdCapital has also agreed to vote the private shares it is purchasing in favor of such proposed
business combination. As a result, in addition to our initial stockholders’ founder shares, we would need ___, or approximately
__%, of the 17,118,624 public shares sold in the Initial Public Offering to be voted in favor of an initial business combination
in order to have our initial business combination approved (assuming all outstanding shares are voted) in order to have such initial
business combination approved (or, if the applicable rules of Nasdaq then in effect require approval by a majority of the votes
cast by public stockholders, we would need ____ of public shares sold in the Initial Public Offering to be voted in favor of a
transaction (assuming all outstanding stock is voted) in order to have such initial business combination approved). Accordingly,
if we seek stockholder approval of our initial business combination, the agreement by our initial stockholders and management
team to vote in favor of our initial business combination will increase the likelihood that we will receive the requisite stockholder
approval for such initial business combination.
Our
initial stockholders control a substantial interest in us and thus may exert a substantial influence on actions requiring a stockholder
vote, potentially in a manner that you do not support.
Our
initial stockholders own 20% of our issued and outstanding shares of common stock. Accordingly, they may exert a substantial influence
on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended
and restated certificate of incorporation. If our initial stockholders purchase any additional shares of common stock in the aftermarket
or in privately negotiated transactions, this would increase their control. Neither our initial stockholders nor, to our knowledge,
any of our officers or directors, have any current intention to purchase additional securities. Factors that would be considered
in making such additional purchases would include consideration of the current trading price of our common stock. In addition,
our board of directors, whose members were elected by our initial stockholders, is and will be divided into three classes, each
of which will generally serve for a term for three years with only one class of directors being elected in each year. We may not
hold an annual meeting of stockholders to elect new directors prior to the completion of our initial business combination, in
which case all of the current directors will continue in office until at least the completion of the business combination. If
there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of
directors will be considered for election and our initial stockholders, because of their ownership position, will have considerable
influence regarding the outcome. Accordingly, our initial stockholders will continue to exert control at least until the completion
of our initial business combination.
The
ability of our public stockholders to convert their shares for cash may make our financial condition unattractive to potential
business combination targets, which may make it difficult for us to enter into a business combination with a target.
We
may seek to enter into a business combination transaction agreement with a prospective target business that requires as a closing
condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their conversion
rights, we may not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination.
Consequently, if accepting all properly submitted conversion requests would cause our net tangible assets to be less than $5,000,001
either immediately prior to or upon consummation of the business combination or such greater amount necessary to satisfy a closing
condition as described above, we would not proceed with such conversion and the related business combination and may instead search
for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into
a business combination transaction with us.
The
ability of our public stockholders to exercise conversion rights with respect to a large number of our shares may not allow us
to complete the most desirable business combination or optimize our capital structure.
At
the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise
their conversion rights, and therefore will need to structure the transaction based on our expectations as to the number of shares
that will be submitted for conversion. If our initial business combination agreement requires us to use a portion of the cash
in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve
a portion of the cash in the trust account to meet such requirements, or arrange for third party financing. In addition, if a
larger number of shares are submitted for conversion than we initially expected, we may need to restructure the transaction to
reserve a greater portion of the cash in the trust account or arrange for third party financing. Raising additional third-party
financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations
may limit our ability to complete the most desirable business combination available to us or optimize our capital structure.
The
ability of our public stockholders to exercise conversion rights with respect to a large number of our shares could increase the
probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order
to convert your shares.
If
our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price
or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful
is increased. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account
until we liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your shares in the
open market; however, at such time our shares may trade at a discount to the pro rata amount per share in the trust account. In
either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with the
conversion until we liquidate or you are able to sell your shares in the open market.
The
requirement that we complete our initial business combination within 18 months after the closing of the Initial Public Offering
may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have in
which to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could
undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.
Any
potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete
our initial business combination within 18 months from the closing of the Initial Public Offering. Consequently, such target business
may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination
with that particular target business, we may be unable to complete our initial business combination with any target business.
This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due
diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
We
may not be able to complete our initial business combination within 18 months after the closing of the Initial Public Offering,
in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate.
Our
amended and restated certificate of incorporation provides that we must complete our initial business combination within 18 months
after the closing of the Initial Public Offering. Our ability to complete our initial business combination may be negatively impacted
by general market conditions, volatility in the capital and debt markets and the other risks described herein. If we have not
completed our initial business combination within such time period, 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 trust account not previously released to us (to pay our tax obligations and less up
to $100,000 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 liquidation
distributions, if any) 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 the case of clauses (ii) and (iii),
to our obligations under Delaware law to provide for claims of creditors and in all cases subject to the other requirements of
applicable law.
If
we are unable to consummate our initial business combination within 18 months from the closing of the Initial Public Offering,
our public stockholders may be forced to wait beyond such to 18 months before redemption from our trust account.
If
we are unable to consummate our initial business combination within 18 months from the closing of the Initial Public Offering,
the proceeds then on deposit in the trust account, including interest earned on the trust account not previously released to us
(to pay our tax obligations and less up to $100,000 of interest to pay dissolution expenses), will be used to fund the redemption
of our public shares, as further described herein. Any redemption of public stockholders from the trust account will be effected
automatically by function of our amended and restated certificate of incorporation prior to any voluntary winding up. If we are
required to wind-up, liquidate the trust account and distribute such amount therein, pro rata, to our public
stockholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable
provisions of the DGCL. In that case, investors may be forced to wait beyond 18 months from the closing of the Initial Public
Offering before the redemption proceeds of our trust account become available to them, and they receive the return of their pro
rata portion of the proceeds from our trust account. We have no obligation to return funds to investors prior to the date of our
redemption or liquidation unless we seek to amend our certificate of incorporation as described herein or consummate our initial
business combination prior thereto and only then in cases where investors have sought to convert their common stock. Only upon
our redemption or any liquidation will public stockholders be entitled to distributions if we are unable to complete our initial
business combination.
We
do not have a specified maximum conversion threshold. The absence of such a threshold may make it possible for us to complete
our initial business combination with which a substantial majority of our stockholders do not agree.
Our
amended and restated certificate of incorporation does not provide a specified maximum conversion threshold, except that in no
event will we consummate an initial business combination if holders exercising conversion rights would cause our net tangible
assets to be less than $5,000,001 either immediately prior to or upon consummation of the business combination (such that we are
not subject to the SEC’s “penny stock” rules). As a result, we may be able to complete our initial business
combination even though a substantial majority of our public stockholders have converted their shares. In the event the aggregate
cash consideration we would be required to pay for all shares of common stock that are validly submitted for conversion 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 convert any shares, all shares of common stock submitted
for conversion will be returned to the holders thereof, and we instead may search for an alternate business combination.
If
we seek stockholder approval of our initial business combination, our initial stockholders, directors, executive officers, advisors
and their affiliates may elect to purchase shares or public warrants from public stockholders, which may influence a vote on a
proposed business combination and reduce the public float of our common stock.
If
we seek stockholder approval of our initial business combination and we do not conduct conversions in connection with our initial
business combination pursuant to the tender offer rules, our initial stockholders, directors, executive officers, advisors or
their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior
to or following the completion of our initial business combination, although they are under no obligation to do so. However, other
than as expressly stated herein, 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 or public warrants in such transactions.
In
the event that our initial stockholders, directors, executive officers, advisors or their affiliates purchase shares in privately
negotiated transactions from public stockholders who have already elected to exercise their conversion rights, such selling stockholders
would be required to revoke their prior elections to convert their shares. The purpose of any such purchases of shares could be
to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval
of the business combination or to satisfy a closing condition in an agreement with a target business that requires us to have
a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such
requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of
public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection
with our initial business combination. Any such purchases of our securities may result in the completion of our initial business
combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16
of the Exchange Act to the extent such purchasers are subject to such reporting requirements. See “Proposed Business—Permitted
purchases of our securities” for a description of how our initial stockholders, directors, executive officers, advisors
or any of their affiliates will select which stockholders to purchase securities from in any private transaction.
In
addition, if such purchases are made, the public float of our common stock or public warrants and the number of beneficial holders
of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our
securities on a national securities exchange.
In
connection with any stockholder meeting called to approve a proposed initial business combination, we may require stockholders
who wish to convert their shares in connection with a proposed business combination to comply with specific requirements for conversion
that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights.
In
connection with any stockholder meeting called to approve a proposed initial business combination, each public stockholder will
have the right, regardless of whether he is voting for or against such proposed business combination, to demand that we convert
his shares for a pro rata share of the trust account as of two business days prior to the consummation of the initial business
combination. We may require public stockholders who wish to convert their shares in connection with a proposed business combination
to either (i) tender their certificates (if any) to our transfer agent or (ii) deliver their shares to the transfer
agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holders’
option, prior to the vote on the business combination with the specific deadline set forth in the proxy materials sent in connection
with the proposal to approve the business combination. In order to obtain a physical share certificate, a stockholder’s
broker and/or clearing broker, DTC and our transfer agent will need to act to facilitate this request. It is our understanding
that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However,
because we do not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks
to obtain a physical share certificate. While we have been advised that it takes a short time to deliver shares through the DWAC
System, we cannot assure you of this fact. Accordingly, if it takes longer than we anticipate for stockholders to deliver their
shares, stockholders who wish to convert may be unable to meet the deadline for exercising their conversion rights and thus may
be unable to convert their shares.
If,
in connection with any stockholder meeting called to approve a proposed business combination, we require public stockholders who
wish to convert their shares to comply with specific requirements for conversion, such converting stockholders may be unable to
sell their securities when they wish to in the event that the proposed business combination is not approved.
If
we require public stockholders who wish to convert their shares to comply with specific delivery requirements for conversion and
such proposed business combination is not consummated, we will promptly return such certificates to the tendering public stockholders.
Accordingly,
investors who attempted to convert their shares in such a circumstance will be unable to sell their securities after the failed
acquisition until we have returned their securities to them. The market price for our shares of common stock may decline during
this time and you may not be able to sell your securities when you wish to, even while other stockholders that did not seek conversion
may be able to sell their securities.
If
a stockholder fails to receive notice of our offer to convert our public shares in connection with our initial business combination,
or fails to comply with the procedures for tendering its shares, such shares may not be converted.
We
will comply with the proxy rules or tender offer rules, as applicable, when conducting conversions in connection with our initial
business combination. Despite our compliance with these rules, if a stockholder fails to receive our proxy solicitation or tender
offer materials, as applicable, such stockholder may not become aware of the opportunity to convert its shares. In addition, the
proxy solicitation or tender offer materials, as applicable, that we will furnish to holders of our public shares in connection
with our initial business combination will describe the various procedures that must be complied with in order to validly convert
or tender public shares. In the event that a stockholder fails to comply with these procedures, its shares may not be converted
to cash.
Because
of our limited resources and the significant competition for business combination opportunities, it may be more difficult for
us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders
may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders,
and our warrants will expire worthless.
We
expect to encounter intense competition from other entities having a business objective similar to ours, including private investors
(which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international,
competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have
extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing
services to various industries. Many of these competitors possess greater technical, human and other resources or more industry
knowledge than we do, and our financial resources will be relatively limited when contrasted with those of many of these competitors.
While we believe there are numerous target businesses we could potentially acquire with the net proceeds of the Initial Public
Offering and the sale of the Private Placement Units, our ability to compete with respect to the acquisition of certain target
businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others
an advantage in pursuing the acquisition of certain target businesses. Furthermore, we are obligated to offer holders of our public
shares the right to convert their shares for cash at the time of our initial business combination in conjunction with a stockholder
vote or via a tender offer. Target companies will be aware that this may reduce the resources available to us for our initial
business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business
combination. If we are unable to complete our initial business combination, our public stockholders may receive only their pro
rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will
expire worthless.
If
the net proceeds of the Initial Public Offering not being held in the trust account, together with the interest that may be released
to us, are insufficient to allow us to operate for at least the next 18 months, it could limit the amount available to fund our
search for a target business or businesses and complete our initial business combination, and we will depend on loans from our
initial stockholders or management team to fund our search and to complete our initial business combination.
Because
we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target
businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular
target business’ operations.
Although
we initially intend to focus our search for a target business in the media, engineering construction, engineering services, facility
management and services, food and beverages, semiconductor, aerospace, paper and pulp, logistics and distribution, IT services,
software solutions, tourism, hospitality, aviation, retail, precious metals trading and services, oil and gas, environmental services,
steel, household appliances, construction materials and shipping and cruise industries sectors, we are not limited to evaluating
a target business in any particular industry sector (except that we will not, under our amended and restated certificate of incorporation,
be permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations).
As a result, there is no current basis to evaluate the possible merits or risks of any particular target business’ operations,
results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our initial business
combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we
combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected
by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers
and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will
properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence.
Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that
those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately
prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination
target. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer
a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value unless
they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or
other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy
solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement
or material omission.
We
may seek acquisition opportunities in any industry our management chooses (which industries may be outside of our management’s
areas of expertise).
We
may consider a business combination with a target business operating in any industry our management chooses. Although our management
will endeavor to evaluate the risks inherent in any particular business combination candidate, we cannot assure you that we will
adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our units
will not ultimately prove to be less favorable to investors in the Initial Public Offering than a direct investment, if an opportunity
were available, in a business combination candidate. In the event we elect to pursue a business combination outside of the areas
of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or operation,
and the information contained in this Annual Report regarding the areas of our management’s expertise would not be relevant
to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain
or assess all of the significant risk factors. Accordingly, any securityholders who choose to remain securityholders following
our initial business combination could suffer a reduction in the value of their securities. Such securityholders are unlikely
to have a remedy for such reduction in value.
We
may seek business combination opportunities with a financially unstable business or an entity lacking an established record of
revenue, cash flow or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining
key personnel.
To
the extent we complete our initial business combination with a financially unstable business or an entity lacking an established
record of revenues or earnings, we may be affected by numerous risks inherent in the operations of the business with which we
combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Although
our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to
properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence.
Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that
those risks will adversely impact a target business.
We
are not required to obtain an opinion from an independent investment banking firm, or another valuation or appraisal firm that
commonly renders fairness opinions, and consequently, you may have no assurance from an independent source that the price we are
paying for the business is fair to our stockholders from a financial point of view.
Unless
we complete our initial business combination with an affiliated entity, we are not required to obtain an opinion from an independent
investment banking firm, or another valuation or appraisal firm that commonly renders fairness opinions that the price we are
paying is fair to our stockholders from a financial point of view. If no opinion is obtained, our stockholders will be relying
on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial
community. Such standards used will be disclosed in our proxy solicitation or tender offer materials, as applicable, related to
our initial business combination.
We
may issue additional shares of common stock or preferred stock to complete our initial business combination or under an employee
incentive plan after completion of our initial business combination. We may also issue shares of common stock upon the conversion
of the founder shares at a ratio greater than one-to-one at the time of our initial business combination as
a result of the anti-dilution provisions contained therein. Any such issuances would dilute the interest of our stockholders and
likely present other risks.
We
may issue a substantial number of additional shares of common stock or preferred stock to complete our initial business combination
or under an employee incentive plan after completion of our initial business combination. However, our amended and restated certificate
of incorporation provide, among other things, that prior to our initial business combination, we may not issue additional shares
that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business
combination or any amendment to our amended and restated certificate of incorporation that would affect the rights granted to
public stockholders in the Initial Public Offering, including but not limited to conversion rights. These provisions of our amended
and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be
amended with a stockholder vote. The issuance of additional shares of common stock or preferred stock:
|
● |
may
significantly dilute the equity interest of investors in the Initial Public Offering; |
|
● |
may
subordinate the rights of holders of common stock if shares of preferred stock are issued with rights senior to those afforded
our common stock; |
|
● |
could
cause a change in control if a substantial number of shares of common stock are issued, which may affect, among other things,
our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present
officers and directors; and |
|
● |
may
adversely affect prevailing market prices for our units, shares of common stock and/or warrants. |
A
provision of our warrant agreement may make it more difficult for us to consummate an initial business combination.
If:
|
(i) |
we
issue additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing
of our initial business combination at an issue price or effective issue price of less than $9.20 per share of common stock
(with such issue price or effective issue price to be determined in good faith by our board of directors, and in the case
of any such issuance to our initial stockholders or their affiliates, without taking into account any founders’ shares
held by them prior to such issuance) (the “Newly Issued Price”); |
| (ii) | the
aggregate gross proceeds from such issuances represent more than 60% of the total equity
proceeds, inclusive of interest earned on equity held in trust, available for the funding
of our initial business combination on the date of the consummation of our initial business
combination (net of conversions), and |
| (iii) | the
volume weighted average trading price of our common stock during the 20-trading day period
starting on the trading day prior to the day on which we consummate our initial business
combination (such price, the “Market Value”) is below $9.20 per share, |
then
the exercise price of the warrants will be adjusted to be equal to 115% of the greater of the Market Value and the Newly Issued
Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the greater
of the Market Value and the Newly Issued Price. This may make it more difficult for us to consummate an initial business combination
with a target business.
We
may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely
affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although
we have no commitments as of the date of this Annual Report to issue any notes or other debt securities, or to otherwise incur
outstanding debt following the Initial Public Offering, we may choose to incur substantial debt to complete our initial business
combination. We and our officers have agreed that we will not incur any indebtedness unless we have obtained from the lender a
waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance
of debt will affect the per share amount available for conversion from the trust account. Nevertheless, the incurrence of debt
could have a variety of negative effects, including:
|
● |
default
and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our
debt obligations; |
|
● |
acceleration
of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
|
● |
our
immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
|
● |
our
inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain
such financing while the debt security is outstanding; |
|
● |
our
inability to pay dividends on our common stock; |
|
● |
using
a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for
dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
|
● |
limitations
on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
|
● |
increased
vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government
regulation; and |
|
● |
limitations
on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution
of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
We
may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth
of a target business, which could compel us to restructure or abandon a particular business combination. If we are unable to complete
our initial business combination, our public stockholder may only receive their pro rata portion of the funds in the trust account
that are available for distribution to public stockholders, and our warrants will expire worthless.
Although
we believe that the net proceeds of the Initial Public Offering and the sale of the Private Placement Units will be sufficient
to allow us to complete our initial business combination, because we have not yet selected any prospective target business, we
cannot ascertain the capital requirements for any particular transaction. If the net proceeds of the Initial Public Offering and
the sale of the Private Placement Units prove to be insufficient, either because of the size of our initial business combination,
the depletion of the available net proceeds in search of a target business, the obligation to convert for cash a significant number
of shares from stockholders who elect conversion in connection with our initial business combination, we may be required to seek
additional financing or to abandon the proposed business combination. We cannot assure you that such financing will be available
on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial
business combination, we would be compelled to either restructure the transaction or abandon that particular business combination
and seek an alternative target business candidate. If we are unable to complete our initial business combination, our public stockholders
may only receive their pro rata portion of the funds in the trust account that are available for distribution to public stockholders,
and our warrants will expire worthless. In addition, even if we do not need additional financing to complete our initial business
combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional
financing could have a material adverse effect on the continued development or growth of the target business. None of our officers,
directors or stockholders is required to provide any financing to us in connection with or after our initial business combination.
Resources
could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts
to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public
stockholders may only receive their pro rata portion of the funds in the trust account that are available for distribution to
public stockholders, and our warrants will expire worthless.
We
anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements,
disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants,
attorneys and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point
for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target
business, we may fail to complete our initial business combination for any number of reasons including those beyond our control.
Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts
to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public
stockholders may only receive their pro rata portion of the funds in the trust account that are available for distribution to
public stockholders, and our warrants will expire worthless.
We
may only be able to complete one business combination with the proceeds of the Initial Public Offering and the sale of the Private
Placement Units, which will cause us to be solely dependent on a single business which may have a limited number of products or
services. This lack of diversification may negatively impact our operations and profitability.
The
net proceeds from the Initial Public Offering and the private placement of units provided us with approximately $172.9 million
that we may use to complete our initial business combination. We may effectuate our initial business combination with a single
target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to
effectuate our initial business combination with more than one target business because of various factors, including the existence
of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present
operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By
completing our initial business combination with only a single entity, our lack of diversification may subject us to numerous
economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business
combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
|
● |
solely
dependent upon the performance of a single business, property or asset; or |
|
● |
dependent
upon the development or market acceptance of a single or limited number of products, processes or services. |
This
lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a
substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.
We
may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to
complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations
and profitability.
If
we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers
to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which
may make it more difficult for us, and delay our ability, to complete our initial business combination. With multiple business
combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations
and due diligence (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the
operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address
these risks, it could negatively impact our profitability and results of operations.
We
may attempt to complete our initial business combination with a private company about which little information is available, which
may result in a business combination with a company that is not as profitable as we suspected, if at all.
In
pursuing our business combination strategy, we may seek to effectuate our initial business combination with a privately held company.
By definition, very little public information generally exists about private companies, and we could be required to make our decision
on whether to pursue a potential initial business combination on the basis of limited information, which may result in a business
combination with a company that is not as profitable as we suspected, if at all.
We
may need additional funds to consummate an initial business combination.
If
we are required to seek additional capital for working capital purposes prior to the consummation of a business combination, we
would need to borrow funds from our initial stockholders, management team or other third parties to operate or may be forced to
liquidate. Neither our initial stockholders, members of our management team nor any of their affiliates is under any obligation
to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the trust account
or from funds released to us upon completion of our initial business combination. Up to $1,500,000 of such loans may be convertible
into units of the post-business combination entity at a price of $10.00 per unit at the option of the lender. The units would
be identical to the Private Placement Units. Prior to the completion of our initial business combination, we do not expect to
seek loans from parties other than our initial stockholders, members of our management team or an affiliate of our initial stockholders
or members of our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against
any and all rights to seek access to funds in our trust account. If we are unable to complete our initial business combination
because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account.
Consequently, our public stockholders may only receive an estimated $10.10 per share, or possibly less, on our redemption of our
public shares, and our warrants will expire worthless.
Because
we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous
initial business combination with some prospective target businesses.
The
federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial
significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the
same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the
tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting
principles generally accepted in the United States of America, or GAAP, or international financial reporting standards as issued
by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements
may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States),
or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some
targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules
and complete our initial business combination within the prescribed time frame.
Our
search for a business combination, and any target business with which we ultimately consummate a business combination, may be
materially adversely affected by the coronavirus (COVID-19) pandemic and other events, and the status of debt
and equity markets.
The COVID-19 pandemic has
adversely affected, and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious
diseases) could adversely affect, the economies and financial markets worldwide, and the business of any potential target business
with which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete
a business combination if concerns relating to COVID-19 continue to restrict travel, limit the ability to
have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable
to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search
for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new
information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat
its impact, among others. If the disruptions posed by COVID-19 or other events (such as terrorist attacks,
natural disasters or a significant outbreak of other infectious diseases) continue for an extensive period of time, our ability
to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination,
may be materially adversely affected.
In
addition, our ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may
be impacted by COVID-19 and other events (such as terrorist attacks, natural disasters or a significant outbreak
of other infectious diseases), including as a result of increased market volatility, decreased market liquidity in third-party
financing being unavailable on terms acceptable to us or at all.
As
the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there
may be more competition for attractive targets. This could increase the cost of our initial business combination and could even
result in our inability to find a target or to consummate an initial business combination.
In
recent years, and especially since the fourth quarter of 2020, the number of special purpose acquisition companies that have been
formed has increased substantially. Many potential targets for special purpose acquisition companies have already entered into
an initial business combination, and there are still many special purpose acquisition companies seeking targets for their initial
business combination, as well as many such companies currently in registration. As a result, at times, fewer attractive targets
may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate
an initial business combination.
In
addition, because there are more special purpose acquisition companies seeking to enter into an initial business combination with
available targets, the competition for available targets with attractive fundamentals or business models may increase, which could
cause targets companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such
as economic or industry sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close
business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate
or frustrate our ability to find and consummate an initial business combination and may result in our inability to consummate
an initial business combination on terms favorable to our investors altogether.
Changes
in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and
complete an initial business combination.
In recent years, the market for directors and
officers liability insurance for special purpose acquisition companies has changed. The premiums charged for such policies have generally
increased and the terms of such policies have generally become less favorable. There can be no assurance that these trends will not continue.
The increased cost and decreased availability
of directors and officers liability insurance could make it more difficult and more expensive for us to negotiate an initial business
combination. In order to obtain directors and officers liability insurance or modify its coverage as a result of becoming a public company,
the post-business combination entity might need to incur greater expense, accept less favorable terms or both. However, any failure to
obtain adequate directors and officers liability insurance could have an adverse impact on the post-business combination’s ability
to attract and retain qualified officers and directors.
In addition, even after we were to complete an
initial business combination, our directors and officers could still be subject to potential liability from claims arising from conduct
alleged to have occurred prior to the initial business combination. As a result, in order to protect our directors and officers, the post-business combination
entity will likely need to purchase additional insurance with respect to any such claims (“run-off insurance”). The need
for run-off insurance would be an added expense for the post-business combination entity, and could interfere with or frustrate
our ability to consummate an initial business combination on terms favorable to our investors.
Risks
Relating to the Post-Business Combination Company
Subsequent
to our completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and
impairment or other charges that could have a significant negative effect on our financial condition, results of operations and
our share price, which could cause you to lose some or all of your investment.
Even
if we conduct due diligence on a target business with which we combine, we cannot assure you that this diligence will surface
all material issues with a particular target business, that it would be possible to uncover all material issues through a customary
amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a
result of these factors, we may be forced to later write-down or write-off assets, restructure our operations,
or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies
certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary
risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity,
the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In
addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held
by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any stockholders who choose to
remain stockholders following the business combination could suffer a reduction in the value of their securities. Such stockholders
are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due
to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully
bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to
the business combination contained an actionable material misstatement or material omission.
We
may have a limited ability to assess the management of a prospective target business and, as a result, may effect our initial
business combination with a target business whose management may not have the skills, qualifications or abilities to manage a
public company, which could, in turn, negatively impact the value of our stockholders’ investment in us.
When
evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess
the target business’ management may be limited due to a lack of time, resources or information. Our assessment of the capabilities
of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications
or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary
to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly,
any securityholders who choose to remain securityholders following the initial business combination could suffer a reduction in
the value of their securities. Such securities are unlikely to have a remedy for such reduction in value.
There
may be tax consequences to our business combinations that may adversely affect us.
While
we expect to undertake any merger or acquisition so as to minimize taxes both to the owners of the acquired business and us, such
business combination might not meet the statutory requirements of a tax-free reorganization, or the parties
might not obtain the intended tax-free treatment upon a transfer of shares or assets. A non-qualifying reorganization could
result in the imposition of substantial taxes. Additionally, depending on the date and size of our initial business combination,
it is possible that at least 60% of our adjusted ordinary gross income may consist of personal holding company income. In addition,
depending on the concentration of our stock in the hands of individuals, including the members of our initial stockholders and certain tax-exempt organizations, pension
funds, and charitable trusts, it is possible that more than 50% of our stock will be owned or deemed owned (pursuant to the constructive
ownership rules) by such persons during the last half of a taxable year. Thus, no assurance can be given that we will not become
a personal holding company following the Initial Public Offering or in the future. If we are or were to become a personal holding
company in a given taxable year, we would be subject to an additional personal holding company tax, currently 20%, on our undistributed
taxable income, subject to certain adjustments.
We
may reincorporate in another jurisdiction in connection with our initial business combination and such reincorporation may result
in taxes imposed on stockholders.
We
may, in connection with our initial business combination and subject to requisite stockholder approval under the DGCL, reincorporate
in the jurisdiction in which the target company or business is located or in another jurisdiction. The transaction may require
a stockholder to recognize taxable income in the jurisdiction in which the stockholder is a tax resident or in which its members
are resident if it is a tax transparent entity. We do not intend to make any cash distributions to stockholders to pay such taxes.
Stockholders may be subject to withholding taxes or other taxes with respect to their ownership of us after the reincorporation.
Our
ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon
the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel
could negatively impact the operations and profitability of our post-combination business.
Prior
to the completion of an initial business combination, our operations will be dependent upon a relatively small group of individuals
and, in particular, our executive officers and directors. We believe that our success depends on the continued service of our
officers and directors, at least until we have completed our initial business combination. In addition, our executive officers
and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of
interest in allocating their time among various business activities, including identifying potential business combinations and
monitoring the related due diligence. We do not have an employment agreement with, or key-man insurance on
the life of, any of our directors or executive officers. The unexpected loss of the services of one or more of our directors or
executive officers could have a detrimental effect on us.
The
role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel
may remain with the target business in senior management or advisory positions following our initial business combination, it
is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize
any individuals we engage after our initial business combination, we cannot assure you that our assessment of these individuals
will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC,
which could cause us to have to expend time and resources helping them become familiar with such requirements. In addition, the
officers and directors of an initial business combination candidate may resign upon completion of our initial business combination.
The departure of an initial business combination target’s key personnel could negatively impact the operations and profitability
of our post-combination business. The role of an initial business combination candidate’s key personnel upon the completion
of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an initial
business combination candidate’s management team will remain associated with the initial business combination candidate
following our initial business combination, it is possible that members of the management of an initial business combination candidate
will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination
business.
Our
management may not be able to maintain control of a target business after our initial business combination. We cannot provide
assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities
necessary to profitably operate such business.
We
may structure our initial business combination so that the post-transaction company in which our public stockholders own shares
will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination
if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires
a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment
Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns
50% or more of the voting securities of the target, our stockholders prior to our initial business combination may collectively
own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the
business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of common
stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the
target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately
prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction.
In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining
a larger share of the company’s shares than we initially acquired. Accordingly, this may make it more likely that our management
will not be able to maintain control of the target business.
If
we pursue a target company with operations or opportunities outside of the United States for our initial business combination,
we may face additional burdens in connection with investigating, agreeing to and completing such initial business combination,
and if we effect such initial business combination, we would be subject to a variety of additional risks that may negatively impact
our operations.
If
we pursue a target a company with operations or opportunities outside of the United States for our initial business combination,
we would be subject to risks associated with cross-border business combinations, including in connection with investigating, agreeing
to and completing our initial business combination, conducting due diligence in a foreign jurisdiction, having such transaction
approved by any local governments, regulators or agencies and changes in the purchase price based on fluctuations in foreign exchange
rates.
If
we effect our initial business combination with such a company, we would be subject to any special considerations or risks associated
with companies operating in an international setting, including any of the following:
|
● |
costs
and difficulties inherent in managing cross-border business operations; |
|
● |
rules
and regulations regarding currency conversion; |
|
● |
complex
corporate withholding taxes on individuals; |
|
● |
laws
governing the manner in which future business combinations may be effected; |
|
● |
exchange
listing and/or delisting requirements; |
|
● |
tariffs
and trade barriers; |
|
● |
regulations
related to customs and import/export matters; |
|
● |
local
or regional economic policies and market conditions; |
|
● |
unexpected
changes in regulatory requirements; |
|
● |
tax
issues, such as tax law changes and variations in tax laws as compared to the United States; |
|
● |
currency
fluctuations and exchange controls; |
|
● |
challenges
in collecting accounts receivable; |
|
● |
cultural
and language differences; |
|
● |
employment
regulations; |
| ● | underdeveloped
or unpredictable legal or regulatory systems; |
| | |
| ● | corruption; |
|
● |
protection
of intellectual property; |
|
● |
social
unrest, crime, strikes, riots and civil disturbances; |
|
● |
regime
changes and political upheaval; |
|
● |
terrorist
attacks and wars; and |
|
● |
deterioration
of political relations with the United States. |
We
may not be able to adequately address these additional risks. If we were unable to do so, we may be unable to complete such initial
business combination, or, if we complete such combination, our operations might suffer, either of which may adversely impact our
business, financial condition and results of operations.
If
our management following our initial business combination is unfamiliar with United States securities laws, they may have to expend
time and resources becoming familiar with such laws, which could lead to various regulatory issues.
Following
our initial business combination, our management may resign from their positions as officers or directors of the company and the
management of the target business at the time of the business combination will remain in place. Management of the target business
may not be familiar with United States securities laws. If new management is unfamiliar with United States securities laws, they
may have to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead
to various regulatory issues which may adversely affect our operations.
If
we consummate a business combination with a target company with operations or opportunities outside of the United States, substantially
all of our assets could be located in a foreign country and substantially all of our revenue could be derived from our operations
in such country. Accordingly, our results of operations and prospects could be subject, to a significant extent, to the economic,
political and legal policies, developments and conditions in the country in which we operate.
The
economic, political and social conditions, as well as government policies, of the country in which our operations are ultimately
located could affect our business. Economic growth could be uneven, both geographically and among various sectors of the economy
and such growth may not be sustained in the future. If in the future such country’s economy experiences a downturn or grows
at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in demand for spending
in certain industries could materially and adversely affect our ability to find an attractive target business with which to consummate
our initial business combination and if we effect our initial business combination, the ability of that target business to become
profitable.
Exchange
rate fluctuations and currency policies may cause a target business’ ability to succeed in the international markets to
be diminished.
In
the event we acquire a non-U.S. target, all revenues and income would likely be received in a foreign currency,
and the dollar equivalent of our net assets and distributions, if any, could be adversely affected by reductions in the value
of the local currency. The value of the currencies in our target regions fluctuate and are affected by, among other things, changes
in political and economic conditions. Any change in the relative value of such currency against our reporting currency may affect
the attractiveness of any target business or, following consummation of our initial business combination, our financial condition
and results of operations. Additionally, if a currency appreciates in value against the dollar prior to the consummation of our
initial business combination, the cost of a target business as measured in dollars will increase, which may make it less likely
that we are able to consummate such transaction.
Risks
Relating to our Management and Directors
Our
executive officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination
as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete
our initial business combination.
Our
executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in
a conflict of interest in allocating their time between our operations and our search for a business combination and their other
businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each
of our executive officers is engaged in several other business endeavors for which he may be entitled to substantial compensation,
and our executive officers are not obligated to contribute any specific number of hours per week to our affairs. Our independent
directors also serve as officers and board members for other entities. If our executive officers’ and directors’ other
business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels,
it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial
business combination. For a complete discussion of our executive officers’ and directors’ other business affairs,
please see “Management.”
Our
officers and directors presently have fiduciary or contractual obligations to other entities and, accordingly, may have conflicts
of interest in determining to which entity a particular business opportunity should be presented.
Following the completion
of the Initial Public Offering and until we consummate our initial business combination, we intend to engage in the business of identifying
and combining with one or more businesses. 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 to such entity. Accordingly, they may be required to present suitable business combination opportunities
to such entities prior to presenting them to our company for consideration. Accordingly, our officers and directors may have conflicts
of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved
in our favor and a potential target business may be presented to another entity prior to its presentation to us, subject to their fiduciary
duties under Delaware law. For a complete discussion of our executive officers’ and directors’ business affiliations and the
potential conflicts of interest that you should be aware of, please see “ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
– Directors and Executive Officers.”
Our officers and directors
may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by us, including
another blank check company, and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity
should be presented.
Following the completion
of the Initial Public Offering and until we consummate our initial business combination, we intend to engage in the business of identifying
and combining with one or more businesses. It is likely that our officers and directors will in the future become affiliated with entities
that are engaged in a similar business, including other blank check companies that may have acquisition objectives that are similar to
ours. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
These conflicts may not be resolved in our favor and a potential target business may be presented to other entities prior to its presentation
to us, subject to our officers’ and directors’ fiduciary duties under Delaware law. For a complete discussion of our officers’
and directors’ business affiliations and the potential conflicts of interest that you should be aware of, please see “ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT – Directors and Executive Officers.”
We may engage in a
business combination with one or more target businesses that have relationships with entities that may be affiliated with our initial
stockholders, executive officers, directors or existing holders which may raise potential conflicts of interest.
In light of the involvement
of our initial stockholders, executive officers and directors with other entities, we may decide to acquire one or more businesses affiliated
with our initial stockholders, executive officers, directors or existing holders. Our directors also serve as officers and board members
for other entities, including, without limitation, those described under “ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
– Directors and Executive Officers.” Such entities may compete with us for business combination opportunities. Our initial
stockholders, officers and directors are not currently aware of any specific opportunities for us to complete our initial business combination
with any entities with which they are affiliated, and there have been no substantive discussions concerning a business combination with
any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities,
we would pursue such a transaction if we determined that such affiliated entity met our criteria for a business combination as set forth
in “Proposed Business—Effecting our initial business combination—Selection of a target business and structuring of our
initial business combination” and such transaction was approved by a majority of our independent and disinterested directors. Despite
our agreement to obtain an opinion regarding the fairness to our company from a financial point of view of a business combination with
one or more businesses affiliated with our initial stockholders, executive officers, directors or existing holders, potential conflicts
of interest still may exist and, as a result, the terms of the business combination may not be as advantageous to our public stockholders
as they would be absent any conflicts of interest.
Since
our initial stockholders, executive officers and directors will lose their entire investment in us if our initial business combination
is not completed (other than with respect to public shares they may acquire during or after the Initial Public Offering), a conflict
of interest may arise in determining whether a particular business combination target is appropriate for our initial business
combination.
In
October 2020, Special Sits General Partner I SA, an entity affiliated with certain members of our management team, paid $25,000,
or approximately $0.009 per share, to cover certain of our offering costs in consideration for 2,875,000 shares of common stock
in connection with our organization. In February 2021, we effected a dividend of 0.5 shares for each outstanding share of common
stock, resulting in there being an aggregate of 4,312,500 founders’ shares outstanding. Also in February 2021, Special Sits
General Partner I SA transferred 4,312,500 founders’ shares to our sponsor. Because the underwriter in our initial public
offering did not fully exercise its overallotment option, 32,844 founder shares were forfeited by our sponsor. The founder shares
will be worthless if we do not complete an initial business combination. In addition, concurrently with our initial public offering,
our Sponsor purchased an aggregate of 622,966 Private Placement Units for a purchase price of $10.00 per Private Placement Unit
($6,229,660 in the aggregate). The Private Placement Units are identical to the public units. If we do not complete our initial
business combination within 18 months from the closing of the Initial Public Offering, the common stock and warrants contained
within the Private Placement Units will be worthless. In addition, we may obtain loans from our initial stockholders, our officers
or directors, or any of their affiliates. The personal and financial interests of our executive officers and directors may influence
their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing
the operation of the business following our initial business combination. This risk may become more acute as the 18-month anniversary of
the closing of the Initial Public Offering nears, which is the deadline for our completion of an initial business combination.
Our
initial stockholders paid an aggregate of $25,000 for the founder shares. As a result, it stands to make a substantial profit
even if an initial business combination subsequently declines in value or is unprofitable for our public stockholders, and may
have an incentive to recommend such an initial business combination to our stockholders.
As
a result of the low acquisition cost of our founder shares, our initial stockholders could make a substantial profit even if we
select and consummate an initial business combination with an acquisition target that subsequently declines in value or is unprofitable
for our public stockholders. Thus, they may have more of an economic incentive for us to enter into an initial business combination
with a riskier, weaker-performing or financially unstable business, or an entity lacking an established record of revenues
or earnings, than would be the case if such parties had paid the full offering price for their founders’ shares.
We
may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing
market price of our shares at that time.
In
connection with our initial business combination, we may issue shares to investors in private placement transactions (so-called PIPE
transactions) at a price of $10.00 per share. The purpose of such issuances will be to enable us to provide sufficient liquidity
to the post-business combination entity. The price of the shares we issue may therefore be less, and potentially significantly
less, than the market price for our shares at such time.
Our
key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business
combination, and a particular business combination may be conditioned on the retention or resignation of such key personnel. These
agreements may provide for them to receive compensation following our initial business combination and as a result, may cause
them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our
key personnel may be able to remain with our company after the completion of our initial business combination only if they are
able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take
place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation
in the form of cash payments and/or our securities for services they would render to us after the completion of the business combination.
Such negotiations also could make such key personnel’s retention or resignation a condition to any such agreement. The personal
and financial interests of such individuals may influence their motivation in identifying and selecting a target business, subject
to their fiduciary duties under Delaware law.
EarlyBirdCapital
may have a conflict of interest in rendering services to us in connection with our initial business combination.
We
have engaged EarlyBirdCapital to assist us in connection with our initial business combination. We will pay EarlyBirdCapital a
cash fee for such services in an aggregate amount equal to up to 3.5% of the total gross proceeds raised in the offering only
if we consummate our initial business combination. Additionally, the EBC founder shares purchased by EarlyBirdCapital and its
designees will be worthless if we do not consummate an initial business combination. These financial interests may result in the
underwriters having a conflict of interest when providing the services to us in connection with an initial business combination.
Risks
Relating to our Securities
You
will not have any rights or interests in funds from the trust account, except under certain limited circumstances. Therefore,
to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
Our
public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) our completion
of an initial business combination, and then only in connection with those shares of common stock that such stockholder properly
elected to convert, subject to the limitations described herein, (ii) the conversion of any public shares properly tendered
in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance
or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within
18 months from the closing of the Initial Public Offering or (B) with respect to any other provision relating to stockholders’
rights or pre-initial business combination activity and (iii) the redemption of our public shares if
we are unable to complete an initial business combination within 18 months from the closing of the Initial Public Offering, subject
to applicable law and as further described herein. In no other circumstances will a public stockholder have any right or interest
of any kind in the trust account. Holders of warrants will not have any right to the proceeds held in the trust account with respect
to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially
at a loss.
Nasdaq
may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our
securities and subject us to additional trading restrictions.
Our
units, common stock, and warrants were approved for listing on Nasdaq on or promptly after the date of the prospectus associated
with our Initial Public Offering and the registration statement of which such prospectus forms a part and our common stock and
warrants on or promptly after their date of separation. Although after giving effect to the Initial Public Offering we expect
to meet, on a pro forma basis, the minimum initial listing standards set forth in Nasdaq listing standards, we cannot assure you
that our securities will continue to be listed on Nasdaq in the future or prior to our initial business combination. In order
to continue listing our securities on Nasdaq prior to our initial business combination, we must maintain certain financial, distribution
and share price levels. Generally, we must maintain a minimum market capitalization (generally $50,000,000) and a minimum number
of holders of our securities (generally 300 public holders).
Additionally,
in connection with our initial business combination, we will likely be required to demonstrate compliance with Nasdaq’s
initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue
to maintain the listing of our securities on Nasdaq. For instance, our share price would generally be required to be at least
$4.00 per share and our stockholders’ equity would generally be required to be at least $4.0 million. We cannot assure
you that we will be able to meet those initial listing requirements at that time.
If
Nasdaq delists any of our securities from trading on its exchange and we are not able to list such securities on another national
securities exchange, we expect such securities could be quoted on an over-the-counter market. If this were
to occur, we could face significant material adverse consequences, including:
|
● |
a
limited availability of market quotations for our securities; |
|
● |
reduced
liquidity for our securities; |
|
● |
a
determination that our common stock are a “penny stock” which will require brokers trading in our common stock
to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market
for our securities; |
|
● |
a
limited amount of news and analyst coverage; and |
|
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a
decreased ability to issue additional securities or obtain additional financing in the future. |
The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating
the sale of certain securities, which are referred to as “covered securities.” Because we expect that our units and
eventually our common stock and warrants will be listed on Nasdaq, our units, common stock and warrants will qualify as covered
securities under the statute. Although the states are preempted from regulating the sale of our securities, the federal statute
does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity,
then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed
on Nasdaq, our securities would not qualify as covered securities under the statute, and we would be subject to regulation in
each state in which we offer our securities.
An
investor may not be able to exercise its warrants when desired which may cause such warrants to expire worthless.
Under
the terms of the warrant agreement, we have agreed that as soon as practicable, we will use our best efforts to file a registration
statement under the Securities Act covering such shares and maintain a current prospectus relating to the shares of common stock
issuable upon exercise of the warrants until the expiration of the warrants in accordance with the provisions of the warrant agreement.
We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change
in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by
reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants
are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis.
However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders
seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the
securities laws of the state of the exercising holder, unless an exemption is available. Under the terms of the warrant agreement,
we have agreed to use our best efforts to take such action as is necessary to register or qualify for sale the shares of common
stock issuable upon exercise of the warrants in such states, to the extent an exemption is not available. However, we cannot assure
you that we will be able to do so. In no event will we be required to net cash settle any warrant, or issue securities or other
compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants
under the Securities Act or applicable state securities laws. If the issuance of the shares upon exercise of the warrants is not
so registered or qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise
such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part
of a purchase of units will have paid the full unit purchase price solely for the shares of common stock included in the units.
If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify
the underlying securities for sale under all applicable state securities laws.
If
you exercise your public warrants on a “cashless basis,” you will receive fewer shares of common stock from such exercise
than if you were to exercise such warrants for cash.
There
are circumstances in which the exercise of the public warrants may be required or permitted to be made on a cashless basis. For
instance, if we call our warrants for redemption, we can force all holders to exercise their warrants on a cashless basis. Additionally,
If a registration statement covering the shares of common stock issuable upon exercise of the warrants is not effective by the
90th business day after the closing of our initial business combination, warrantholders may, until such time as there is an effective
registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or
another exemption. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering
the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the
number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants
and the “fair market value” (as defined in the next sentence) by (y) the fair market value. The “fair market
value” of our common stock for the above purpose shall mean the volume weighted average price of our common stock during
the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. We will
provide our warrant holders with the final fair market value no later than one business day after the 10-trading day period described
above ends. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares
of common stock per warrant (subject to adjustment). As a result, you would receive fewer shares of common stock from such exercise
than if you were to exercise such warrants for cash.
The
grant of registration rights to our initial stockholders, EarlyBirdCapital and its designees, and holders of our Private Placement
Units may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely
affect the market price of our common stock.
Pursuant
to an agreement that was entered into concurrently with the issuance and sale of the securities in the Initial Public Offering,
our initial stockholders, EarlyBirdCapital and its designees, and each of their permitted transferees can demand that we register
the common stock into which founder shares and EBC founder shares are convertible, holders of our Private Placement Units and
their permitted transferees can demand that we register the Private Placement Units and the common stock issuable upon exercise
of the Private Placement Units and holders of warrants that may be issued upon conversion of working capital loans may demand
that we register such securities. The registration rights will be exercisable with respect to the founder shares, EBC founder
shares, the Private Placement Units and the common stock issuable upon exercise of such Private Placement Units. We will bear
the cost of registering these securities. The registration and availability of such a significant number of securities for trading
in the public market may have an adverse effect on the market price of our common stock. In addition, the existence of the registration
rights may make our initial business combination more costly or difficult to conclude. This is because the shareholders of the
target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the
negative impact on the market price of our common stock that is expected when the securities owned by our initial stockholders
and holders of our Private Placement Units or their respective permitted transferees are registered.
The
securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the
value of the assets held in trust such that the per-share conversion amount received by public stockholders
may be less than $10.10 per share.
The
proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or
less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act,
which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently
yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe
and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled
out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to
complete our initial business combination or make certain amendments to our amended and restated certificate of incorporation,
our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus
any interest income, net of taxes paid or payable (less, in the case we are unable to complete our initial business combination,
$100,000 of interest). Negative interest rates could reduce the value of the assets held in trust such that the per-share conversion amount
received by public stockholders may be less than $10.10 per share.
We
may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We
have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors
have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek
recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied
by us only if (i) we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination.
Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers
or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative
litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders.
Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage
awards against our officers and directors pursuant to these indemnification provisions.
If,
after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary
bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members
of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members
of our board of directors and us to claims of punitive damages.
If,
after we distribute the proceeds in the trust account to our public stockholders, 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. In addition, our board
of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing
itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims
of creditors.
If,
before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary
bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over
the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders
in connection with our liquidation may be reduced.
If,
before distributing the proceeds in the trust account to our public stockholders, 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, the per-share amount that
would otherwise be received by our stockholders in connection with our liquidation may be reduced.
Our
stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption
of their shares.
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 initial business combination within 18 months from the closing of the
Initial Public Offering may be considered a liquidating distribution under Delaware law. If a 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 stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability
of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our
public shares as soon as reasonably possible following the 24th month from the closing of the Initial Public Offering in the event
we do not complete our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
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 10 years following our dissolution. 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. If our plan of
distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution
is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder,
and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you
that we will properly assess all claims that may be potentially brought against us. 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 beyond the third anniversary of such date. 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 initial business combination
within 18 months from the closing of the Initial Public Offering is not considered a liquidating distribution under Delaware law
and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party
may bring or due to other circumstances that are currently unknown), 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.
Provisions
in our amended and restated certificate of incorporation and bylaws and Delaware law may inhibit a takeover of us, which could
limit the price investors might be willing to pay in the future for our common stock and could entrench management.
Our
amended and restated certificate of incorporation and bylaws contain provisions that may discourage unsolicited takeover proposals
that stockholders may consider to be in their best interests. Our board of directors is divided into three classes, each of which
will generally serve for a term of three years with only one class of directors being elected in each year. As a result, at a
given annual meeting only a minority of the board of directors may be considered for election. Since our “staggered board”
may prevent our stockholders from replacing a majority of our board of directors at any given annual meeting, it may further entrench
management and discourage unsolicited stockholder proposals that may be in the best interests of stockholders. Moreover, our board
of directors has the ability to designate the terms of and issue new series of preferred stock.
We
are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these
provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment
of a premium over prevailing market prices for our securities.
Our
amended and restated certificate of incorporation will provide, subject to limited exceptions, that the Court of Chancery of the State
of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our certificate of incorporation
requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers
and employees for breach of fiduciary duty and certain other actions may be brought only in the Court of Chancery in the State of Delaware,
except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party
not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of
the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum
other than the Court of Chancery or (C) for which the Court of Chancery does not have subject matter jurisdiction. Any person or
entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to
the forum provisions in our certificate of incorporation.
This
choice of forum provision may make it more costly, or limit a stockholder’s ability, to bring a claim in a judicial forum
that it finds favorable for disputes with us or any of our directors, officers or employees, which may discourage lawsuits with
respect to such claims. We cannot be certain that a court will decide that this provision is either applicable or enforceable,
and if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or
unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which
could harm our business, operating results and financial condition.
Our certificate of incorporation
provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created
by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought
to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
In addition, the exclusive forum provision will not apply to actions brought under the Securities Act, or the rules and regulations thereunder.
We
may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders
of at least 50% of the then outstanding warrants. As a result, the exercise price of your warrants could be increased, the exercise
period could be shortened and the number of shares of our common stock purchasable upon exercise of a warrant could be decreased,
all without your approval.
Our warrants have been issued
in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The
warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct
any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant
agreement set forth in the prospectus associated with our Initial Public Offering, or defective provision, but requires the approval by
the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered
holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at
least 50% of the then outstanding warrants approve of such amendment. Although our ability to amend the terms of the public warrants with
the consent of at least 50% of the then outstanding warrants is unlimited, examples of such amendments could be amendments to, among other
things, increase the exercise price of the warrants, convert the warrants into cash, shorten the exercise period or decrease the number
of shares of common stock purchasable upon exercise of a warrant.
We
may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants
worthless.
We
have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a
price of $0.01 per warrant, provided that the last reported sales price of the common stock equals or exceeds $18.00 per share
(as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading-day
period commencing at any time after the warrants become exercisable and ending on the third business day prior to proper notice
of such redemption provided that on the date we give notice of redemption and during the entire period thereafter until the time
we redeem the warrants, we have an effective registration statement under the Securities Act covering the shares of common stock
issuable upon exercise of the warrants and a current prospectus relating to them is available. If and when the warrants become
redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities
for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your
warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants
at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption
price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market
value of your warrants. None of the private warrants will be redeemable by us so long as they are held by the initial purchasers
or their permitted transferees.
Our
warrants may have an adverse effect on the market price of our common stock and make it more difficult to effectuate our initial
business combination.
We
issued warrants to purchase 8,559,312 shares of our common stock as part of the units offered by the prospectus associated with
our Initial Public Offering and simultaneously with the closing of the Initial Public Offering, we issued in a private placement
warrants to purchase 354,280 shares of our common stock as part of the Private Placement Units. In addition, if our initial stockholders,
officers, directors or their affiliates make any working capital loans, they may convert those loans into up to an additional
150,000 Private Placement Units, at the price of $10.00 per unit. To the extent we issue common stock to effectuate a business
transaction, the potential for the issuance of a substantial number of additional shares of common stock upon exercise of these
warrants could make us a less attractive acquisition vehicle to a target business. Such warrants, when exercised, will increase
the number of issued and outstanding shares of common stock and reduce the value of the common stock issued to complete the business
transaction. Therefore, our warrants may make it more difficult to effectuate a business transaction or increase the cost of acquiring
the target business.
General
Risks
Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial
doubt about our ability to continue as a “going concern.”
We have incurred and expect to incur significant costs in pursuit of
our acquisition plans. We lack the financial resources we need to sustain operations for a reasonable period of time, which is considered
to be one year from the date of the issuance of the financial statements included in this Annual Report on Form 10-K. As a result, there
is substantial doubt that we can sustain operations for a period of at least one-year from the issuance date of these financial statements.
The financial statements do not include any adjustments that might result from our inability to continue as a going concern.
We have no operating
history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We have no operating
results. Our only activities through December 31, 2021 were organizational activities, those necessary to prepare for the Initial Public
Offering, and searching for a target for our Business Combination. We do not expect to generate any operating revenues until after the
completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities
held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses. Because we lack an operating history, you have no basis upon which to evaluate our
ability to achieve our business objective of completing our initial business combination and may be unable to complete our initial business
combination. If we fail to complete our initial business combination, we will never generate any operating revenues.
If
we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance
requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
If
we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
|
● |
restrictions
on the nature of our investments; and |
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restrictions
on the issuance of securities, |
each
of which may make it difficult for us to complete our initial business combination. In addition, we may have imposed upon us burdensome
requirements, including:
|
● |
registration
as an investment company; |
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● |
adoption
of a specific form of corporate structure; and |
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reporting,
record keeping, voting, proxy and disclosure requirements and other rules and regulations. |
In
order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we
must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our
activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting
more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business
will be to identify and complete a business combination and thereafter to operate the post-transaction business or assets for
the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to
buy unrelated businesses or assets or to be a passive investor.
We
do not believe that our anticipated principal activities will subject us to the Investment Company Act. To this end, the proceeds
held in the trust account may only be held as cash items or invested in United States “government securities” within
the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds
meeting the conditions of Rule 2a-7(d) promulgated under the Investment Company Act which invest only in direct
U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities
or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring
and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private
equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company
Act. The trust account is intended as a holding place for funds pending the earliest to occur of either: (i) the completion
of our initial business combination; (ii) the conversion of any public shares properly tendered in connection with a stockholder
vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation
to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of
the Initial Public Offering; or (B) with respect to any other provision relating to stockholder rights or pre-initial business combination
activity; or (iii) absent an initial business combination within 18 months from the closing of the Initial Public Offering,
our return of the funds held in the trust account to our public stockholders as part of our redemption of the public shares. If
we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed
to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses
for which we have not allotted funds and may hinder our ability to complete a business combination. If we are unable to complete
our initial business combination, our public stockholders may only receive their pro rata portion of the funds in the trust account
that are available for distribution to public stockholders, and our warrants will expire worthless.
Changes
in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our
ability to negotiate and complete our initial business combination, and results of operations.
We are subject to laws
and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and
other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly.
Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material
adverse effect on our business, investments and results of operations. For instance, the SEC has recently proposed rules applicable to
blank check companies like our company that, if adopted, could make it more expensive and difficult to consummate an initial business
combination. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse
effect on our business, including our ability to negotiate and complete our initial business combination, and results of operations.
We
are an emerging growth company and smaller reporting company within the meaning of the Securities Act, and if we take advantage
of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less
attractive to investors and may make it more difficult to compare our performance with other public companies.
We
are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may
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 nonbinding advisory vote on executive compensation
and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have
access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances
could cause us to lose that status earlier, including if the market value of our shares of common stock held by non-affiliates exceeds $700 million
as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December
31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If
some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our
securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading
prices of our securities may be more volatile.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such an election to opt out
is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or
revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial
statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted
out of using the extended transition period difficult or impossible because of the potential differences in accountant standards
used.
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting
companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years
of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the
market value of our common stock held by non-affiliates exceeds $250 million as of the end of that year’s
second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market
value of our common stock held by non-affiliates exceeds $700 million as of the end of that year’s
second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of
our financial statements with other public companies difficult or impossible.
Compliance
obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate a business combination, require substantial
financial and management resources, and increase the time and costs of completing an acquisition.
Section 404
of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report
on Form 10-K for the year ending December 31, 2022. Only in the event we are deemed to be a large accelerated
filer or an accelerated filer will we be required to comply with the independent registered public accounting firm attestation
requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we
will not be required to comply with the independent registered public accounting firm attestation requirement on our internal
control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley
Act particularly burdensome on us as compared to other public companies because a target business with which we seek to complete
our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of
its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley
Act may increase the time and costs necessary to complete any such acquisition.
Cyber
incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial
loss.
We
will likely depend on digital technologies, including information systems, infrastructure and cloud applications and services, including
those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure,
or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary
information and sensitive or confidential data. As an early-stage company without significant investments in data security protection,
we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or
to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of
them, could have adverse consequences on our business and lead to financial loss or inability to consummate an initial business combination.
We
identified a material weakness in our internal control over financial reporting relating to our complex financial instruments. This material
weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in
a timely manner.
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness
of our internal controls and we will disclose any changes and material weaknesses identified through such evaluation in those internal
controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
As described elsewhere in this report, in connection with the preparation
of our financial statements as of December 31, 2021, we identified a material weakness in our internal controls relating to our
complex financial instruments. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements
were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements
included in this Form 10-K present fairly in all material respects our financial position, results of operations and cash flows
for the period presented. However, we cannot assure you that the foregoing will not result in any future material weaknesses or deficiencies
in internal control over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls
and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial
statements.