Item 1. Business
Introduction
We are a blank
check company incorporated under the laws of the British Virgin Islands on July 23, 2018 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 in this report as our initial business combination. On
August 2, 2019, we entered into a Combination and Stock Purchase Agreement (the “Business Combination Agreement”) with
Campalier, S.A. de C.V., Promotora Forteza, S.A. de C.V., Strevo, S.A. de C.V. (collectively, the “Sellers”),
Betterware de México, S.A. de C.V. (“Betterware”), BLSM Latino América Servicios, S.A. de C.V.
(“BLSM”), and, solely for the purposes of Article XI therein, our sponsor, pursuant to which we agreed to merge
(the “Merger”) with and into Betterware in a business combination (the “Business Combination”) that
will result in Betterware surviving the Merger (the “combined company”) and BLSM becoming a wholly-owned
subsidiary of the combined company.
In July 2018, we issued
1,473,500 founder shares to our sponsor for $25,000 in cash, at a purchase price of approximately $0.02 per share. In September
2018, our sponsor forfeited 36,000 founder shares, resulting in an aggregate of 1,437,500 founder shares outstanding. In November
2018, our sponsor forfeited 46,250 founder shares following the expiration of the unexercised portion of the over-allotment option
granted to the underwriters in connection with our initial public offering, thereby reducing the number of founder shares held
by the sponsor to 1,391,250.
The registration
statement on Form S-1 (File No. 333-227423) for our initial public offering was declared effective by the Securities and
Exchange Commission (the “SEC”) on October 11, 2018. On October 16, 2018, we consummated our initial public
offering of 5,000,000 units, with each unit consisting of one ordinary share, no par value, and one warrant, each warrant
exercisable to purchase one ordinary share at an exercise price of $11.50 per share. On October 23, 2018, the underwriters
for our initial public offering purchased an additional 565,000 units pursuant to the partial exercise of their
over-allotment option. The units in our initial public offering were sold at an offering price of $10.00 per unit, generating
total gross proceeds of $55,650,000.
Simultaneously with
the consummation of our initial public offering and the closing of the over-allotment option, we consummated private placements
of 225,000 and 14,125 private units, respectively, to our sponsor at a price of $10.00 per private unit, generating total proceeds
of $2,391,250 (the “private placements”).
A total of $55,650,000
(or $10.00 per unit sold in our initial public offering) of the net proceeds from our initial public offering and the private placements
was placed in a trust account established for the benefit of our public shareholders (the “trust account”), with Continental
Stock Transfer & Trust Company acting as trustee, and has been invested only in U.S. “government securities” within
the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having
a maturity of 180 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of our initial
business combination and (ii) the distribution of the trust account, as described below, except that interest earned on the trust
account can be released to pay our taxes payable and for dissolution or liquidation expenses up to $50,000, as applicable.
Transaction costs amounted
to $1,939,920, consisting of $1,391,250 of underwriting fees, and $548,670 of other costs. As of June 30, 2019, we had $175,830
in our operating bank accounts, $56,588,390 in securities held in the trust account to be used for a business combination or to
repurchase or redeem our ordinary shares in connection therewith and a working capital deficit of $235,000.
Our units began trading
on October 12, 2018 on the Nasdaq Capital Market under the symbol “DDMXU.” Commencing on October 23, 2018, the ordinary
shares and warrants comprising the units began separate trading on the Nasdaq Capital Market under the symbols “DDMX”
and “DDMXW,” respectively. Those units not separated continue to trade on the Nasdaq Capital Market under the symbol
“DDMXU.”
In July 2019, our sponsor
transferred all of the outstanding founder shares and 47,825 private units to certain of our directors and officers and their affiliates
(as permitted transferees) at the price originally paid for such securities, and such transferred securities remain subject to
the escrow and transfer restrictions described elsewhere in this report.
Management Expertise
We have sought and
will continue to seek to capitalize on the operating and investing experience and network of relationships of Dr. Martín
Werner, our Chairman and Chief Executive Officer, Jorge Combe, our Chief Operating Officer, and our other officers and directors
in consummating an initial business combination. During their careers, Dr. Werner and Mr. Combe have been involved in merger and
acquisition transactions and bond offerings valued, in the aggregate, at more than $90 billion in the retail and consumer, financial
services, infrastructure, energy, leisure and real estate industries. Dr. Werner and Mr. Combe have over 40 years of combined experience
in the financial services industry, most notably as a Partner and Managing Director, respectively, of Goldman Sachs.
During their time at
Goldman Sachs, Dr. Werner and Mr. Combe led the Mexico and Latin-American Investment Banking Division in expanding its client
network in various industries and embracing a leadership position in the region by executing mergers and acquisitions transactions,
initial public offerings, capital raising, debt raising, leveraged buyouts and private equity transactions.
Dr. Werner was also
instrumental in positioning Goldman Sachs as a regional player of private infrastructure investments. He worked alongside Goldman
Sachs Infrastructure Partners, the infrastructure fund that focuses on transportation, energy and utilities investments with a
long-term strategy and over $10 billion in assets under management, on their $4.1 billion investment through a joint venture
with Empresas ICA in Red de Carreteras de Occidente (RCO), Mexico’s largest private concessionaire that operates an aggregate
of more than 760km of toll roads in four separate locations. Dr. Werner’s participation in RCO was a catalyst in transforming
and accelerating RCO’s business growth. Dr. Werner continues to serve as RCO’s president and chairman of the board
of directors.
Our management team
has extensive knowledge of the local market in Mexico and we believe they have the requisite skills to search for and consummate
a business combination. For example, Dr. Werner was involved in Citigroup’s acquisition of Grupo Financiero Banamex,
S.A. de C.V., in several Telmex/America Movil acquisitions in Latin America, and in many transactions for Mexico’s energy
companies, Petroleos Mexicanos, S.A. de C.V. and Comision Federal de Electricidad, S.A. de C.V. Mr. Combe was heavily involved
in sales transactions in the consumer and pharma sectors, particularly to Mars, Incorporated and Teva Pharmaceutical Industries
Ltd., and in the real estate sector in the initial offering of TF Administradora, s. de R.L. de C.V. (Terrafina) and Concentradora
Fibra Danhos S.A. de C.V., and follow-on offerings for Fibra Uno Adminisracion S.A. de C.V. and Hotelera Mexicana, S.A. de C.V.,
among others.
In addition to the
foregoing, we have sought and will continue to seek to capitalize on the investment expertise of DD3 Capital Partners S.A. de C.V.
(“DD3 Capital”), an affiliate of our sponsor, and support from its platform, in consummating an initial business combination.
DD3 Capital is a private investment and financial services firm founded in 2016 by Dr. Werner and Mr. Combe and headquartered in
Mexico City. DD3 Capital provides a wide range of financial services to its clients including, among others, merger and acquisitions
advisory, equity and debt capital raising, highly structured debt financing and financial restructurings. The firm distinguishes
itself by providing holistic investment advice, access to exclusive investment opportunities and creating innovative solutions
for clients with tailored services aligned to long-term goals. Despite its nascent operations, DD3 Capital manages over $50 million
in assets. DD3 Capital’s investments are generally comprised of:
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Mezzanine Lending: Loans for residential real estate projects
with terms from 12 to 48 months.
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Capital Loans: Loans for mid-term projects in a variety
of sectors.
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Equity Investments: Preferred or common equity in long-term
assets.
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In 2018, DD3 Capital
established a partnership with LarrainVial S.A., a leading full-service Chilean financial services firm with operations in Peru
and Colombia, and Grupo Patio XI, one of the largest real estate developers in Latin America, which have a combined 20% ownership
stake in DD3 Capital. We believe that this partnership, which is geographically complementary to DD3 Capital’s operations,
will expand the business opportunities in local and international markets that are available to us.
Additionally, our board
members possess a number of attributes that we believe will enhance our ability to create value for our shareholders through a
successful business combination. Our board members collectively serve on more than 24 company boards and have first-hand knowledge
of potential deals and transactions in Mexico. In particular, Dr. Guillermo Ortiz, one of our independent directors, has extensive
professional experience as Secretary of Finance and Public Credit and as the Governor of the Bank of Mexico, where he was employed
from 1998 to 2009 under two different government administrations, actively contributing to maintaining Mexico’s economic
stability during the financial crisis and making headwinds in emerging markets. Dr. Ortiz has long-standing relationships
with industry executives, owners of private and public companies, capital market investors, private equity funds and government
officials.
We intend to identify
and seek to consummate a business combination with a business that could benefit from a hands-on partner with extensive financial
experience. Even fundamentally sound companies can often under-perform due to underinvestment, temporary periods of dislocation
in the markets in which they operate, over-levered capital structures, excessive cost structures, incomplete management teams and/or
inappropriate business strategies. Our management team has extensive experience in identifying, structuring and executing acquisitions
across various industries to capture arbitrage opportunities and managing assets to optimize a business’s performance. In
addition, our team has significant hands-on experience working with private companies, from preparing and executing an initial
public offering to being active owners and directors. Our management team has been instrumental, working closely with companies,
in implementing major business transformations and helping to create value through the public markets. Dr. Werner and Mr. Combe
have developed an extensive network of relationships through their careers, ranging from owners of private and public companies,
private equity funds, investment bankers, attorneys, accountants and business brokers to executives of government-owned entities
and public officials. We believe that this network will allow us to generate a substantial number of attractive risk-adjusted acquisition
opportunities. Our management team is confident that its ability to identify and implement value creation initiatives will remain
central to its unique acquisition strategy. Our management team’s objective is to generate attractive financial returns and
create significant value for our shareholders by using its relationships with top individuals and industry players in the region.
Notwithstanding the
foregoing, the past successes of Dr. Werner and Mr. Combe, DD3 Capital, our other officers and directors, and their respective
affiliates, is not a guarantee that we will be able to identify a suitable candidate for our initial business combination or realize
success with respect to any business combination we may consummate. You should not rely on the historical record of such individuals’
or entity’s performance as indicative of our future performance. None of our officers or directors has had experience with
blank check companies or special purpose acquisition companies in the past.
Target Business Focus
We have focused our
search on target businesses located in Mexico and Hispanic businesses located in the U.S., although we are not limited to companies
in these geographic areas. We strongly believe there is a vast number of opportunities in Mexico. Mexico currently has a population
of approximately 130 million and a $1.2 trillion gross domestic product, or GDP, making it the 15th largest global economy
and the second largest in Latin America. Mexico has a resilient macroeconomic backdrop and strong economic foundation. Mexico’s
economy continues to grow with diversified foreign direct investment, or FDI, sources, competitive edges and solid structural reforms
that are able to absorb economic shocks and support GDP growth.
Mexico’s economic
growth accelerated in 2018 with a real GDP growth of 2.0% in 2018, largely as a result of an improved outlook for the U.S. economy.
While manufacturing is expected to act as a major driver of growth over the coming decade, we believe Mexico is set to begin transitioning
toward a more services-oriented economy with stronger private consumers boosting the country’s economic outlook.
Mexico is also an open
economy with a network of 13 free trade agreements encompassing 50 countries, 32 Reciprocal Investment Promotion and Protection
Agreements, or RIPPAs, with 33 countries, and nine trade agreements, including NAFTA and the Trans-Pacific Partnership, among others.
Although the United States represents more than 80% of Mexico’s total exports, relaxed regulation of Mexico’s energy
sector and manufacturing industry will be an important anchor of future direct investment and solid economic expansion that will
diversify the country’s trade partnerships and improve cross-border growth opportunities. Nevertheless, Mexico is experiencing
high volatility in foreign exchange rates, headwinds in the local stock market, and uncertainty from private company owners. Thus,
we are seeking to benefit from the country’s current status and capitalize on investment opportunities with attractive valuations
and very favorable medium-term fundamentals by applying our experience in executing transactions under varying economic and financial
market conditions.
Mexico’s capital
markets and banking penetration levels are more comparable to those of less developed economies and fixed investments are the main
driver of economic growth. Over the last couple of years, the Mexican Stock Exchange has tried to encourage investors through
the incorporation of new investment vehicles; nevertheless, the Mexican stock market lacks a diverse sophisticated investors base
to fully exploit the potential benefits of the investment. As a result, the Mexican stock market has not been effective in allowing
high growth medium size companies to raise equity. We believe that this market imperfection will allow us to capitalize on unique
opportunities as many companies will find alternative sources of capital and a U.S. listing extremely attractive and enables them
to continue to grow and thrive. Given the significant valuation discount to relevant public peers that mid-market companies usually
carry in Mexico and DD3 Capital’s experience in executing deals with similar private companies, we believe that we can create
attractive upside potential to public investors through a business combination.
On July 1, 2018, popular
elections were held in Mexico to vote for the president, members of the Congress and other federal and local offices. As a result
of the electoral process, Andres Manuel Lopez Obrador, who was running as the candidate of the Together We Make History (Juntos
Haremos Historia) alliance, was elected President of Mexico and took office on December 1, 2018. Additionally, the Together
We Make History alliance won a majority in Congress and most of the governorships and local congresses. The victory achieved by
the Together We Make History alliance in the federal executive branch and the Congress could result in either the implementation
of substantial changes to, the Mexican Constitution, federal laws, ordinances, regulations and policies currently in force in Mexico
or the continuity of prior approved laws and policies that are necessary or convenient for Mexico’s development. The implementation
of changes to the current laws could generate uncertainty, which in turn could affect the country’s economic situation and
the stability of the peso, among other macroeconomic variables. The past elections, both at the federal and local levels, and the
uncertainty associated with the measures to be implemented by the new government could significantly affect Mexico’s development.
On November 30, 2018, the presidents of Mexico, the United States and Canada signed the United States-Mexico-Canada Agreement,
or the USMCA, which has only been ratified by Mexico. Once ratified by the legislatures of the three countries, the USMCA would
replace NAFTA. As of the date of this report, there is uncertainty about whether the USMCA will be ratified by the United States
and Canada, as well as the timing thereof, and the potential for further re-negotiation, or even termination, of NAFTA. We cannot
provide any assurance that future political developments in Mexico, over which we have no control, will not have an unfavorable
impact on our financial position or results of operations.
Notwithstanding the
foregoing, effecting a business combination with a company located in Mexico, or another jurisdiction outside of the United States,
could subject us to a variety of additional risks that may negatively impact our operations. See the risk factor titled “If
we effect a business combination with a company located in Mexico or another foreign jurisdiction, we would be subject to a variety
of additional risks that may negatively impact our operations” for more information on the risks attendant to acquiring
a target business in Mexico. Furthermore, if we determine to acquire a target business located outside of Mexico, the positive
aspects of consummating a business combination in Mexico would not be applicable to our business going forward.
Acquisition Criteria
Consistent with our
business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating
prospective target businesses. We intend to use these criteria and guidelines in evaluating acquisition opportunities, but we may
decide to enter into an initial business combination with a target business that does not meet one or all of these criteria and
guidelines. We intend to acquire companies that:
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are fundamentally sound but we believe can achieve better results by leveraging the operating and
financial experience of our management team;
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we believe are able to innovate through new operational techniques, or where we can drive
improved financial performance;
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are established companies with proven business models, strong operations and fundamentals for revenue
and earnings growth;
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generate solid free cash flows or have the potential to generate strong, stable and increasing
free cash flows;
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have leading, growing or strong industry positioning, or are well positioned to participate as
a consolidator in its sector;
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have an experienced management team that can implement growth initiatives with a primary capital
injection; and/or
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offer attractive risk-adjusted returns.
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These criteria are
not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based,
to the extent relevant, on these general guidelines as well as other considerations, factors and criteria our management may deem
relevant.
We believe our management
team’s extensive contacts, broad industry knowledge and highly regarded experience will yield a robust deal flow from which
we may select a target. We will seek to acquire the target on terms and in a manner that leverages our management team’s
experience. The potential upside from growth in the target business and an improved capital structure will be weighed against any
identified downside risks designed to balance value creation with capital preservation.
Effecting a Business Combination
We will either (1)
seek shareholder approval of our initial business combination at a meeting called for such purpose, at which time shareholders
may seek to redeem 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 shareholders
with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a shareholder 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. The decision as to whether we will seek shareholder approval of our proposed
business combination or allow shareholders 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 shareholder approval. Unlike other blank check companies which require shareholder votes and conduct
proxy solicitations in conjunction with their initial business combinations and related redemptions of public shares for cash upon
consummation of such initial business combinations, even when a vote is not required by law, we will have the flexibility to avoid
such shareholder vote and allow our shareholders to sell their shares pursuant to the SEC’s tender offer rules. In that case,
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 shareholder approval, a majority
of the outstanding ordinary shares voted are voted in favor of the business combination.
We have until April
16, 2020 to consummate an initial business combination. If we are unable to consummate an initial business combination within such
time period, we will redeem 100% of our outstanding public shares for a pro rata portion of the funds held in the trust account,
equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account
and not previously released to us, divided by the number of then outstanding public shares, subject to applicable law and as further
described herein, and then seek to dissolve and liquidate. We expect the pro rata redemption price to be approximately $10.00
per public share, without taking into account any interest earned on such funds. However, we cannot assure you that we will in
fact be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public
shareholders.
Our initial business
combination must occur with one or more target businesses that together have a fair market value of at least 80% of the assets
held in the trust account (excluding taxes payable on the income earned on the trust account) at the time of the agreement to enter
into the initial business combination. The fair market value of the target or targets 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). Even though our board of directors will rely on generally accepted standards, our board of directors will
have discretion to select the standards employed. In addition, the application of the standards generally involves a substantial
degree of judgment. Accordingly, investors will be relying on the business judgment of the board of directors when it evaluates
the fair market value of the target or targets. The proxy solicitation materials or tender offer documents used by us in connection
with any proposed transaction will provide public shareholders with our analysis of the fair market value of the target business,
as well as the basis for our determinations. If our board is not able independently to determine the fair market value of the target
business or businesses, we will obtain an opinion from an independent investment banking firm, or another independent entity that
commonly renders valuation opinions, with respect to the satisfaction of such criteria.
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 our initial 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 shareholders
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. Even if the post-transaction company
owns or acquires 50% or more of the voting securities of the target, our shareholders 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 could acquire a 100% controlling interest in the target;
however, as a result of the issuance of a substantial number of new shares, our shareholders 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,
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.
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. While we believe there
may be numerous potential target businesses that we could acquire with the net proceeds of our initial public offering and the
sale of the private units, 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:
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our obligation to seek shareholder approval of a business combination or engage in a tender offer
may delay the completion of a transaction;
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our obligation to pay EarlyBirdCapital a fee upon consummation of our initial business combination
pursuant to the business combination marketing agreement;
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our obligation to redeem or repurchase ordinary shares held by our public shareholders may reduce
the resources available to us for a business combination; and
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our outstanding warrants and unit purchase option, and the potential future dilution they represent.
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Any of these factors
may place us at a competitive disadvantage in successfully negotiating a business combination. Our management believes, however,
that our status as a public entity and access to the United States public equity markets may give us a competitive advantage over
privately-held entities having a similar business objective as ours in acquiring a target business with significant growth potential
on favorable terms.
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 a suitable target business to acquire has been located, management will spend more time investigating
such target business and negotiating and processing the business combination (and consequently spend more time on our affairs)
than had been spent prior to locating a suitable target business. We do not intend to have any full-time employees prior to the
consummation of a business combination.
Periodic Reporting and Audited Financial
Statements
We have registered
our units, ordinary shares and warrants under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance
with the requirements of the Exchange Act, our annual reports will contain financial statements audited and reported on by our
independent registered public accountants. These filings are available to the public via the Internet at the SEC’s website
located at http://www.sec.gov. You may also read and copy any document that we file with the SEC at the SEC’s public reference
room located at 100 F Street, N.E., Washington, D.C. 20549. For more information, please call the SEC at 1-800-SEC-0330. You may
request a copy of our filings with the SEC (excluding exhibits) at no cost by writing or telephoning us at the following address
or telephone number:
DD3 Acquisition Corp.
c/o DD3 Mex Acquisition
Corp
Pedregal 24, 4th Floor
Colonia Molino del
Rey, Del. Miguel Hidalgo
11040 Mexico City,
Mexico
Tel: +52 (55) 8647-0417
We will provide shareholders
with audited financial statements of the prospective target business as part of any proxy solicitation materials or tender offer
documents sent to shareholders to assist them in assessing the target business. These financial statements will need to be prepared
in accordance with or reconciled to United States generally accepted accounting principles or international financial reporting
standards. We cannot assure you that any particular target business identified by us as a potential acquisition candidate will
have the necessary financial statements. To the extent that this requirement cannot be met, we may not be able to acquire the proposed
target business.
We may be required
to have our internal control procedures audited for the fiscal year ending June 30, 2020 as required by the Sarbanes-Oxley Act
of 2002 (the “Sarbanes-Oxley Act”). A target company may not be in compliance with the provisions of the Sarbanes-Oxley
Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance
with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
We are an “emerging
growth company,” as defined in the JOBS Act and will remain such for up to five years. However, if our annual gross revenue
is $1.07 billion or more, if our non-convertible debt issued within a three-year period exceeds $1 billion or the market value
of our ordinary shares that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any
given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company,
we have elected, under Section 107(b) of the JOBS Act, to take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting
standards.
Item 1A. Risk Factors
Ownership of our
securities involves a high degree of risk. 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 a holder of
our securities could lose all or part of its investment. This report also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result
of specific factors, including the risks described below. Shareholders should review closely the risk factors included in the proxy
statement/prospectus that will be a part of the Registration Statement on Form F-4 that is expected to be filed with the SEC in
connection with the special meeting of shareholders to approve the Business Combination Agreement and the Business Combination.
We are a blank
check company with no operating history and, accordingly, you will not have any basis on which to evaluate our ability to achieve
our business objective.
We are a blank check
company with no operating results to date. Since we do not have an operating history, you have no basis upon which to evaluate
our ability to achieve our business objective, which is to acquire an operating business. We will not generate any revenues until,
at the earliest, after the consummation of a business combination.
If we are unable
to consummate a business combination, our public shareholders may be forced to wait beyond April 16, 2020 before receiving distributions
from the trust account.
If we are unable to
consummate our initial business combination by April 16, 2020, we will, as promptly as reasonably possible but not more than ten
business days thereafter, distribute the aggregate amount then on deposit in the trust account (net of taxes payable, and less
up to $50,000 of interest to pay liquidation expenses), pro rata to our public shareholders by way of redemption of our public
shares and cease all operations except for the purposes of winding up of our affairs by way of a voluntary liquidation, as further
described herein. Any redemption of public shares from the trust account shall be effected automatically by function of our memorandum
and articles of association prior to our commencing any voluntary liquidation. If we are required to liquidate prior to distributing
the aggregate amount then on deposit in the trust account (net of taxes payable, and less up to $50,000 of interest to pay liquidation
expenses), pro rata to our public shareholders, then such winding up, liquidation and distribution must comply with the applicable
provisions of the BVI Business Companies Act, 2004 (the “Companies Act”). In that case, investors may be forced to
wait beyond April 16, 2020 before the redemption proceeds of our trust account become available to them. Except as otherwise described
herein, we have no obligation to return funds to investors prior to the date of our redemption or liquidation unless we consummate
our initial business combination prior thereto and only then in cases where investors have sought to redeem their public shares.
Only upon the redemption of our public shares or any liquidation will public shareholders be entitled to distributions if we are
unable to complete our initial business combination.
If we liquidate,
distributions, or part of them, may be delayed while the liquidator determines the extent of potential creditor claims.
Pursuant to, among
other documents, our memorandum and articles of association, if we do not complete our initial business combination by April 16,
2020, our public shares will be automatically redeemed for their pro rata share of the available funds in the trust account. Thereafter,
we will proceed to commence a voluntary liquidation and thereby a formal dissolution of the company. In connection with such a
voluntary liquidation, the liquidator would give notice to our creditors inviting them to submit their claims for payment, by notifying
known creditors (if any) who have not submitted claims and by placing a public advertisement in at least one newspaper published
in the British Virgin Islands and in at least one newspaper circulating in the location where the company has its principal place
of business, and taking any other steps the liquidator considers appropriate, after which our remaining assets would be distributed.
As soon as our affairs
are fully wound-up, if we were to liquidate, the liquidator must complete his statement of account and will then notify the Registrar
of Corporate Affairs in the British Virgin Islands (the “Registrar”) that the liquidation has been completed. However,
the liquidator may determine that he or she requires additional time to evaluate creditors’ claims (particularly if there
is uncertainty over the validity or extent of the claims of any creditors). Also, a creditor or shareholder may file a petition
with the British Virgin Islands Court, which, if successful, may result in our liquidation being subject to the supervision of
that court. Such events might delay distribution of some or all of our remaining assets.
In any liquidation
proceedings of the company under British Virgin Islands law, the funds held in our trust account may be included in our estate
and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any such claims deplete
the trust account we may not be able to return to our public shareholders the redemption amounts payable to them.
If we are deemed
to be insolvent, distributions, or part of them, may be delayed while the insolvency liquidator determines the extent of potential
creditor claims. In these circumstances, prior payments made by the company may be deemed “voidable transactions.”
Pursuant to our memorandum
and articles of association, if we do not complete our initial business combination by April 16, 2020, our public shares will be
automatically redeemed into their pro rata portion of the proceeds of the trust account.
However, if at any
time we are deemed insolvent for the purposes of the Insolvency Act, 2003 of the British Virgin Islands (the “Insolvency
Act”) (i.e. (i) we fail to comply with the requirements of a statutory demand that has not been set aside under section 157
of the Insolvency Act; (ii) execution or other process issued on a judgment, decree or order of a British Virgin Islands Court
in favor of a creditor of the company is returned wholly or partly unsatisfied; or (iii) either the value of the company’s
liabilities exceeds its assets, or the company is unable to pay its debts as they become due), we are required to immediately enter
insolvent liquidation. In these circumstances, a liquidator will be appointed who will give notice to our creditors inviting them
to submit their claims for payment, by notifying known creditors (if any) who have not submitted claims and by placing a public
advertisement in at least one newspaper published in the British Virgin Islands and in at least one newspaper circulating in the
location where the company has its principal place of business, and taking any other steps he considers appropriate, after which
our assets would be distributed. Following the process of insolvent liquidation, the liquidator will complete its final report
and accounts and will then notify the Registrar. The liquidator may determine that he requires additional time to evaluate creditors’
claims (particularly if there is uncertainty over the validity or extent of the claims of any creditors). Also, a creditor or shareholder
may file a petition with the British Virgin Islands Court which, if successful, may result in our liquidation being subject to
the supervision of that court. Such events might delay distribution of some or all of our assets to our public shareholders. In
such liquidation proceedings, the funds held in our trust account may be included in our estate and subject to the claims of third
parties with priority over the claims of our shareholders. To the extent any such claims deplete the trust account we cannot assure
you we will be able to return to our public shareholders the amounts otherwise payable to them.
If we are deemed insolvent,
then there are also limited circumstances where prior payments made to shareholders or other parties may be deemed to be a “voidable
transaction” for the purposes of the Insolvency Act, in which case shareholders could be required to pay back such amounts.
A voidable transaction would be, for these purposes, payments made as “unfair preferences” or “transactions at
an undervalue.” Where a payment was at risk of being deemed a voidable transaction, a liquidator appointed over an insolvent
company could apply to the British Virgin Islands Court for an order, inter alia, for the transaction to be set aside as a voidable
transaction in whole or in part.
Our initial shareholders
have waived their right to participate in any liquidation distribution with respect to the founder shares, and our sponsor has
waived its right to participate in any liquidation distribution with respect to the private shares. We will pay the costs of our
liquidation and distribution of the trust account from our remaining assets outside of the trust account. In addition, our sponsor
has agreed that it will be liable to us for all claims of creditors to the extent that we fail to obtain executed waivers from
such entities in order to protect the amounts held in trust, except as to any claims under our indemnity of the underwriters of
our initial public offering against certain liabilities, including liabilities under the Securities Act. However, we cannot assure
you that the liquidator will not determine that he or she requires additional time to evaluate creditors’ claims (particularly
if there is uncertainty over the validity or extent of the claims of any creditors). We also cannot assure you that a creditor
or shareholder will not file a petition with the British Virgin Islands Court which, if successful, may result in our liquidation
being subject to the supervision of that court. Such events might delay distribution of some or all of our assets to our public
shareholders.
If we are deemed
to be insolvent, distributions made to public shareholders, or part of them, from our trust account may be subject to claw back
in certain circumstances.
If we do not complete
our initial business combination by April 16, 2020, and instead distribute the aggregate amount then on deposit in the trust account
(net of taxes payable, and less up to $50,000 of interest to pay liquidation expenses), pro rata to our public shareholders by
way of redemption, it will be necessary for our directors to pass a board resolution approving the redemption of those ordinary
shares and the payment of the proceeds to public shareholders. Such board resolutions are required to confirm that we satisfy the
solvency test prescribed by the Companies Act (namely that our assets exceed our liabilities; and that we are able to pay our debts
as they become due). If, after the redemption proceeds are paid to public shareholders, it is subsequently determined that our
financial position at the time was such that it did not satisfy the solvency test, the Companies Act provides a mechanism by which
those proceeds could be recovered from public shareholders. However, the Companies Act also provides for circumstances where such
proceeds could not be subject to claw back, namely where (a) the public shareholders received the proceeds in good faith and without
knowledge of our failure to satisfy the solvency test; (b) a public shareholder altered its position in reliance of the validity
of the payment of the proceeds; or (c) it would be unfair to require repayment of the proceeds in full or at all.
Our security
holders are not entitled to protections normally afforded to investors of blank check companies.
Since the net proceeds
of our initial public offering are intended to be used to complete a business combination with a target business that has not been
identified, we may be deemed to be a “blank check” company under the United States securities laws. However, since
we had net tangible assets in excess of $5,000,000 upon the consummation of our initial public offering and filed a Current
Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC
to protect investors of blank check companies such as Rule 419. Accordingly, our security holders are not afforded the benefits
or protections of those rules which would, for example, completely restrict the transferability of our securities, require us to
complete a business combination within 18 months of the effective date of the initial registration statement and restrict the use
of interest earned on the funds held in the trust account. Because we are not subject to Rule 419, our units were immediately tradable
upon consummation of our initial public offering, and we will be entitled to withdraw certain amounts from the funds held in the
trust account prior to the completion of a business combination.
If funds not
being held in trust are insufficient to allow us to operate until April 16, 2020, we may be unable to complete a business combination.
We believe that
the funds available to us outside of the trust account and a commitment from DD3 Capital, an affiliate of our sponsor, to
provide us an aggregate of $50,000 in loans, will be sufficient to allow us to operate through April 16, 2020, assuming
that a business combination is not consummated during that time. However, we cannot assure you that our estimates will be
accurate. Accordingly, if we use all of the funds held outside of the trust account, we may not have sufficient funds
available with which to structure, negotiate or close an initial business combination. In such event, we would need to borrow
funds from our sponsor, officers or directors or their affiliates to operate or may be forced to liquidate. Our sponsor,
officers, directors and their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in
whatever amount that they deem reasonable in their sole discretion for our working capital needs. Each loan would be
evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination, without
interest, or, at the holder’s discretion, up to $1,500,000 of the notes may be converted into units at a price
of $10.00 per unit. The units would be identical to the private units.
If third parties
bring claims against us, the proceeds held in trust could be reduced and the per-share redemption price received by shareholders
may be less than $10.00.
Our placing of funds
in trust may not protect those funds from third party claims against us. Although we will seek to have all vendors and service
providers we engage and prospective target businesses we negotiate with execute agreements with us waiving any right, title, interest
or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders, they may not execute
such agreements. Furthermore, even if such entities execute such agreements with us, they may seek recourse against the trust account.
A court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which
could take priority over those of our public shareholders. If we are unable to complete a business combination and distribute the
proceeds held in trust to our public shareholders, our sponsor has agreed (subject to certain exceptions described in our final
prospectus filed with the SEC on October 12, 2018) that it will be liable to ensure that the proceeds in the trust account are
not reduced below $10.00 per share by the claims of target businesses or claims of vendors or other entities that are owed money
by us for services rendered or contracted for or products sold to us. However, it may not be able to meet such obligation. We have
not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s
only assets are securities of our company. We have not asked our sponsor to reserve for such indemnification obligations. Therefore,
the per-share distribution from the trust account may be less than $10.00, plus interest, due to such claims.
Our directors
may decide not to enforce our sponsor’s indemnification obligations, resulting in a reduction in the amount of funds in the
trust account available for distribution to our public shareholders.
In the event that the
proceeds in the trust account are reduced below $10.00 per public share and our sponsor asserts that it is unable to satisfy its
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. It is possible that our independent
directors in exercising their business judgment may choose not to do so in any particular instance. If our independent directors
choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to
our public shareholders may be reduced below $10.00 per share.
We are an “emerging
growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will
make our ordinary shares less attractive to investors.
We are an “emerging
growth company,” as defined in the JOBS Act. We will remain an “emerging growth company” for up to five years.
However, if our non-convertible debt issued within a three-year period exceeds $1.0 billion or our total annual gross revenues
exceed $1.07 billion, or the market value of our ordinary shares that are held by non-affiliates exceeds $700 million on the last
day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following
fiscal year. As an emerging growth company, we are not required to comply with the auditor attestation requirements of Section
404 of the Sarbanes-Oxley Act, we have reduced disclosure obligations regarding executive compensation in our periodic reports
and proxy statements and we are exempt from the requirements of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, we
have elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private
companies until those standards apply to private companies. As such, our financial statements may not be comparable to companies
that comply with public company effective dates. We cannot predict if investors will find our ordinary shares less attractive because
we may rely on these provisions. If some investors find our ordinary shares less attractive as a result, there may be a less active
trading market for our shares and our share price may be more volatile.
If we do not
hold an annual meeting of shareholders until after the consummation of our initial business combination, shareholders will not
be afforded an opportunity to elect directors and to discuss company affairs with management until such time.
Unless otherwise required
by law or the Nasdaq Capital Market, we do not currently intend to call an annual meeting of shareholders until after we consummate
our initial business combination. If our shareholders want us to hold a meeting prior to our consummation of our initial business
combination, they may do so by members holding not less than 30% of voting rights in respect of the matter for which the meeting
is requested making a request in writing to the directors in accordance with Section 82(2) of the Companies Act. Under British
Virgin Islands law, we may not increase the required percentage to call a meeting above 30%. Until we hold an annual meeting of
shareholders, public shareholders may not be afforded the opportunity to elect directors and to discuss company affairs with management.
Changes in laws
or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results
of operations.
We are subject to laws
and regulations enacted by national, regional and local governments. In particular, we are 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. In addition, a failure to comply with
applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of
operations.
Nasdaq may delist
our securities from quotation on its exchange which could limit investors’ ability to make transactions in our securities
and subject us to additional trading restrictions.
Our securities are
currently listed on Nasdaq, a national securities exchange. We cannot assure you that our securities will continue to be listed
on Nasdaq in the future prior to an initial business combination. Additionally, in connection with our initial business combination,
it is likely that Nasdaq will require us to file a new initial listing application and meet its initial listing requirements as
opposed to its more lenient continued listing requirements. We cannot assure you that we will be able to meet those initial listing
requirements at that time.
If Nasdaq delists our
securities from trading on its exchange, we and our investors could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity with respect to our securities;
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a determination that our ordinary shares are “penny stock” which will require brokers
trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in
the secondary trading market for our ordinary shares;
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a limited amount of news and analyst coverage for our company; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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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 our units, ordinary shares and warrants are currently
listed on Nasdaq, our units, ordinary shares and warrants are covered securities. 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. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank
check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten
to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed
on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer
our securities.
The provisions
of our memorandum and articles of association relating to the rights and obligations attaching to our ordinary shares may be amended
prior to the consummation of our initial business combination with the approval of the holders of 65% (or 50% if for the purposes
of approving, or in conjunction with, the consummation of our initial business combination) of our outstanding ordinary shares
attending and voting on such amendment at the relevant meeting, which is a lower amendment threshold than that of many blank check
companies. It may be easier for us, therefore, to amend our memorandum and articles of association to facilitate the consummation
of our initial business combination that a significant number of our shareholders may not support.
Many blank check companies
have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a
company’s pre-business combination activity, without approval by a certain percentage of the company’s shareholders.
Typically, amendment of these provisions requires approval by between 90% and 100% of the company’s public shareholders.
Our memorandum and articles of association provide that, prior to the consummation of our initial business combination, the provisions
related to pre-business combination activity and the rights and obligations attaching to the ordinary shares may be amended if
approved by holders of 65% (or 50% if approved in connection with our initial business combination) of our outstanding ordinary
shares attending and voting on such amendment. Prior to our initial business combination, if we seek to amend any provisions of
our memorandum and articles of association relating to shareholders’ rights or pre-business combination activity, we will
provide dissenting public shareholders with the opportunity to redeem their public shares in connection with any such vote on any
proposed amendments to our memorandum and articles of association. Other provisions of our memorandum and articles of association
may be amended prior to the consummation of our initial business combination if approved by a majority of the votes of shareholders
attending and voting on such amendment or by resolution of the directors. Following the consummation of our initial business combination,
the rights and obligations attaching to our ordinary shares and other provisions of our memorandum and articles of association
may be amended if approved by a majority of the votes of shareholders attending and voting on such amendment or by resolution of
the directors. Our initial shareholders, which beneficially own approximately 22.6% of our ordinary shares, will participate in
any vote to amend our memorandum and articles of association and will have the discretion to vote in any manner they choose. As
a result, we may be able to amend the provisions of our memorandum and articles of association which govern our pre-business combination
and the rights and obligations attaching to the ordinary shares more easily than many blank check companies, and this may increase
our ability to consummate an initial business combination with which you do not agree. However, we and our directors and officers
have agreed not to propose any amendment to our memorandum and articles of association that would affect the substance and timing
of our obligation to redeem the public shares of any public shareholder without the consent of that holder if we are unable to
consummate our initial business combination by April 16, 2020.
Our initial shareholders
control a substantial interest in us and thus may influence certain actions requiring a shareholder vote.
Our initial shareholders
own approximately 22.6% of our issued and outstanding ordinary shares. None of our sponsor, officers, directors or their affiliates
has indicated any intention to purchase any units or ordinary shares from persons in the open market or in private transactions.
However, our sponsor, officers, directors or their affiliates could determine in the future to make such purchases in the open
market or in private transactions, to the extent permitted by law, in order to influence the vote or magnitude of the number of
shareholders seeking to tender their shares to us. In connection with any vote for a proposed business combination, our sponsor,
as well as all of our officers and directors, have agreed to vote the ordinary shares owned by them in favor of such proposed business
combination.
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. It is unlikely that there will be an annual meeting of shareholders to elect new directors prior to the consummation
of a business combination, in which case all of the current directors will continue in office until at least the consummation 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 shareholders, because of their ownership position, will have considerable
influence regarding the outcome. Accordingly, our initial shareholders will continue to exert control at least until the consummation
of a business combination.
Our memorandum
and articles of association permit the board of directors by resolution to amend our memorandum and articles of association to
create additional classes of securities, including shares with rights, preferences, designations and limitations as they determine
which may have an anti-takeover effect.
Our memorandum and
articles of association permits the board of directors by resolution to amend the memorandum and articles of association to designate
rights, preferences, designations and limitations attaching to the preferred shares as they determine in their discretion, without
shareholder approval with respect the terms or the issuance. If issued, the rights, preferences, designations and limitations of
the preferred shares would be set by the board of directors and could operate to the disadvantage of the outstanding ordinary shares
the holders of which would not have any pre-emption rights in respect of such an issue of preferred shares. Such terms could include,
among others, preferences as to dividends and distributions on liquidation, or could be used to prevent possible corporate takeovers.
We may issue some or all of such preferred shares in connection with our initial business combination. Notwithstanding the foregoing,
we and our directors and officers have agreed not to propose any amendment to our memorandum and articles of association that would
affect the substance and timing of our obligation to redeem our public shares if we are unable to consummate our initial business
combination by April 16, 2020.
If we do not
file and maintain a current and effective registration statement relating to the ordinary shares issuable upon exercise of the
warrants, holders will only be able to exercise such warrants on a “cashless basis.”
If we do not file and
maintain a current and effective registration statement relating to the ordinary shares issuable upon exercise of the warrants
at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis”
and only if an exemption from registration is available. As a result, the number of ordinary shares that holders will receive upon
exercise of the warrants will be fewer than it would have been had such holder exercised his warrant for cash. Further, if an exemption
from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise
their warrants for cash if a current and effective registration statement relating to the ordinary shares issuable upon exercise
of the warrants is available. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet these conditions
and to file and maintain a current and effective registration statement relating to the ordinary shares issuable upon exercise
of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so. If we are unable
to do so, the warrants may be deprived of any value, the market for the warrants may be limited and they may expire worthless if
they cannot be sold.
A warrantholder
will only be able to exercise a warrant if the issuance of ordinary shares upon such exercise has been registered or qualified
or is deemed exempt under the securities laws of the state of residence of the holder of the warrants.
No warrants will be
exercisable and we will not be obligated to issue ordinary shares unless the ordinary shares issuable upon such exercise has been
registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants.
If the ordinary shares issuable upon exercise of the warrants are not qualified or exempt from qualification in the jurisdictions
in which the holders of the warrants reside, the warrants may be deprived of any value, the market for the warrants may be limited
and they may expire worthless if they cannot be sold.
We may amend
the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then
outstanding warrants.
Our warrants were 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 defective provision. The warrant agreement requires the approval by the holders of at least 50% of the then outstanding
warrants (including the private warrants) in order to make any change that adversely affects the interests of the registered holders.
We would need only 2,662,938, or 47.9% of the public warrants to vote in favor of a proposed amendment for it to be approved (excluding
the warrants underlying the unit purchase option and assuming the holders of the private warrants all voted in favor of the amendment).
Accordingly, we may amend the terms of the warrants in a manner that may be adverse to you without your approval.
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 (excluding the private warrants and any warrants underlying additional units issued to our sponsor,
officers or directors in payment of working capital loans made to us but including any warrants issued upon exercise of the unit
purchase option issued to EarlyBirdCapital) 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 an ordinary share equals or exceeds $18.00 per share
(as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading-day
period 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 ordinary shares 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 our sponsor, officers or directors or their permitted transferees.
Our management’s
ability to require holders of our warrants to exercise such warrants on a cashless basis will cause holders to receive fewer ordinary
shares upon their exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If we call our public
warrants for redemption after the redemption criteria have been satisfied, our management will have the option to require any holder
that wishes to exercise his warrant (including any warrants held by our sponsor, officers or directors or their permitted transferees)
to do so on a “cashless basis.” If our management chooses to require holders to exercise their warrants on a cashless
basis, the number of ordinary shares received by a holder upon exercise will be fewer than it would have been had such holder exercised
his warrant for cash. This will have the effect of reducing the potential “upside” of the holder’s investment
in our company.
Our public shareholders
may not be afforded an opportunity to vote on our proposed business combination.
We will either (1)
seek shareholder approval of our initial business combination at a meeting called for such purpose at which public shareholders
may seek to redeem their public 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 public
shareholders with the opportunity to sell their public shares to us by means of a tender offer (and thereby avoid the need for
a shareholder 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 in our final prospectus filed with the SEC on October 12,
2018. The decision as to whether we will seek shareholder approval of a proposed business combination or will allow shareholders
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 shareholder approval.
For instance, Nasdaq rules currently allow us to engage in a tender offer in lieu of a shareholder meeting but would still require
us to obtain shareholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration
in any business combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of
our outstanding shares, we would seek shareholder approval of such business combination instead of conducting a tender offer. Furthermore,
shareholder approval would not be required pursuant to the Companies Act if our initial business combination were structured as
a purchase of assets, a purchase of stock of the target not involving a merger with us, or a merger of the target into a subsidiary
of our company, or if we otherwise entered into contractual arrangements with a target to obtain control of such company. Accordingly,
it is possible that we will consummate our initial business combination even if holders of a majority of our public shares do not
approve of the business combination we consummate.
We may issue
shares of our capital stock or debt securities to complete a business combination, which would dilute the equity interest of our
shareholders and may cause a change in control of our company.
Our memorandum and
articles of association authorizes the issuance of an unlimited amount of both ordinary shares of no par value and preferred shares
of no par value. Although we have no commitment as of the date of this report, we may issue a substantial number of additional
ordinary shares or preferred shares, or a combination of ordinary shares and preferred shares, to complete a business combination.
The issuance of additional ordinary shares will not reduce the per-share redemption amount in the trust account. The issuance of
additional ordinary shares or preferred shares:
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may significantly dilute the equity interest of our shareholders;
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may subordinate the rights of holders of ordinary shares if we issue preferred shares with rights
senior to those afforded to our ordinary shares;
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may cause a change in control if a substantial number of ordinary shares 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
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may adversely affect prevailing market prices for our ordinary shares.
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Similarly, if we issue
debt securities, it could result in:
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default and foreclosure on our assets if our operating revenues after a business combination are
insufficient to repay our debt obligations;
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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;
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable
on demand; and
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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.
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If we incur indebtedness,
our lenders will not have a claim on the cash in the trust account and such indebtedness will not decrease the per-share redemption
amount in the trust account.
Since we are
not limited to a particular industry, sector or geographic jurisdiction in which to complete a business combination, we are unable
to currently ascertain the merits or risks of the industry or business in which we may ultimately operate.
Although we currently
intend to focus on target businesses located in Mexico and Hispanic businesses located in the U.S., we may pursue an acquisition
opportunity in any business industry, sector or geographic location we choose. Accordingly, there is no current basis for you to
evaluate the possible merits or risks of the particular industry in which we may ultimately operate or the target business which
we may ultimately acquire. To the extent we complete a business combination with a financially unstable company or an entity in
its development stage, we may be affected by numerous risks inherent in the business operations of those entities. If we complete
a business combination with an entity in an industry or geographic location characterized by a high level of risk, we may be affected
by the currently unascertainable risks of that industry or geographic location. Although our management will endeavor to evaluate
the risks inherent in a particular industry, geographic location or target business, we cannot assure you that we will properly
ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our securities will not
ultimately prove to be less favorable to investors than a direct investment, if an opportunity were available, in a target business.
Our ability to
successfully effect a business combination and to be successful thereafter will be largely dependent upon the efforts of our key
personnel, some of whom may join us following a business combination. While we intend to closely scrutinize any individuals we
engage after a business combination, we cannot assure you that our assessment of these individuals will prove to be correct.
Our ability to successfully
effect a business combination is dependent upon the efforts of our key personnel. We believe that our success depends on the continued
service of our key personnel, at least until we have consummated our initial business combination. We cannot assure you that any
of our key personnel will remain with us for the immediate or foreseeable future. In addition, none of our officers are required
to commit any specified amount of time to our affairs and, accordingly, our officers will have conflicts of interest in allocating
management time among various business activities, including identifying potential business combinations and monitoring the related
due diligence. We do not have employment agreements with, or key-man insurance on the life of, any of our officers. The unexpected
loss of the services of our key personnel could have a detrimental effect on us.
The role of our key
personnel after a business combination, however, cannot presently be ascertained. Although some of our key personnel may serve
in senior management or advisory positions following a business combination, it is likely that most, if not all, of the management
of the target business will remain in place. In addition, the operational experience of our officers is generally limited to the
investment banking industry. While we intend to closely scrutinize any individuals we engage after a 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 public company which could cause us to have to expend time and resources helping them become familiar with such
requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect
our operations.
Our key personnel
may negotiate employment or consulting agreements with a target business in connection with a particular business combination.
These agreements may provide for them to receive compensation following a 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 will
be able to remain with the company after the consummation of a business combination only if they are able to negotiate employment
or consulting agreements or other appropriate arrangements 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 the company after the consummation of the
business combination. The personal and financial interests of such individuals may influence their motivation in identifying and
selecting a target business.
Our 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 could have a negative impact on our ability to consummate a business combination.
Our officers and directors
are officers and/or directors of our sponsor and will not commit their full time to our affairs. We presently expect each of our
employees 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 our initial business combination. The foregoing could have a negative impact on our ability
to consummate our initial business combination.
Our officers
and directors may have a conflict of interest in determining whether a particular target business is appropriate for a business
combination.
Our sponsor has waived
its right to redeem its founder shares and any other shares it purchases, or to receive distributions from the trust account with
respect to its founder shares upon our liquidation if we are unable to consummate a business combination. Accordingly, the founder
shares, as well as the private units and any warrants purchased by our officers or directors in the aftermarket, will be worthless
if we do not consummate a business combination. The personal and financial interests of our directors and officers may influence
their motivation in timely identifying and selecting a target business and completing a business combination. Consequently, our
directors’ and officers’ discretion in identifying and selecting a suitable target business may result in a conflict
of interest when determining whether the terms, conditions and timing of a particular business combination are appropriate and
in our shareholders’ best interest.
Our officers
and directors or their affiliates have pre-existing fiduciary and contractual obligations and accordingly, may have conflicts of
interest in determining to which entity a particular business opportunity should be presented.
Our officers and directors
or their affiliates have pre-existing fiduciary and contractual obligations to other companies. Accordingly, they may participate
in transactions and have obligations that may be in conflict or competition with our consummation of our initial business combination.
As a result, a potential target business may be presented by our management team to another entity prior to its presentation to
us and we may not be afforded the opportunity to engage in a transaction with such target business.
If we seek shareholder
approval of our business combination, our sponsor, directors, officers, advisors and their affiliates may elect to purchase shares
from shareholders, in which case they may influence a vote in favor of a proposed business combination that you do not support.
If we seek shareholder
approval of our business combination and we do not conduct redemptions in connection with our business combination pursuant to
the tender offer rules (assuming we are not deemed to be a foreign private issuer at such time), our sponsor, directors, officers,
advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or
following the consummation of our initial business combination. Such a purchase would include a contractual acknowledgement that
such shareholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees
not to exercise its redemption rights. In the event that our sponsor, directors, officers, advisors or their affiliates purchase
shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights,
such selling shareholders would be required to revoke their prior elections to redeem their shares.
The purpose of such
purchases would be to (1) increase the likelihood of obtaining shareholder approval of the business combination or (2) satisfy
a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the
closing of the business combination, where it appears that such requirement would otherwise not be met. This may result in the
consummation of an initial business combination that may not otherwise have been possible.
Purchases of
ordinary shares in the open market or in privately negotiated transactions by our sponsor, directors, officers, advisors or their
affiliates may make it difficult for us to maintain the listing of our ordinary shares on a national securities exchange following
the consummation of an initial business combination.
If our sponsor, directors,
officers, advisors or their affiliates purchase ordinary shares in the open market or in privately negotiated transactions, the
public “float” of our ordinary shares and the number of beneficial holders of our securities would both be reduced,
possibly making it difficult to maintain the listing or trading of our securities on a national securities exchange following consummation
of the business combination or requiring us to comply with the going-private rules under the Exchange Act.
Our outstanding
warrants and unit purchase option may have an adverse effect on the market price of our ordinary shares and make it more difficult
to effect a business combination.
We issued warrants
to purchase 5,565,000 ordinary shares as part of the units sold in our initial public offering (including the partial exercise
of the underwriters’ over-allotment option) and private warrants to purchase 239,125 ordinary shares as part of the private
units sold in the private placements. We also issued a unit purchase option to purchase 250,000 units to EarlyBirdCapital which,
if exercised, will result in the issuance of 250,000 ordinary shares and warrants to purchase an additional 250,000 ordinary shares.
We may also issue other units to our sponsor, officers or directors in payment of working capital loans made to us as described
in our final prospectus filed with the SEC on October 12, 2018. To the extent we issue ordinary shares to effect a business combination,
the potential for the issuance of a substantial number of additional shares upon exercise of these warrants could make us a less
attractive acquisition vehicle in the eyes of a target business. Such securities, when exercised, will increase the number of issued
and outstanding ordinary shares and reduce the value of the shares issued to complete the business combination. Accordingly, our
warrants and the unit purchase option may make it more difficult to effectuate a business combination or increase the cost of acquiring
the target business. Additionally, the sale, or even the possibility of sale, of the shares underlying the warrants could have
an adverse effect on the market price for our securities or on our ability to obtain future financing.
If our security
holders exercise their registration rights, it may have an adverse effect on the market price of our ordinary shares and the existence
of these rights may make it more difficult to effect a business combination.
Our sponsor is entitled
to make a demand that we register the resale of the founder shares at any time commencing three months prior to the date on which
their shares may be released from escrow. The founder shares will be held in escrow until, (1) with respect to 50% of the founder
shares, the earlier of one year after the date of the consummation of our initial business combination and the date on which the
closing price of our ordinary shares equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations
and recapitalizations) for any 20 trading days within any 30-trading day period commencing after our initial business combination
and (2) with respect to the remaining 50% of the founder shares, one year after the date of the consummation of our initial business
combination, or earlier, in either case, if, subsequent to our initial business combination, we consummate a liquidation, merger,
stock exchange or other similar transaction which results in all of our shareholders having the right to exchange their ordinary
shares for cash, securities or other property. Additionally, the holders of the private units and any units our sponsor, officers,
directors, or their affiliates may be issued in payment of working capital loans made to us are entitled to demand that we register
the resale of the private units and any other units we issue to them (and the underlying securities) commencing at any time after
we consummate an initial business combination. The presence of these additional ordinary shares trading in the public market may
have an adverse effect on the market price of our securities. In addition, the existence of these rights may make it more difficult
to effectuate a business combination or increase the cost of acquiring the target business, as the shareholders of the target business
may be discouraged from entering into a business combination with us or will request a higher price for their securities because
of the potential effect the exercise of such rights may have on the trading market for our ordinary shares.
If we are deemed
to be an investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted,
which may make it difficult for us to complete a business combination.
A company that, among
other things, is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing,
reinvesting, owning, trading or holding certain types of securities would be deemed an investment company under the Investment
Company Act. Since we will invest the proceeds held in the trust account, it is possible that we could be deemed an investment
company. Notwithstanding the foregoing, we do not believe that our anticipated principal activities will subject us to the Investment
Company Act. To this end, the proceeds held in trust may be invested by the trustee only in United States “government securities”
within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government
treasury obligations. By restricting the investment of the proceeds to these instruments, we intend to meet the requirements for
the exemption provided in Rule 3a-1 promulgated under the Investment Company Act.
If we are nevertheless
deemed to be an investment company under the Investment Company Act, we may be subject to certain restrictions that may make it
more difficult for us to complete a business combination, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities.
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In addition, we may
have imposed upon us certain burdensome requirements, including:
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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, compliance policies and procedures and disclosure requirements
and other rules and regulations.
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Compliance with these
additional regulatory burdens would require additional expense for which we have not allotted any funds.
If we do not
conduct an adequate due diligence investigation of a target business, we may be required to subsequently 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.
We intend to conduct
a due diligence investigation of the target businesses we propose to acquire. Intensive due diligence is time consuming and expensive
due to the operations, accounting, finance and legal professionals who must be involved in the due diligence process. Even if we
conduct extensive due diligence on a target business, this diligence may not reveal all material issues that may affect a particular
target business, and factors outside the control of the target business and outside of our control may later arise. If our diligence
fails to identify issues specific to a target business, industry or the environment in which the target business operates, 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 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 ordinary shares.
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.
The requirement
that we complete an initial business combination by April 16, 2020 may give potential target businesses leverage over us in negotiating
a business combination.
We have until April
16, 2020 to complete an initial business combination. Any potential target business with which we enter into negotiations concerning
a business combination will be aware of this requirement. Consequently, such target business may obtain leverage over us in negotiating
a business combination, knowing that if we do not complete a business combination with that particular target business, we may
be unable to complete a business combination with any other target business. This risk will increase as we get closer to the time
limit referenced above.
We may not obtain
a fairness opinion with respect to the target business that we seek to acquire and therefore you may be relying solely on the judgment
of our board of directors in deciding whether to approve a proposed business combination that we submit to our shareholders for
approval.
We will only be required
to obtain a fairness opinion with respect to the target business that we seek to acquire if it is an entity that is affiliated
with any of our officers, directors or sponsor. In all other instances, we will have no obligation to obtain an opinion. Accordingly,
investors will be relying solely on the judgment of our board of directors in deciding whether to approve a proposed business combination
that we submit to our shareholders for approval.
Resources could
be spent researching acquisitions that are not consummated, which could materially adversely affect subsequent attempts to locate
and acquire or merge with another business.
It is anticipated 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 a decision is made not to complete a specific business combination, the costs incurred up to that point
for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific
target business, we may fail to consummate the business combination for any number of reasons including those beyond our control.
Any such event would result in a loss to us of the related funds spent to cover the costs incurred which could materially adversely
affect subsequent attempts to locate and acquire or merge with another business.
Compliance with
the Sarbanes-Oxley Act will require substantial financial and management resources and may 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 and may require that we have such system
of internal controls audited beginning with our Annual Report on Form 10-K for the year ending June 30, 2020. If we fail to maintain
the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or shareholder
litigation. Any inability to provide reliable financial reports could harm our business. Section 404 of the Sarbanes-Oxley Act
also requires that our independent registered public accounting firm report on management’s evaluation of our system of internal
controls. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal
controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase
the time and costs necessary to complete any such acquisition. Furthermore, any failure to implement required new or improved controls,
or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future,
could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause
investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of
our shares.
We are not subject
to the supervision of the Financial Services Commission of the British Virgin Islands and so our shareholders are not protected
by any regulatory inspections in the British Virgin Islands.
We are not an entity
subject to any regulatory supervision in the British Virgin Islands by the Financial Services Commission. As a result, shareholders
are not protected by any regulatory supervision or inspections by any regulatory agency in the British Virgin Islands and we are
not required to observe any restrictions in respect of our conduct save as disclosed in our memorandum and articles of association.
Shareholders
may face difficulties in protecting their interests, and their ability to protect their rights through the U.S. federal courts
may be limited, because we are incorporated under British Virgin Islands law.
We are a company incorporated
under the laws of the British Virgin Islands. As a result, it may be difficult for holders of our securities to enforce judgments
obtained in the United States courts against our directors or officers.
Our corporate affairs
are governed by our memorandum and articles of association, the Companies Act and the common law of the British Virgin Islands.
The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities
of our directors to us under British Virgin Islands law are governed by the Companies Act and the common law of the British Virgin
Islands. The common law of the British Virgin Islands is derived from English common law, and whilst the decisions of the English
courts are of persuasive authority, they are not binding on a court in the British Virgin Islands. The rights of our shareholders
and the fiduciary responsibilities of our directors under British Virgin Islands law may not be as clearly established as they
would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the British Virgin Islands
has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully
developed and judicially interpreted bodies of corporate law. In addition, while statutory provisions do exist in British Virgin
Islands law for derivative actions to be brought in certain circumstances, shareholders in British Virgin Islands companies may
not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which
any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result
in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized
in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing
has occurred.
The British Virgin
Islands Courts are also unlikely:
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to recognize or enforce against us judgments of courts of the United States based on certain civil
liability provisions of U.S. securities laws where that liability is in respect of penalties, taxes, fines or similar fiscal or
revenue obligations of the company; and
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to impose liabilities against us, in original actions brought in the British Virgin Islands, based
on certain civil liability provisions of U.S. securities laws that are penal in nature.
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There is no statutory
recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin
Islands will in certain circumstances recognize such a foreign judgment and treat it as a cause of action in itself which may be
sued upon as a debt at common law so that no retrial of the issues would be necessary provided that:
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the U.S. court issuing the judgment had jurisdiction in the matter and the company either submitted
to such jurisdiction or was resident or carrying on business within such jurisdiction and was duly served with process;
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the judgment is final and for a liquidated sum;
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the judgment given by the U.S. court was not in respect of penalties, taxes, fines or similar fiscal
or revenue obligations of the company;
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in obtaining judgment there was no fraud on the part of the person in whose favor judgment was
given or on the part of the court;
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recognition or enforcement of the judgment would not be contrary to public policy in the British
Virgin Islands; and
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the proceedings pursuant to which judgment was obtained were not contrary to natural justice.
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In appropriate circumstances,
a British Virgin Islands Court may give effect in the British Virgin Islands to other kinds of final foreign judgments such as
declaratory orders, orders for performance of contracts and injunctions.
As a result of all
of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management
or controlling shareholders than they would as public shareholders of a U.S. company.
We may qualify
as a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences
to U.S. investors.
If we are determined
to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. holder of our ordinary
shares or warrants, the U.S. holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional
reporting requirements. Our actual PFIC status for our current taxable year may depend on whether we qualify for the PFIC start-up
exception. Depending on the particular circumstances the application of the start-up exception may be subject to uncertainty, and
there cannot be any assurance that we will qualify for the start-up exception. Accordingly, there can be no assurances with respect
to our status as a PFIC for our current taxable year or any future taxable year. Our actual PFIC status for any taxable year, however,
will not be determinable until after the end of such taxable year. If we determine we are a PFIC for any taxable year, we will
endeavor to provide to a U.S. holder such information as the Internal Revenue Service (“IRS”) may require, including
a PFIC annual information statement, in order to enable the U.S. holder to make and maintain a “qualified electing fund”
election, but there can be no assurance that we will timely provide such required information, and such election would likely be
unavailable with respect to our warrants. We urge U.S. holders to consult their own tax advisors regarding the possible application
of the PFIC rules.
Risks Associated
with Acquiring and Operating a Business Outside of the United States
If we effect
a business combination with a company located in Mexico or another foreign jurisdiction, we would be subject to a variety of additional
risks that may negatively impact our operations.
If we are successful
in consummating a business combination with a target business in Mexico, or if we effect a business combination with a company
located in another foreign country, we would be subject to any special considerations or risks associated with companies operating
in the target business’ home jurisdiction, including any of the following:
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rules and regulations or currency conversion or corporate withholding taxes on individuals;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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tax issues, such as tax law changes and variations in tax laws as compared to the United States;
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currency fluctuations and exchange controls;
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challenges in collecting accounts receivable;
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cultural and language differences;
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employment regulations;
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crime, strikes, riots, civil disturbances, terrorist attacks and wars; and
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deterioration of political relations with the United States, which could result in uncertainty
and/or changes in or to existing trade treaties.
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In particular, if we
acquire a target business in Mexico, we would be subject to the risk of changes in economic conditions, social conditions and political
conditions inherent in Mexico, including changes in laws and policies that govern foreign investment, as well as changes in United
States laws and regulations relating to foreign trade and investment, including NAFTA and the USMCA.
We cannot assure you
that we would be able to adequately address these additional risks. If we were unable to do so, our operations might suffer.
Our officers
and directors may not have significant experience or knowledge regarding the jurisdiction or industry of the target business we
may seek to acquire.
We may consummate a
business combination with a target business in any geographic location or industry we choose. We cannot assure you that our officers
and directors will have enough experience or have sufficient knowledge relating to the jurisdiction of the target or its industry
to make an informed decision regarding a business combination.
Because of the
costs and difficulties inherent in managing cross-border business operations, our results of operations may be negatively impacted.
Managing a business,
operations, personnel or assets in another country is challenging and costly. Any management that we may have (whether based abroad
or in the U.S.) may be inexperienced in cross-border business practices and unaware of significant differences in accounting rules,
legal regimes and labor practices. Even with a seasoned and experienced management team, the costs and difficulties inherent in
managing cross-border business operations, personnel and assets can be significant (and much higher than in a purely domestic business)
and may negatively impact our financial and operational performance.
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 team may resign from their positions as officers or directors of the company and the management
team of the target business at the time of the business combination will likely remain in place. Management of the target business
may not be familiar with United States securities laws. If new management is unfamiliar with our 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 effect
a business combination with a company located outside of the United States, the laws of the country in which such company operates
will likely govern many of our material agreements and we may not be able to enforce our legal rights.
If we effect a business
combination with a company located outside of the United States, the laws of the country in which such company operates will likely
govern many of the material agreements relating to its operations. We cannot assure you that the target business will be able to
enforce any of its material agreements or that remedies will be available in this new jurisdiction. The system of laws and the
enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United States.
The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business,
business opportunities or capital. Additionally, if we acquire a company located outside of the United States, it is likely that
substantially all of our assets would be located outside of the United States and some of our officers and directors might reside
outside of the United States. As a result, it may not be possible for investors in the United States to enforce their legal rights
against or to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated
upon civil liabilities against our directors and officers under federal securities laws.
We may re-incorporate
in another jurisdiction in connection with our initial business combination, and the laws of such jurisdiction will likely govern
all of our material agreements and we may not be able to enforce our legal rights.
In connection with
our initial business combination, we may relocate the home jurisdiction of our business from the British Virgin Islands to Mexico
or another jurisdiction. If we determine to do this, the laws of such jurisdiction would likely govern all of our material agreements.
The system of laws and the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation
as in the United States or the British Virgin Islands. The inability to enforce or obtain a remedy under any of our future agreements
could result in a significant loss of business, business opportunities or capital. Any such reincorporation may subject us to foreign
regulations that could materially and adversely affect our business.
After our initial
business combination, it is likely that a majority of our directors and officers will live outside the United States and all of
our assets will be located outside the United States; therefore investors may not be able to enforce federal securities laws or
their other legal rights.
It is likely that after
our initial business combination, a majority of our directors and officers will reside outside of the United States and all of
our assets will be located outside of the United States. As a result, it may be difficult, or in some cases impossible, for investors
in the United States to enforce their legal rights against or to effect service of process upon all of our directors or officers
or to enforce judgments of United States courts predicated upon civil liabilities under United States laws.
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 acquired business and/or asset 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.
Risks Associated with the Proposed Business
Combination
References to “Betterware”
in this section refer to Betterware de México, S.A. de C.V., and references to the “combined company” in this
section refer to us and Betterware together after completion of the proposed Business Combination. Shareholders should review closely
the risk factors included in the proxy statement/prospectus that will be a part of the Registration Statement on Form F-4 that
is expected to be filed with the SEC in connection with the special meeting of shareholders to approve the Business Combination
Agreement and the proposed Business Combination.
Subsequent to
the consummation of the proposed Business Combination, the combined company may be required to take write-downs or write-offs,
restructuring and impairment or other charges that could have a significant negative effect on the combined company’s financial
condition, results of operations and share price, which could cause you to lose some or all of your investment.
Although we have conducted
due diligence on Betterware, we cannot assure you that this diligence revealed all material issues that may be present in Betterware’s
business, that it would be possible to uncover all material issues through a customary amount of due diligence or that factors
outside of our and Betterware’s control will not later arise. As a result, the combined company may be forced to later write-down
or write-off assets, restructure its operations, or incur impairment or other charges that could result in the combined company
reporting losses. Even though these charges may be non-cash items and not have an immediate impact on the combined company’s
liquidity, the fact that the combined company reports charges of this nature could contribute to negative market perceptions about
the combined company or its securities. In addition, charges of this nature may cause the combined company to violate net worth
or other covenants to which it may be subject or to be unable to obtain future financing on favorable terms or at all.
There can be
no assurance that the combined company’s securities will be approved for listing on Nasdaq following the closing of the proposed
business combination or that the combined company will be able to comply with the continued listing standards of Nasdaq.
In connection with
the closing of the proposed Business Combination, it is anticipated that the combined company’s securities will be listed
on Nasdaq. The combined company’s continued eligibility for listing on Nasdaq may depend on the number of our ordinary shares
that are redeemed. If, after the proposed Business Combination, Nasdaq delists the combined company’s securities from trading
on its exchange for failure to meet the listing standards, the combined company and its shareholders could face significant material
adverse consequences including:
• a limited
availability of market quotations for the combined company’s securities;
• a determination
that the combined company shares are “penny stock” which will require brokers trading in the combined company shares
to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for
the combined company shares;
• a limited
amount of analyst coverage; and
• a decreased
ability to issue additional securities or obtain additional financing in the future.
If the proposed
Business Combination’s benefits do not meet the expectations of investors or securities analysts, the market price of our
securities may decline.
If the benefits of
the proposed Business Combination do not meet the expectations of investors or securities analysts, the market price of our securities
prior to the closing of the proposed Business Combination may decline. The market values of our securities at the time of the proposed
Business Combination may vary significantly from their prices on the date the Business Combination Agreement was executed, the
date of any proxy statement or registration statement, or the date on which our shareholders vote on the proposed Business Combination.
In addition, following
the proposed Business Combination, fluctuations in the price of the combined company’s securities could contribute to the
loss of all or part of your investment. Prior to the proposed Business Combination, there has not been a public market for the
Betterware’s share capital. Accordingly, the valuation ascribed to Betterware may not be indicative of the price that will
prevail in the trading market following the proposed Business Combination. If an active market for the combined company’s
securities develops and continues, the trading price of the combined company’s securities following the proposed Business
Combination could be volatile and subject to wide fluctuations in response to various factors, some of which will be beyond the
combined company’s control. Any of the factors listed below could have a material adverse effect on your investment in the
combined company’s securities and the combined company’s securities may trade at prices significantly below the price
you paid for them. In such circumstances, the trading price of the combined company’s securities may not recover and may
experience a further decline.
Factors affecting
the trading price of the combined company’s securities may include:
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actual or anticipated fluctuations in the combined company’s quarterly financial results
or the quarterly financial results of companies perceived to be similar to it;
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changes in the market’s expectations about the combined company’s operating results;
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success of competitors;
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the combined company’s operating results failing to meet the expectation of securities analysts
or investors in a particular period;
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changes in financial estimates and recommendations by securities analysts concerning the combined
company;
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operating and share price performance of other companies that investors deem comparable to the
combined company;
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the combined company’s ability to market new and enhanced products on a timely basis;
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changes in laws and regulations affecting the combined company’s business;
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the combined company’s ability to meet compliance requirements;
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commencement of, or involvement in, litigation involving the combined company;
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changes in the combined company’s capital structure, such as future issuances of securities
or the incurrence of additional debt;
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the volume of the combined company shares available for public sale;
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any major change in the combined company’s board of directors or management;
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sales of substantial amounts of the combined company shares by the combined company’s directors,
executive officers or significant shareholders or the perception that such sales could occur; and
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general economic and political conditions such as recessions, interest rates, fuel prices, international
currency fluctuations and acts of war or terrorism.
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Broad market and industry
factors may materially harm the market price of the combined company’s securities irrespective of the combined company’s
operating performance. The stock market in general, and Nasdaq in particular, have experienced price and volume fluctuations that
have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices
and valuations of these stocks, and of the combined company’s securities, may not be predictable. A loss of investor confidence
in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the combined company
could depress the combined company’s share price regardless of the combined company’s business, prospects, financial
conditions or results of operations. A decline in the market price of the combined company’s securities also could adversely
affect the combined company’s ability to issue additional securities and the combined company’s ability to obtain additional
financing in the future.
Following the
consummation of the proposed Business Combination, the combined company will incur significant increased expenses and administrative
burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.
Following the consummation
of the proposed Business Combination, the combined company will face increased legal, accounting, administrative and other costs
and expenses as a public company that Betterware does not incur as a private company. The Sarbanes-Oxley Act, including the requirements
of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities
exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements from
which foreign private issuers are not exempt will increase costs and make certain activities more time-consuming. A number of those
requirements will require the combined company to carry out activities Betterware has not done previously. For example, the combined
company will create new board committees and adopt new internal controls and disclosure controls and procedures. In addition, additional
expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements
are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over
financial reporting), the combined company could incur additional costs rectifying those issues, and the existence of those issues
could adversely affect the combined company’s reputation or investor perceptions of it. It may also be more expensive to
obtain director and officer liability insurance. Risks associated with the combined company’s status as a public company
may make it more difficult to attract and retain qualified persons to serve on the board of directors or as executive officers.
The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance
costs and the costs of related legal, accounting and administrative activities. These increased costs will require the combined
company to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives.
Advocacy efforts by shareholders and third parties may also prompt additional changes in governance and reporting requirements,
which could further increase costs.
The combined
company’s failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley
Act that will be applicable to it after the proposed Business Combination is consummated could have a material adverse effect on
its business.
Betterware is not currently
subject to Section 404 of the Sarbanes-Oxley Act. However, following the consummation of the proposed Business Combination, the
combined company will be required to provide management’s attestation on internal controls. The standards required for a
public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required of Betterware
as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately
respond to the increased regulatory compliance and reporting requirements that will be applicable after the proposed Business Combination.
If the combined company is not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate
compliance, it may not be able to assess whether its internal controls over financial reporting are effective, which may subject
it to adverse regulatory consequences and could harm investor confidence and the market price of its securities.
The combined
company will qualify as an emerging growth company within the meaning of the Securities Act, and if it takes advantage of certain
exemptions from disclosure requirements available to emerging growth companies, which could make the combined company’s securities
less attractive to investors and may make it more difficult to compare the combined company’s performance to the performance
of other public companies.
The combined company
will qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the
JOBS Act. As such, the combined company will be eligible for and intends to take advantage of certain exemptions from various reporting
requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging
growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden
parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports
and proxy statements. The combined company will remain an emerging growth company until the earliest of (i) the last day of the
fiscal year in which the market value of its ordinary shares that are held by non-affiliates exceeds $700 million as of June 30
of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during
such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt
in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first
sale of our ordinary shares in our initial public offering. In addition, Section 107 of the JOBS Act also provides that an emerging
growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section
7(a)(2)(B) of the Securities Act as long as the combined company is an emerging growth company. An emerging growth company can
therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected not to opt out of such extended transition period and, therefore, the combined company may not be subject to the
same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find the
combined company shares less attractive because the combined company will rely on these exemptions, which may result in a less
active trading market for the combined company shares and their price may be more volatile.
Betterware’s
management has limited experience in operating a public company.
Betterware’s
executive officers have limited experience in the management of a publicly traded company. Betterware’s management team may
not successfully or effectively manage its transition to a public company following the proposed Business Combination that will
be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience
in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is
likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted
to the management and growth of the combined company. Betterware currently may not have a complement of personnel with the appropriate
level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting
required of public companies in the United States and U.S. GAAP. The development and implementation of the standards and controls
necessary for the combined company to achieve the level of accounting standards required of a public company in the United States
may require costs greater than expected. It is possible that the combined company will be required to expand its employee base
and hire additional employees to support its operations as a public company which will increase its operating costs in future periods.
Our initial shareholders
have agreed to vote in favor of the proposed Business Combination, regardless of how our public shareholders vote.
Unlike many other blank
check companies in which the initial shareholders agree to vote their founder shares in accordance with the majority of the votes
cast by the public shareholders in connection with an initial business combination, our initial shareholders have agreed to vote
their founder shares, private shares and any public shares purchased during or after our initial public offering, in favor of the
proposed Business Combination. Our initial shareholders own approximately 22.6% of the outstanding ordinary shares. Accordingly,
it is more likely that the necessary shareholder approval to complete the proposed Business Combination will be received than would
be the case if our initial shareholders agreed to vote their founder shares in accordance with the majority of the votes cast by
our public shareholders.
In connection
with the shareholder vote to approve the proposed Business Combination, we intend to offer each public shareholder the option to
vote in favor of the proposed Business Combination and still seek conversion of his, her or its shares.
In connection with
the shareholder vote to approve the proposed Business Combination, we intend to offer each public shareholder (but not our sponsor,
officers or directors) the right to redeem his, her or its ordinary shares for cash (subject to the limitations described in our
final prospectus, filed with the SEC on October 12, 2018) regardless of whether such shareholder votes for or against the proposed
Business Combination. This ability to seek redemption of ordinary shares while voting in favor of our proposed Business Combination
may make it more likely that we will consummate the proposed Business Combination.
In connection
with any shareholder meeting called to approve a proposed initial business combination, we may require shareholders who wish to
redeem their shares in connection with a proposed business combination to comply with specific requirements for redemption that
may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.
In connection with
any shareholder meeting called to approve a proposed initial business combination, each public shareholder will have the right,
regardless of whether he, she or it is voting for or against such proposed business combination, to demand that we redeem his,
her or its shares into 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 shareholders who wish to redeem their shares in connection with a proposed business combination
to either (i) tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically
using the Depository Trust Company’s, or DTC’s, DWAC (Deposit/Withdrawal At Custodian) System, at the holders’ option, in each
case prior to a date set forth in the proxy materials sent in connection with the proposal to approve the business combination.
In order to obtain a physical stock certificate, a shareholder’s broker and/or clearing broker, DTC and our transfer agent
will need to act to facilitate this request. It is our understanding that shareholders 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 stock 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 shareholders to deliver their shares, shareholders who wish to redeem may be unable to meet
the deadline for exercising their redemption rights and thus may be unable to redeem their shares.
If, in connection
with any shareholder meeting called to approve a proposed business combination, we require public shareholders who wish to redeem
their shares to comply with specific requirements for redemption, such redeeming shareholders 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
shareholders who wish to redeem their shares to either (i) tender their certificates 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
as described above and such proposed business combination is not consummated, we will promptly return such certificates to the
tendering public shareholders. Accordingly, investors who attempted to redeem 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
ordinary shares may decline during this time and you may not be able to sell your securities when you wish to, even while other
shareholders that did not seek redemption may be able to sell their securities.
Our ability to
successfully effect the proposed Business Combination and the combined company’s ability to be successful thereafter will
be largely dependent upon the efforts of our key personnel, including the key personnel of Betterware, certain of whom are expected
to join the combined company following the proposed Business Combination. While we intend to closely scrutinize any individuals
the combined company is expected to engage after the proposed Business Combination, we cannot assure you that any assessment of
these individuals will prove to be correct.
Our ability to successfully
effect the proposed Business Combination is dependent upon the efforts of certain key personnel, including the key personnel of
Betterware. Although we expect certain of such key personnel to remain with the combined company following the proposed Business
Combination, there can be no assurance that they will do so. It is possible that we or Betterware will lose some key personnel,
the loss of which could negatively impact the operations and profitability of the combined company. Furthermore, while we intend
to closely scrutinize any individuals the combined company is expected to engage following the proposed Business Combination, we
cannot assure you that any 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 the combined company to have to expend time and resources
helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory
issues which may adversely affect the operations of the combined company.
If, before distributing
the proceeds in the trust account to our public shareholders, 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
shareholders and the per-share amount that would otherwise be received by the public shareholders in connection with our liquidation
may be reduced.
If, before distributing
the proceeds in the trust account to our public shareholders, 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 public
shareholders. To the extent any bankruptcy claims deplete the trust account, the per-share amount that would otherwise be received
by our public shareholders in connection with our liquidation may be reduced.
Future issuances
of equity securities may dilute the interests of our shareholders and reduce the price of our securities.
Any future issuance
of our equity securities could dilute the interests of our then existing shareholders and could substantially decrease the trading
price of our securities. We may issue equity or equity-linked securities in connection with the proposed Business Combination or
in the future, including pursuant to a private investment in public equity, or PIPE, or other offering of equity securities, for
a number of reasons, including to finance our operations and business strategy (including in connection with acquisitions and other
transactions), to adjust our ratio of debt to equity, to satisfy our obligations upon the exercise of then-outstanding options
or other equity-linked securities, if any, or for other reasons.
An investor may
be subject to adverse U.S. federal income tax consequences in the event the IRS were to disagree with the U.S. federal income tax
consequences of the proposed Business Combination to investors.
The Tax Cuts and Jobs
Act of 2017, or the TCJA, and was signed into law on December 22, 2017. The TCJA changes many of the U.S. corporate and international
tax provisions, and certain of the provisions are unclear. No ruling has been or will be requested from the IRS as to any U.S.
federal income tax consequences of the proposed Business Combination to investors. The IRS may disagree with the combined company’s
view of the expected U.S. federal income tax consequences of the proposed Business Combination, and its determination may be upheld
by a court. Any such determination could subject an investor or the combined company to adverse U.S. federal income tax consequences
that would be different than those described herein. Accordingly, each prospective investor is urged to consult a tax advisor with
respect to the specific tax consequences of the acquisition, ownership and disposition of our securities, including the applicability
and effect of state, local or non-U.S. tax laws, as well as U.S. federal tax laws.
Because we have
no current plans to pay cash dividends on our ordinary shares for the foreseeable future, you may not receive any return on investment
unless you sell your ordinary shares for a price greater than that which you paid for it.
We may retain future
earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the
foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion
of the combined company’s board of directors and will depend on, among other things, the combined company’s results
of operations, financial condition, cash requirements, contractual restrictions and other factors that the combined company’s
board of directors may deem relevant. In addition, the combined company’s ability to pay dividends may be limited by covenants
of any existing and future outstanding indebtedness it or its subsidiaries incur. As a result, you may not receive any return on
an investment in our ordinary shares unless you sell our ordinary shares for a price greater than that which you paid for it.
If, following
the proposed Business Combination, securities or industry analysts do not publish or cease publishing research or reports about
the combined company, its business, or its market, or if they change their recommendations regarding the combined company shares
adversely, the price and trading volume of the combined company shares could decline.
The trading market
for the combined company shares will be influenced by the research and reports that industry or securities analysts may publish
about the combined company, its business, market or competitors. Securities and industry analysts do not currently, and may never,
publish research on the combined company. If no securities or industry analysts commence coverage of the combined company, the
price and trading volume of the combined company shares would likely be negatively impacted. If any of the analysts who may cover
the combined company change their recommendation regarding the combined company shares adversely, or provide more favorable relative
recommendations about the combined company’s competitors, the price of the combined company shares would likely decline.
If any analyst who may cover the combined company were to cease coverage of the combined company or fail to regularly publish reports
on it, the combined company could lose visibility in the financial markets, which in turn could cause its share price or trading
volume to decline.
In connection
with the proposed Business Combination, we intend to re-domicile out of the British Virgin Islands and continue as a company incorporated
under the laws of Mexico. If we effect the redomiciliation in connection with the proposed Business Combination, Mexican law will
likely govern many of the combined company’s material agreements and the combined company may not be able to enforce its
legal rights.
In connection with
the proposed Business Combination, we intend to re-domicile out of the British Virgin Islands and continue as a company incorporated
under the laws of Mexico. If we effect the redomiciliation, Mexican law will likely govern many of the combined company’s material
agreements. The system of laws and the enforcement of existing laws in Mexico may not be as certain in implementation and interpretation
as in the United States or the British Virgin Islands. The inability to enforce or obtain a remedy under any of the combined company’s
future agreements could result in a significant loss of business, business opportunities or capital. Any such reincorporation may
subject the combined company to foreign regulations that could materially and adversely affect the combined company’s business.
If we effect
the proposed Business Combination with Betterware, a company located in Mexico, Mexican law will likely govern many of the combined
company’s material agreements and the combined company may not be able to enforce its legal rights.
If we effect the proposed
Business Combination with Betterware, a company located in Mexico, Mexican law will likely govern many of the combined company’s
material agreements relating to its operations. We cannot assure you that the combined company will be able to enforce any of its
material agreements or that remedies will be available in Mexico. The system of laws and the enforcement of existing laws in Mexico
may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy
under any of the combined company’s future agreements could result in a significant loss of business, business opportunities
or capital.
Economic conditions
and government policies in Mexico and elsewhere may have a material impact on the combined company’s operations.
A deterioration in
Mexico’s economic condition, social instability, political unrest or other adverse social developments in Mexico could adversely
affect the combined company’s business and financial condition. Those events could also lead to increased volatility in the
foreign exchange and financial markets, thereby affecting the combined company’s ability to obtain new financing and service
its debt.
In the past, Mexico
has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation
and other economic problems. These problems may worsen or reemerge, as applicable, in the future and could adversely affect the
combined company’s business and ability to service its debt. A deterioration in international financial or economic conditions,
such as a slowdown in growth or recessionary conditions in Mexico’s trading partners, including the United States, or the
emergence of a new financial crisis, could have adverse effects on the Mexican economy, the combined company’s financial
condition and its ability to service its debt.
Mexico has experienced
a period of increasing criminal activity, which could affect the combined company’s operations.
In recent years, Mexico
has experienced a period of increasing criminal activity, primarily due to the activities of drug cartels and related criminal
organizations. In response, the Mexican Government has implemented various security measures and has strengthened its military
and police forces aimed at decreasing incidents of theft and other criminal activity. Despite these efforts, criminal activity
continues to exist in Mexico. These activities, their possible escalation and the violence associated with them, in an extreme
case, may have a negative impact on the combined company’s financial condition and results of operations.
Economic and
political developments in Mexico and the United States may adversely affect Mexican economic policy.
Political events in
Mexico may significantly affect Mexican economic policy and, consequently, the combined company’s operations. Presidential
and federal congressional elections in Mexico were held on July 1, 2018. Mr. Andrés Manuel López Obrador, a member
of the Movimiento Regeneración Nacional (National Regeneration Movement, or Morena), was elected President of Mexico
and took office on December 1, 2018, replacing Mr. Enrique Peña Nieto, a member of the Partido Revolucionario Institucional
(Institutional Revolutionary Party, or PRI). The new President’s term will expire on September 30, 2024. The newly-elected
members of the Mexican Congress took office on September 1, 2018. As of the date of this report, the National Regeneration Movement
holds an absolute majority in the Chamber of Deputies.
The new administration
and the Mexican Congress are discussing a number of reforms that could affect economic conditions in Mexico. Until any reform has
been adopted and implemented, we cannot predict how these policies could impact the combined company’s results of operation
and financial position. We cannot provide any assurances that political developments in Mexico will not have an adverse effect
on the Mexican economy and, in turn, the combined company’s business, results of operations and financial condition, including
the combined company’s ability to repay its debt.
Economic conditions
in Mexico are highly correlated with economic conditions in the United States due to the physical proximity and the high degree
of economic activity between the two countries generally, including the trade facilitated by NAFTA. As a result, political developments
in the United States, including changes in the administration and governmental policies, can also have an impact on the exchange
rate between the U.S. dollar and the Mexican peso, economic conditions in Mexico and the global capital markets.
On November 30, 2018,
the presidents of Mexico, the United States and Canada signed the USMCA, which has only been ratified by Mexico. Once ratified
by the legislatures of the three countries, the USMCA would replace NAFTA. As of the date of this report, there is uncertainty
about whether the USMCA will be ratified by the United States and Canada, as well as the timing thereof, and the potential for
further re-negotiation, or even termination, of NAFTA. Any increase of import tariffs resulting from the implementation of the
USMCA or the re-negotiation or termination of NAFTA could make it economically unsustainable for U.S. companies to import certain
products if they are unable to transfer those additional costs onto consumers, which would increase the combined company’s
expenses and decrease its revenues, even if domestic and international prices for its products remain constant. Higher tariffs
on products that the combined company may export to the United States could also require the combined company to renegotiate its
contracts or lose business, resulting in a material adverse impact on the combined company’s business and results of operations.
In addition, because the Mexican economy is heavily influenced by the U.S. economy, policies that may be adopted by the U.S. government
may adversely affect economic conditions in Mexico. These developments could in turn have an adverse effect on the combined company’s
financial condition, results of operations and ability to repay its debt.