ITEM
1. BUSINESS.
We
are a blank check company incorporated on October 26, 2020 as a Delaware corporation and formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses,
which we refer to throughout this annual report as our initial business combination. We have neither engaged in any operations unrelated
to our search for business combination candidates nor generated any revenue to date.
While
our efforts to identify a prospective target business will not necessarily be limited to a particular industry, sector or region, we
intend to capitalize on the expertise of our management team, board and advisors (collectively, our “Team”) in the professional
sports teams and media sectors, including, but not limited to, related areas such as sports technology, gaming and e-sports. We intend
to target leading professional sports teams, media and brand-name companies and assets, with a particular focus on special situation
assets which have significant potential for growth. Special situation assets and opportunities are those that have arisen due to recent
factors such as COVID-19, mismanagement, media issues, overextension or arbitrage. We will have a global focus in our approach.
Our
objective is to generate attractive returns and create value for our shareholders by applying our strategy of capitalizing on the experience
of our Team. Our Team has spent their careers working in the global professional sports and media industries. Our Team has particular
expertise in operations and turnaround. Our Team’s experience includes negotiating record setting naming rights, cable, TV, radio,
licensed merchandise, sponsorship and food service deals with numerous franchises, as well as numerous facility leasing, financing and
construction contracts. This experience includes managing the business operations of professional athletes (including Michael Jordan
and Patrick Ewing), sports franchises (the New York Yankees, San Francisco 49ers, Florida Panther, Atlanta Thrashers, Atlanta Hawks and
Charlotte Bobcats) and leagues (including the WNBA, the PGA Tour and the NCAA’s Southeastern Conference). We will look to acquire
and manage a business that can benefit from our Team’s global experience with sports teams, leagues, media, brands, technology
and investments.
Our
Team
Harvey
Schiller serves as our Chief Executive Officer. General Schiller is Chairman of Charlestowne Holdings, a financial advisory firm
(2018-present). He is Vice Chairman of the digital, media and sports practice of the Diversified Search Group (2015-present). He previously
served as Commissioner of the Southeastern Conference (1986-1990) and America’s Cup (2015-2017), executive director of the United
States Olympic Committee (1990-1995), president of Turner Sports (1995-2000), president of Atlanta Thrashers NHL hockey team (1997-1999),
Chairman of the financial services firm Assante USA (2002-2004), Chairman of the security firm Global Options (2006-2013), and Chairman
of YankeeNets, owners of the New York Yankees, New Jersey Devils, and New Jersey Nets (2000-2002) and developer of the YES network (2001-2002).
He is also lead director of Mesa Air Group (2015-present), board member of Blinktbi (2018-present) and chair of Sportsgrid and the Collegiate
Sports Management Group (2018-present). General Schiller served a distinguished career as an Air Force pilot (1962-1986) and was a Presidential
appointed permanent professor (1980-1986) at the U.S. Air Force Academy and White House Commission on Presidential Scholars (2005-2009).
Other appointments include NCAA executive committee (1982-1988), Olympic Games consultant (1984-2012), International Baseball President,
board member of the Baseball Hall of Fame (present) and World Baseball Classic (present). General Schiller is a distinguished graduate
of The Citadel and earned a PhD in Chemistry from the University of Michigan.
William
T. Duffy serves as our Chief Financial Officer and Chief Operating Officer. Mr. Duffy serves as the Vice Chairman of The Aspire
Sports Marketing Group, LLC (“Aspire”), a sports consulting firm which he co-founded in 2008. From 2016 to 2019, he was the
CEO of Aspire and he previously held other positions at Aspire, including two years as COO, and has served on its board of managers since
2014. Mr. Duffy’s career has focused on turnarounds of underperforming franchises with a focus on maximizing employee performance
and revenue generation and reducing operating costs, while creating cultures of accountability through hands on leadership and career
development of employees. His international experience at Aspire includes consulting on projects with The R & A, Leicester City FC
and Tijuana Xolos (Liga MX). From 2010 to 2013, Mr. Duffy briefly left Aspire and oversaw finance and arena operations in a variety of
roles at Bobcats Sports and Entertainment, including roles as EVP, CFO and CAO. He served as liaison to the City of Charlotte for the
expansion NBA Franchise Charlotte Bobcats and Time Warner Cable Arena. Prior to Aspire, Mr. Duffy held the positions of CFO of the San
Francisco 49ers (1996-1999), CAO of the Buffalo Bills (1999-2000), CFO of the Florida Panthers (2001-2003) and EVP, CFO of Atlanta Spirit,
LLC (2004-2008), a group that bought the operating rights of the Atlanta Hawks, Atlanta Thrashers and Philips Arena in 2004 Mr. Duffy
holds a Masters of Science in Accounting from New York University, and AB in Economics from Princeton University and has earned a CPA.
David
B. Falk will serve as a member of our board of directors and as our Senior Advisor. Mr. Falk is the founder of Falk Associates
Management Enterprises (FAME) which provides specialized and personal representation services to the company’s elite clientele
of NBA superstars. Prior to founding FAME in 1992, Mr. Falk served as vice chairman of ProServ where he represented numerous professional
athletes. Mr. Falk has successfully negotiated a number of large and notable NBA contracts, including Alonzo Mourning’s historical
$100 million contract in 1995 and Michael Jordan’s 1996 one-year contract for $30 million. Mr. Falk was also influential in the
creation of the “Air Jordan” brand and was an executive producer of the movie “Space Jam.” Mr. Falk is an investor
in Consumable, a digital advertising company, Hyperwave, a cooking technology company, Ostendo, a quantum photonics technology company,
Wheels Up, an aviation company, and Block Six Analytics. Mr. Falk first attended and is now a member of the Board of Trustees for Syracuse
University. Mr Falk endowed and founded the David B. Falk College of Sports and Human Dynamics at Syracuse University, a leading sports
program in the U.S.
Donna
Orender serves as a member of our board of directors. Ms. Orender spent 17 years at the PGA TOUR where she served as one of three
senior executives in the Office of the Commissioner. During her time there, she exponentially grew the TOUR’s television rights
and led a major expansion of global production, programming distribution and digital business while also founding PGA TOUR Radio with
partner Sirius XM. From 2005 to 2010, Ms. Orender served as the President of the WNBA. During her term business metrics that saw growth
included sponsorship, television ratings, profitability and attendance growth (following an eight year decline). Ms. Orender began her
current role as Chief Executive Officer of Orender Unlimited, a consulting and advisory firm, in 2011. Ms. Orender serves on the nominating
and compensation committees for the V Foundation for Cancer Research board, the board of the World Surf League, and is the founder of
Generation W, an organization that focuses on educating, inspiring and connecting women and girls in the service of building better communities.
Ms. Orender received a B.A. from Queens College and is a multiple hall of fame athlete.
Kenneth
L. Shropshire will serve as a member of our board of directors. Mr. Shropshire has been a faculty member of the Wharton School
at the University of Pennsylvania (“Wharton”) since 1986, where he is now an emeritus professor, with an expertise in sports
business and law. During his tenure at Wharton, Mr. Shropshire founded the Wharton Sports Business Initiative in 2004, a sports business
research center and served as a director until 2017. One such example of the innovative programming Mr. Shropshire developed at Wharton
includes the NFL/NFLPA Player Business Education Transition Program. Currently, in addition to being a professor emeritus at Wharton,
Mr. Shropshire is the Chief Executive Officer of the Global Sport Institute, and serves as the Adidas Distinguished Professor of Global
Sport at Arizona State University since joining in 2017. Mr. Shropshire has served as a director of Moelis & Company since 2014.
In addition, Mr. Shropshire acts as an advisor to multiple organizations in the sports industry, including Altius Sports Partners, Arctos
Sports Partners, Overtime Elite, and Pro Sports Assembly. Mr. Shropshire earned an undergraduate degree in economics from Stanford University
and a law degree from Columbia University, and is a member of the California bar. He joined the law firm of Manatt, Phelps, Rothenberg
and Tunney in Los Angeles prior to working with the 1984 Olympic Games and beginning his lengthy career at Wharton. Mr. Shropshire was
also the former President of the Sports Lawyers Association, the largest organization of sports lawyers in the world.
Past
performance of our Team is not a guarantee either (i) that we will be able to identify a suitable candidate for our initial business
combination or (ii) of success with respect to any business combination we may consummate. You should not rely on the historical performance
record of our Team as indicative of our future performance. Additionally, in the course of their respective careers, members of our Team
have been involved in businesses and deals that were unsuccessful. Our officers and directors have no experience with special purpose
acquisition companies. In addition, our officers and directors may have conflicts of interest with other entities to which they owe fiduciary
or contractual obligations with respect to initial business combination opportunities. For a list of our officers and directors and entities
for which a conflict of interest may or does exist between such persons and the company, as well as the priority and preference that
such entity has with respect to performance of obligations and presentation of business opportunities to us, please refer to the table
and subsequent explanatory paragraph under “Management — Conflicts of Interest”.
Advisors
Jon
Miller will serve as Chairman of our advisory board as well as a board observer. Mr. Miller currently serves as a director of
Akamai Technologies, Inc., Nielsen Holdings plc., AMC Networks Inc., Interpublic Group of Companies, Inc. and J2 Global, Inc. From 2013
until January 2018, Mr. Miller was a partner at Advancit Capital, where he continues to serve as an advisor and member of the Investment
Committee. He previously has served as Chairman and Chief Executive Officer of the Digital Media Group at News Corp., and was its Chief
Digital Officer from April 2009 to September 2012. Mr. Miller was a founding partner of Velocity Interactive Group, an investment firm
focusing on internet and digital media, from its inception in 2007 to 2009. Prior to founding Velocity, Mr. Miller served as the Chairman
and Chief Executive Officer of America Online, Inc. (“AOL”) from 2002 to 2006. Prior to joining AOL, Mr. Miller served as
Chief Executive Officer and President of USA Information and Services. Mr. Miller previously served as a director of, among others, Houghton
Mifflin Harcourt Co., Ticketmaster, LiveNation Entertainment, Inc., RTL Group SA, Shutterstock, Inc. and TripAdvisor, Inc.. Mr. Miller
is a trustee of the American Film Institute and The Paley Center for Media. Mr. Miller holds a B.A. from Harvard College.
Alex
Greystoke will serve as a member of our advisory board and is one of our founders. Mr. Greystoke is a successful serial entrepreneur
with a breadth of skills in a diverse range of industries. Mr. Greystoke is the founder of multiple AI technology companies including
TripChamp, VacationChamp and TravelChamp. He is the inventor of three granted artificial intelligence patents, with eight pending patent
applications. Mr. Greystoke is also an investor with investments in real estate, food and beverage, technology and other sectors. Mr.
Greystoke founded HSC, a boutique corporate finance business raising money for and helping emerging companies commercialize in a range
of sectors including technology, energy, healthcare and consumer products utilizing his wide network of partners throughout Asia, Europe,
the Middle East and the U.S. Mr. Greystoke has served as director to numerous companies in the education, technology, AI and renewable
energy spaces, and has served as a Chairman to a U.K. listed Chinese manufacturing company.
Raghu
Kilambi will serve as a member of our advisory board and is one of our founders. Mr. Kilambi has been CEO of PowerTap Hydrogen
Fueling Corp. since May 2020. Mr. Kilambi previously served as Vice Chairman and Chief Financial Officer of ConversionPoint Technologies
from December 2017 to January 2020. ConversionPoint was sold in two transactions to a private equity-backed group and a strategic buyer.
Mr. Kilambi has also been the principal of Kirarv Capital, a technology investment firm, since June 2009. Mr. Kilambi has raised over
$1 billion of equity and debt capital for growth private and public companies in his career and has also been a senior officer and director
of companies that were awarded Barron’s ASAP Magazine Top Ramp Champ awards and Profit Magazine’s Top 3 Growth Company awards.
Previously, from 1998 to 2001, Mr. Kilambi was the Co-Founder, CFO and Chief Strategy Officer of FutureLink Corp., a leading first-generation
VC-backed cloud computing technology company that grew from startup to over $100 million in annualized revenues. Mr. Kilambi graduated
with Great Distinction with a Bachelor of Commerce (University Scholar), received a Graduate Diploma in Public Accounting from McGill
University (Top 10 List), and qualified as a Canadian Chartered Accountant in 1989 (inactive).
Amber
Allen will serve as a member of our advisory board. Ms. Allen’s experience has been focused in the technology,
entertainment and gaming industries, having spent her career at major companies including Reebok, Disney, Warner Bros., and Riot Games.
Currently, Ms. Allen serves as the founder of Double A Labs, a leader in developing transformative technologies and experiences for brand
engagement. Ms. Allen serves on the Advisory Board of University of Texas Game and Development Design and is a member of
the Fashion Institute of Technology. Ms. Allen also volunteers with Women Who Code and is an advisor to both Dell Women’s Entrepreneurship
Network and Dell Project Innovate.
Bart
Oates will serve as a member of our advisory board. Mr. Oates was a starting center for the USFL Philadelphia Stars, New York
Giants and San Francisco 49ers, for a total 14 seasons of professional football. In the offseasons, Mr. Oates attended Seton Hall Law
School where he graduated with honors and joined the law firm of Ribis, Graham & Curtin in Morristown N.J., where he focused on litigation
and real estate tax appeal work. Currently, Mr. Oates serves as President of the NFL Alumni Association, a position that allows him to
advocate on behalf of former players to establish benefits and opportunities.
Martin
Gruschka will serve as a member of our advisory board. Mr. Gruschka began his career in 1990 as a management consultant for a
Deutsche Bank Group subsidiary, with a focus on East German Privatization projects. Thereafter, he led the European media practice of
Arthur D. Little, a global management consulting group, from 1996 to 1999. Having spent time as an associate director at Deutsche Morgan
Grenfell’s media investment banking division, he co-founded Springwater Capital LLC in 2002 where he currently acts as Managing
Partner. Mr. Gruschka has served as Chairman, President, Board Member and CEO of more than forty companies throughout Europe and the
U.S. in a diverse range of sectors, including media & communications, aerospace, engineering, logistics, recycling, technology, tourism
and business process outsourcing.
Danielle
Cantor Jeweler will serve as a member of our advisory board. Ms. Jeweler is the Executive Vice President and Partner at FAME,
and is an NBPA Certified Agent, representing current and retired NBA talent. Together with partner David Falk, Danielle negotiates contracts
for a number of NBA players. Ms. Jeweler has also negotiated a myriad of national and international endorsement deals for her basketball
clients. In September 2017, Danielle was honored by the Sports Business Journal as a Gamechanger in the sports industry, as the only
female registered agent with active NBA clients. In July 2019, she negotiated the largest guaranteed sports contract by a female agent
(Malcolm Brogdon, with the Indiana Pacers, for 4 years and $85 million). Ms. Jeweler is a member of the Leadership Council for PeacePlayers,
International, and she serves on the Board of Advisors for Most Valuable Kids, the Roy Hibbert Foundation, and Little Smiles. A native
Washingtonian, Ms. Jeweler graduated from the University of Pennsylvania (“UPenn”) in the Annenberg School for Communications
and from The Wharton School for Business. Ms. Jeweler is a competitive youth girls soccer coach and played Division 1 soccer at UPenn.
Marc
Wade will serve as a member of our advisory board. Mr. Wade is a financier, philanthropist and founder of Wade & Company,
a family office. Mr. Wade has historically invested in a diversified portfolio of businesses with a primary focus on asset backed lending.
His portfolio has included commercial real estate, banking, energy, sports and entertainment, technology and securities lending. Mr.
Wade was a minority investor in the NHL franchise New Jersey Devils and Devils Entertainment. Mr. Wade is also Co-Founder of BTI, one
of South America’s largest aggregators of cell phone towers.
Garret
Klugh will serve as a member of our advisory board. Mr. Klugh is the COO of Falk Ventures. He is an internationally recognized
Olympian and frequent guest speaker, lecturer and panelist in the sports-tech industry. Mr. Klugh earned his undergraduate degree at
San Diego State University and his MBA from George Washington University. At SDSU, Mr. Klugh served as the President of the men’s
rowing team. He went on to represent the U.S. on six National Teams and one Olympic Team (Athens 2004). Mr. Klugh won the World Rowing
Championship in 1999 and was honored to be selected by his peers as the Athlete Representative on the Board of Directors for USRowing.
Doug
Perlman will serve as a member of our advisory board. Mr. Perlman is the founder and CEO of Sports Media Advisors (“SMA”),
a boutique advisory firm which focuses on the intersection of sports, television and digital media. Mr. Perlman has worked on all of
SMA’s client engagements including those with the NFL, NASCAR, USTA, UFC, Hockey Canada, Little League, NextVR and several leading
private equity firms. Prior to SMA, he established himself throughout the sports industry in senior executive roles at the NHL and IMG.
Among other accolades, Mr. Perlman has been named to the prestigious Sports Business Journal Forty Under 40 three times, earning a spot
in their “Hall of Fame.” Mr. Perlman has been recognized by multiple industry publications and organizations as a leader
in the sports, media, and technology industries, including being named one of the 100 Most Powerful People in Sports by the Sporting
News while at the NHL. Mr. Perlman regularly appears on television and is often a featured speaker at industry and other events.
We
currently expect our advisors to (i) assist us in sourcing, negotiating and consummating a potential business combination, (ii) provide
their business insights when we assess potential business combination targets and (iii) upon our request, provide their business insights
as we work to create additional value in the businesses that we acquire. However, they have no written advisory agreement with us. Additionally,
these individuals have no other employment or compensation arrangements with us. They will not serve on the board or any committee thereof,
nor will they have any voting or decision making capacity on our behalf. They will also not be required to devote any specific amount
of time to our efforts or be subject to the fiduciary requirements to which our board members are subject. Accordingly, if any of them
become aware of a business combination opportunity which is suitable for us, they are under no obligation to introduce it to us before
any other prospective acquiror.
Business
Strategy
The impact of the COVID-19 pandemic on U.S. and global
professional sports and entertainment industries has been profound. In-stadium revenue opportunities, such as ticket and premium
seating sales, concessions, merchandise and parking have reduced substantially compared to pre-COVID levels. As a result, sports
franchises and vendors are facing a huge strain on cash flow, leaving ownership groups without the appetite, nor liquidity to continue
franchise funding for an undetermined period of time. Organizations with inefficient operating models are experiencing significantly
more stress during these times, leading many groups to reevaluate their management relationships. COVID-19 has also had a significant
impact on businesses associated with or dependent on sports, for example groups holding media rights, sports marketing groups and agencies
and suppliers to the sports industry. We believe the totality of these circumstances presents a unique opportunity to acquire special
situation sports and media assets that would not otherwise be for sale and/or to acquire these businesses at opportunistic prices.
With
the resulting pressures of these limitations and uncertainties in general, the need for innovative and dynamic operating models is evident.
We believe that with the current landscape, our Team will have the leverage to identify and acquire assets with great potential at opportunistic
price points. As more sports franchises, and sports and media related businesses understand the necessity of building global brands in
order to compete for revenue and brand recognition across fan bases, mature management teams, experiences and expertise will be required
to enhance visibility and profitability.
We
believe that our Team can provide all of these attributes to a potential initial business combination target. Our Team has a demonstrated
extensive track record of successful value creation and enhancement (including complex turnarounds) with sports-oriented and media assets
and also has access to proprietary opportunities globally that can be leveraged to drive value. Our Team’s experience includes
negotiating record setting naming rights, cable, TV, radio, licensed merchandise, sponsorship and food service deals with numerous franchises,
as well as numerous facility leasing, financing and construction contracts. This experience includes managing the business operations
of professional athletes (including Michael Jordan and Patrick Ewing), sports franchises (the New York Yankees, Florida Panthers, San
Francisco 49ers, Atlanta Thrashers, Atlanta Hawks and Charlotte Bobcats) and leagues (including the WNBA, the PGA Tour and the NCAA’s
Southeastern Conference).
Our
Team has also directly worked in the trenches to turnaround organizations, athletes and brands. In addition, we intend to utilize the
established global relationships of our Team both for sourcing opportunities and to grow the opportunity which we pursue. Over the course
of their careers, the members of our Team have developed a broad network of contacts and corporate relationships that we believe will
serve as a useful source of acquisition opportunities.
Our
Team has experience globally in:
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Managing brands,
athletes and sports entities; |
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Significant experience
in the media, sports gaming and new technologies sectors; |
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Operating and turning around
companies, implementing and executing growth strategies and cost saving initiatives; |
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Developing and growing
companies, both organically and through acquisitions and strategic transactions, and expanding the product range; |
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Providing strategic guidance
to develop revenue and commercial opportunities; and |
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Identifying, mentoring
and recruiting world-class talent. |
Acquisition
Criteria
Consistent
with this 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 our initial business combination with a target business that does not meet any of these criteria and guidelines.
We
intend to seek to acquire companies, brands, assets and/or teams that we believe meet certain of the following criteria:
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Minimum
enterprise values of between $600 million and $1 billion; |
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Impacted by recent factors
such as COVID-19, mismanagement, media issues, overextension or arbitrage (what we call special situation opportunities); |
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Could benefit from the
substantial expertise, experience and network of our Team; |
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Have attractive growth
prospects or have the potential for having attractive growth prospects; |
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Have a competitive advantage
or have the potential for having a competitive advantage; |
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Exhibit industry leadership
or have the potential for exhibiting industry leadership; |
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Exhibit potential for global
expansion in sports, sponsorship and brand recognition; |
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Would benefit from a public
acquisition currency; or ownership would benefit from liquidity; |
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Demonstrate attractive
valuation; |
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Demonstrate potential for
free cash flow generation; and |
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Have secondary potential
revenue streams. |
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 deemed relevant by
our management in effecting our initial business combination consistent with our business objectives. In the event that we decide to
enter into our initial business combination with a target business that does not meet any of the above criteria and guidelines, we will
disclose that the target business does not meet any of the above criteria in our shareholder communications related to our initial business
combination.
Effecting
a Business Combination
General
We intend
to utilize cash derived from the proceeds of our initial public offering (“IPO”) and the private placement of private units,
our capital stock, debt or a combination of these in effecting a business combination which has not yet been identified. Accordingly,
investors in our IPO invested without first having an opportunity to evaluate the specific merits or risks of any one or more business
combinations. A business combination may involve the acquisition of, or merger with, a company which does not need substantial additional
capital, but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences
of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various
federal and state securities laws. In the alternative, we may seek to consummate a business combination with a company that may be financially
unstable or in its early stages of development or growth. While we may seek to effect simultaneous business combinations with more than
one target business, we will probably have the ability, as a result of our limited resources, to effect only a single business combination.
We
Have Not Identified a Target Business
We have
neither engaged in any operations unrelated to our search for business combination candidates nor generated any revenue to date.
As a result, we cannot assure you that we will be able to locate a target business or that we will be able to engage in a business
combination with a target business on favorable terms or at all.
Subject
to our Team’s pre-existing fiduciary obligations and the fair market value requirement described below, we will have virtually
unrestricted flexibility in identifying and selecting a prospective acquisition candidate. We have not established any specific attributes
or criteria (financial or otherwise) for prospective target businesses other than as described above. Accordingly, there is no basis
for our investors to evaluate the possible merits or risks of the target business with which we may ultimately complete a business combination.
Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will
properly ascertain or assess all significant risk factors.
Sources
of Target Businesses
While
we have not yet selected a target business with which to consummate our initial business combination, we believe based on our management’s
business knowledge and past experience that there are numerous potential candidates. We expect that our principal means of identifying
potential target businesses will be through the extensive contacts and relationships of our sponsor, initial stockholders, officers and
directors. While our officers and directors are not required to commit any specific amount of time in identifying or performing due diligence
on potential target businesses, our officers and directors believe that the relationships they have developed over their careers and
their access to our sponsor’s contacts and resources will generate a number of potential business combination opportunities that
will warrant further investigation. We also anticipate that target business candidates will be brought to our attention from various
unaffiliated sources, including investment bankers, venture capital funds, private equity funds, leveraged buyout funds, management buyout
funds and other members of the financial community. Target businesses may be brought to our attention by such unaffiliated sources as
a result of being solicited by us through calls or mailings.
Our
officers and directors must present to us all target business opportunities that have a fair market value of at least 80% of the assets
held in the trust account at the time of the agreement to enter into the initial business combination, subject to any pre-existing fiduciary
or contractual obligations. While we do not presently anticipate engaging the services of professional firms or other individuals that
specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event
we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on
the terms of the transaction. In no event, however, will our sponsor, initial stockholders, officers, directors or their respective affiliates
be paid any compensation prior to, or for any services they render in order to effectuate, the consummation of an initial business combination
(regardless of the type of transaction that it is) other than the payment of consulting, success or finder fees in connection with the
consummation of our initial business combination, the repayment of the $200,000 loan and reimbursement of any out-of-pocket expenses.
Our audit committee will review and approve all reimbursements and payments made to our sponsor, officers, directors or our or their
respective affiliates, with any interested director abstaining from such review and approval.
We
have no present intention to enter into a business combination with a target business that is affiliated with any of our officers, directors
or sponsor. However, we are not restricted from entering into any such transactions and may do so if (i) such transaction is approved
by a majority of our disinterested independent directors and (ii) we obtain an opinion from an independent investment banking firm, or
another independent entity that commonly renders valuation opinions, that the business combination is fair to our unaffiliated stockholders
from a financial point of view.
Selection
of a Target Business and Structuring of a Business Combination
Subject
to our Team’s pre-existing fiduciary obligations and the limitations that a target business have a fair market value of at least
80% of the balance in the trust account at the time of the execution of a definitive agreement for our initial business combination,
as described below in more detail, and that we must acquire a controlling interest in the target business, our management will have virtually
unrestricted flexibility in identifying and selecting a prospective target business. We have not established any specific attributes
or criteria (financial or otherwise) for prospective target businesses. In evaluating a prospective target business, our management may
consider a variety of factors, including one or more of the following:
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financial condition
and results of operation; |
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growth potential; |
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brand recognition and potential; |
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experience and skill of
management and availability of additional personnel; |
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capital requirements; |
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competitive position; |
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barriers to entry; |
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stage of development of
the products, processes or services; |
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existing distribution and
potential for expansion; |
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degree of current or potential
market acceptance of the products, processes or services; |
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proprietary aspects of
products and the extent of intellectual property or other protection for products or formulas; |
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impact of regulation on
the business; |
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regulatory environment
of the industry; |
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costs associated with effecting
the business combination; |
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industry leadership, sustainability
of market share and attractiveness of market industries in which a target business participates; and |
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macro competitive dynamics
in the industry within which the company competes. |
These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based,
to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting a business
combination consistent with our business objective. In evaluating a prospective target business, we will conduct an extensive due diligence
review which will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of
financial and other information which is made available to us. This due diligence review will be conducted either by our management or
by unaffiliated third parties we may engage, although we have no current intention to engage any such third parties.
The
time and costs required to select and evaluate a target business and to structure and complete the business combination cannot presently
be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target
business with which a business combination is not ultimately completed will result in a loss to us and reduce the amount of capital available
to otherwise complete a business combination.
Fair
Market Value of Target Business
Nasdaq
listing rules require that the target business or businesses that we acquire must collectively have a fair market value equal to at least
80% of the balance of the funds in the trust account at the time of the execution of a definitive agreement for our initial business
combination. Notwithstanding the foregoing, if we are not then listed on Nasdaq for whatever reason, we would no longer be required to
meet the foregoing 80% fair market value test.
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 a newly formed subsidiary
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 stockholders prior to the business combination may collectively
own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination
transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the
outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result
of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own
less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests
or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses
that is owned or acquired is what will be valued for purposes of the 80% of trust account balance test.
The
fair market value of the target will be determined by our board of directors based upon one or more standards generally accepted by the
financial community (such as actual and potential sales, earnings, cash flow and/or book value). The proxy solicitation materials or
tender offer documents used by us in connection with any proposed transaction will provide public stockholders 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 to independently determine
that the target business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking
firm, or another independent entity that commonly renders valuation opinions, with respect to the satisfaction of such criteria. We will
not be required to obtain an opinion from an investment banking firm as to the fair market value if our board of directors independently
determines that the target business complies with the 80% threshold.
Lack
of Business Diversification
We
may seek to effect a business combination with more than one target business, although we expect to complete our business combination
with just one business. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance
of a single business operation. Unlike other entities which may have the resources to complete several business combinations of entities
operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources to diversify
our operations or benefit from the possible spreading of risks or offsetting of losses. By consummating a business combination with only
a single entity, our lack of diversification may:
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subject us
to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the
particular industry in which we may operate subsequent to a business combination, and |
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result in our dependency
upon the performance of a single operating business or the development or market acceptance of a single or limited number of products,
processes or services. |
If
we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for each of
such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may
make it more difficult for us, and delay our ability, to complete the business combination. With multiple acquisitions, we could also
face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations
(if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or
products of the acquired companies in a single operating business.
Limited
Ability to Evaluate the Target Business’ Management
Although
we intend to scrutinize the management of a prospective target business when evaluating the desirability of effecting a business combination,
we cannot assure you that our assessment of the target business’ management will prove to be correct. In addition, we cannot assure
you that the future management will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the
future role of our officers and directors, if any, in the target business following a business combination cannot presently be stated
with any certainty. While it is possible that some of our key personnel will remain associated in senior management or advisory positions
with us following a business combination, it is unlikely that they will devote their full-time efforts to our affairs subsequent to a
business combination. Moreover, they would only be able to remain with the company after the consummation of a business combination if
they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take
place simultaneously with the negotiation of the business combination and could provide for them to receive compensation in the form
of cash payments and/or our securities for services they would render to the company after the consummation of the business combination.
While the personal and financial interests of our key personnel may influence their motivation in identifying and selecting a target
business, their ability to remain with the company after the consummation of a business combination will not be the determining factor
in our decision as to whether or not we will proceed with any potential business combination. Additionally, we cannot assure you that
our officers and directors will have significant experience or knowledge relating to the operations of the particular target business.
Following
a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We
cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers we do recruit will
have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders
May Not Have the Ability to Approve an Initial Business Combination
In
connection with any proposed business combination, we will either (1) seek stockholder approval of our initial business combination at
a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against
the proposed business combination or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the
trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender
offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on
deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein. The decision as to whether
we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender
offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and
whether the terms of the transaction would otherwise require us to seek stockholder approval. If we determine to engage in a tender offer,
such tender offer will be structured so that each stockholder may tender all of his, her or its shares rather than some pro rata portion
of his, her or its shares. 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. Whether we seek stockholder
approval or engage in a tender offer, we will consummate our initial business combination only if we have net tangible assets of at least
$5,000,001 immediately prior to or upon consummation of such business combination and, if we seek stockholder approval, a majority of
the outstanding shares of common stock voted are voted in favor of our initial business combination. We have no specified maximum
percentage threshold for conversions in our amended and restated certificate of incorporation and even those public stockholders who
vote in favor of our initial business combination have the right to convert their public shares. As a result, this may make it easier
for us to consummate our initial business combination.
We
chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities
Act of 1933, as amended. However, if we seek to consummate an initial business combination with a target business that imposes any type
of working capital closing condition or requires us to have a minimum amount of funds available from the trust account upon consummation
of such initial business combination, we may need to have more than $5,000,001 in net tangible assets immediately prior to or upon consummation
and this may force us to seek third party financing which may not be available on terms acceptable to us or at all. As a result, we may
not be able to consummate such initial business combination and we may not be able to locate another suitable target within the applicable
time period, if at all. Public stockholders may therefore have to wait 24 months from the closing of our IPO in order to be able to receive
a pro rata share of the trust account.
Our
sponsor, initial stockholders, officers and directors have agreed (1) to vote any shares of common stock owned by them in favor of any
proposed business combination, (2) not to convert any shares of common stock in connection with a stockholder vote to approve a proposed
initial business combination and (3) not sell any shares of common stock in any tender in connection with a proposed initial business
combination.
Conversion
Rights
At
any meeting called to approve an initial business combination, public stockholders may seek to convert their shares, regardless of whether
they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then
on deposit in the trust account as of two business days prior to the consummation of the initial business combination, less any taxes
then due but not yet paid. Alternatively, we may provide our public stockholders with the opportunity to sell their shares of our common
stock to us through a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of
the aggregate amount then on deposit in the trust account, less any taxes then due but not yet paid.
Our
sponsor, initial stockholders and our officers and directors do not have conversion rights with respect to any shares of common stock
owned by them, directly or indirectly, whether acquired prior to our IPO or purchased by them in our IPO or in the aftermarket. Additionally,
the holders of the representative shares do not have conversion rights with respect to the representative shares.
We
may require public stockholders, whether they are a record holder or hold their shares in “street name,” to either (i) tender
their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically using Depository Trust Company’s
DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s 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.
There
is a nominal cost associated with the above-referenced delivery process and the act of certificating the shares or delivering them through
the DWAC System. The transfer agent will typically charge the tendering broker a nominal amount and it would be up to the broker whether
or not to pass this cost on to the holder. However, this fee would be incurred regardless of whether or not we require holders seeking
to exercise conversion rights. The need to deliver shares is a requirement of exercising conversion rights regardless of the timing of
when such delivery must be effectuated. However, in the event we require stockholders seeking to exercise conversion rights prior to
the consummation of the proposed business combination and the proposed business combination is not consummated this may result in an
increased cost to stockholders.
Any
proxy solicitation materials we furnish to stockholders in connection with a vote for any proposed business combination will indicate
whether we are requiring stockholders to satisfy such certification and delivery requirements. Accordingly, a stockholder would have
from the time the stockholder received our proxy statement up until the vote on the proposal to approve our initial business combination
to deliver his shares if he wishes to seek to exercise his conversion rights. This time period varies depending on the specific facts
of each transaction. However, as the delivery process can be accomplished by the stockholder, whether or not he is a record holder or
his shares are held in “street name,” in a matter of hours by simply contacting the transfer agent or his broker and requesting
delivery of his shares through the DWAC System, we believe this time period is sufficient for an average investor. However, we cannot
assure you of this fact. Please see the risk factor titled “In connection with any stockholder meeting called to approve a proposed
initial business combination, we may require stockholders who wish to convert their shares in connection with a proposed business combination
to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights prior
to the deadline for exercising their rights” for further information on the risks of failing to comply with these requirements.
Any
request to convert such shares once made, may be withdrawn at any time up to the vote on the proposed business combination or the expiration
of the tender offer. Furthermore, if a holder of public shares delivered his certificate in connection with an election of their conversion
and subsequently decides prior to the applicable date not to elect to exercise such rights, he may simply request that the transfer agent
return the certificate (physically or electronically).
If
the initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their
conversion rights would not be entitled to convert their shares for the applicable pro rata share of the trust account. In such case,
we will promptly return any shares delivered by public holders.
Liquidation
if No Business Combination
Our
amended and restated certificate of incorporation provides that we will have only 24 months from the closing of our IPO to complete an
initial business combination. If we have not completed an initial business combination by such date, we will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem
100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust
account, including any interest not previously released to us but net of taxes payable, divided by the number of then outstanding public
shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive
further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii)
and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Our
sponsor, initial stockholders, officers and directors have agreed that they will not propose any amendment to our amended and restated
certificate of incorporation that would affect our public stockholders’ ability to convert or sell their shares to us in connection
with a business combination as described herein or affect the substance or timing of our obligation to redeem 100% of our public shares
if we do not complete a business combination within 24 months from the closing of our IPO unless we provide our public stockholders with
the opportunity to convert their shares of common stock upon such approval at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account, including interest not previously released to us but net of franchise and income taxes payable,
divided by the number of then outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment,
whether proposed by our sponsor, initial stockholders, executive officers, directors or any other person.
Under
the Delaware General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the extent
of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders
upon the redemption of 100% of our outstanding public shares in the event we do not complete our initial business combination within
the required time period may be considered a liquidation distribution under Delaware law. If the corporation complies with certain procedures
set forth in Section 280 of the Delaware General Corporation Law intended to ensure that it makes reasonable provision for all claims
against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period
during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions
are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s
pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after
the third anniversary of the dissolution. It is our intention to redeem our public shares as soon as reasonably possible following our
24th month, and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially
be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend
well beyond the third anniversary of such date.
Furthermore,
if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public shares
in the event we do not complete our initial business combination within the required time period is not considered a liquidation distribution
under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation
Law, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of
three years, as in the case of a liquidation distribution.
Because
we will not be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation
Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending
claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company,
rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only
likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We
are required to seek to have all third parties (including any vendors or other entities we engage after our IPO) and any prospective
target businesses enter into agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies
held in the trust account. As a result, the claims that could be made against us will be limited, thereby lessening the likelihood that
any claim would result in any liability extending to the trust. We therefore believe that any necessary provision for creditors will
be reduced and should not have a significant impact on our ability to distribute the funds in the trust account to our public stockholders.
Nevertheless, Marcum LLP, our independent registered public accounting firm, and the underwriters of the offering, will not execute agreements
with us waiving such claims to the monies held in the trust account. Furthermore, there is no guarantee that other vendors, service providers
and prospective target businesses will execute such agreements. Nor is there any guarantee that, even if they execute such agreements
with us, they will not seek recourse against the trust account. Our sponsor has agreed that it will be liable to 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, but we cannot assure you that it will be able
to satisfy its indemnification obligations if it is required to do so. We have not asked our sponsor to reserve for such indemnification
obligations, nor have we 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. Therefore, we believe it is unlikely that our sponsor will be able
to satisfy its indemnification obligations if it is required to do so. Additionally, the agreement our sponsor entered into specifically
provides for two exceptions to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business
or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may have
in or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of our IPO against certain
liabilities, including liabilities under the Securities Act. As a result, if we liquidate, the per-share distribution from the trust
account could be less than $10.00 due to claims or potential claims of creditors.
We
anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after our 24th month and anticipate
it will take no more than 10 business days to effectuate such distribution. The holders of the founders’ shares and private shares
have waived their rights to participate in any liquidation distribution from the trust account with respect to such shares. There will
be no distribution from the trust account with respect to our warrants, which will expire worthless. We will pay the costs of any subsequent
liquidation from our remaining assets outside of the trust account. If such funds are insufficient, our sponsor has contractually agreed
to advance us the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $15,000) and has
contractually agreed not to seek repayment for such expenses.
If
we are unable to complete an initial business combination and expend all of the net proceeds of our IPO, other than the proceeds deposited
in the trust account, and without taking into account interest, if any, earned on the trust account, the initial per-share redemption
price would be $10.00. As discussed above, the proceeds deposited in the trust account could become subject to claims of our creditors
that are in preference to the claims of public stockholders.
Our
public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete a business
combination within the required time period, if the stockholders seek to have us convert or purchase their respective shares upon a business
combination which is actually completed by us or upon certain amendments to our amended and restated certificate of incorporation prior
to consummating an initial business combination. In no other circumstances shall a stockholder have any right or interest of any kind
to or in the trust account.
If
we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held
in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims
of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we
cannot assure you we will be able to return to our public stockholders at least $10.00 per share.
If
we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions
received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer”
or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders promptly after 24 months
from the closing of our IPO, this may be viewed or interpreted as giving preference to our public stockholders over any potential creditors
with respect to access to or distributions from our assets. Furthermore, our board may be viewed as having breached their fiduciary duties
to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying
public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be
brought against us for these reasons.
Amended
and Restated Certificate of Incorporation
Our
amended and restated certificate of incorporation contains certain requirements and restrictions relating to our IPO that will apply
to us until the consummation of our initial business combination. These provisions cannot be amended without the approval of a majority
of our stockholders. If we seek to amend any provisions of our amended and restated certificate of incorporation that would affect our
public stockholders’ ability to convert or sell their shares to us in connection with a business combination as described herein
or affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination
within 24 months from the closing of our IPO, we will provide dissenting public stockholders with the opportunity to convert their public
shares in connection with any such vote. This conversion right shall apply in the event of the approval of any such amendment, whether
proposed by our sponsor, any executive officer, director, or any other person. Our sponsor, officers and directors have agreed to waive
any conversion rights with respect to any founders’ shares, private shares and any public shares they may hold in connection with
any vote to amend our amended and restated certificate of incorporation. Specifically, our amended and restated certificate of incorporation
provides, among other things, that:
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we shall either
(1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may
seek to convert their shares, regardless of whether they vote for or against the proposed business combination or don’t vote
at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide
our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder
vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable),
in each case subject to the limitations described herein; |
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we will consummate
our initial business combination only if we have net tangible assets of at least $5,000,001 immediately prior to or upon consummation
of such business combination and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are
voted in favor of the business combination; |
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if our initial business
combination is not consummated within 24 months from the closing of our IPO, then we will redeem all of the outstanding public shares
and thereafter liquidate and dissolve our company; |
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upon the consummation of
our IPO, approximately $258.75 million was placed into the trust account; |
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we may not consummate any
other business combination, merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction
prior to our initial business combination; and |
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prior to our initial business
combination, we may not issue additional stock that participates in any manner in the proceeds of the trust account, or that votes
as a class with the common stock sold in our IPO on an initial business combination. |
Competition
In
identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from
other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged
buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and have significant
experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess
greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited by our
available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore,
the requirement that we acquire a target business or businesses that satisfy the 80% of net assets test at the time of the agreement
to enter into the initial business combination, our obligation to pay cash in connection with our public stockholders who exercise their
redemption rights and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Any of
these factors may place us at a competitive disadvantage in successfully negotiating our initial business combination.
Employees
and Human Capital Resources
We
have two 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 our initial business combination and the stage of our initial business
combination process the company is in. Accordingly, once a suitable target business to acquire has been located, management may 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 presently expect our executive officers to devote
such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full-time employees prior to
the consummation of our initial business combination.
Periodic
Reporting and Audited Financial Statements
We
have registered our units, common stock and warrants under 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, such as this annual report on Form 10-K, contain financial statements audited and reported on by our independent registered
public accountants.
We
will provide stockholders with audited financial statements of the prospective target business as part of any proxy solicitation
sent to stockholders to assist them in assessing the target business. In all likelihood, the financial information included in the
proxy solicitation materials will need to be prepared in accordance with U.S. generally accepted accounting principles (“U.S.
GAAP”), or international financial reporting standards, or IFRS, as issued by the International Accounting Standards Board, or
IASB, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the
standards of the Public Company Accounting Oversight Board (United States), or PCAOB. The financial statements may also be required
to be prepared in accordance with U.S. GAAP for the Form 8-K announcing the closing of an initial business combination, which would
need to be filed within four business days thereafter. We cannot assure you that any particular target business selected by us as a
potential acquisition candidate will have the necessary financial information. To the extent that this requirement cannot be met, we
may not be able to acquire the proposed target business.
We
will be required to evaluate our internal control over financial reporting for the fiscal year ending December 31, 2022. 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 Section 2(a) of the Securities Act, as modified by The Jumpstart Our Business
Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors
find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities
may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of
the completion of our initial public offering (“IPO”), (b) in which we have total annual gross revenue of at least $1.07
billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held
by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in
non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall
have the meaning associated with it in the JOBS Act.
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our shares
of common stock held by non-affiliates does not equal or exceed $250.0 million as of the prior June 30th, or (2) our annual revenues
did not equal or exceed $100.0 million during such completed fiscal year and the market value of our shares of common stock held by non-affiliates
did not equal or exceed $700.0 million as of the prior June 30th. To the extent we take advantage of any reduced disclosure obligations,
it may also make comparison of our financial statements with other public companies difficult or impossible.
ITEM
1A. RISK FACTORS.
An
investment in our securities involves a high degree of risk. You should consider carefully the risks described below, which we believe
represent some of the material risks related to our securities, together with the other information contained in this annual report,
before making a decision to invest in our securities. This annual 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.
Risks
Relating to our Search for, Consummation of, or Inability to Consummate, a Business Combination and Post-Business Combination Risks
Our
public stockholders may not be afforded an opportunity to vote on our proposed business combination.
We
will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which public stockholders
may seek to convert their shares, regardless of whether they vote for or against the proposed business combination or don’t vote
at all, 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 stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a
stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes
payable), in each case subject to the limitations described elsewhere in this annual report. 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. The decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders
to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors
such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval.
For instance, Nasdaq rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us
to obtain stockholder 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 stockholder approval of such business combination instead of conducting a tender offer.
If
we are unable to consummate a business combination, our public stockholders may be forced to wait more than 24 months before receiving
distributions from the trust account.
We
have 24 months from the closing of our IPO in which to complete a business combination. We have no obligation to return funds to investors
prior to such date unless we consummate a business combination prior thereto and only then in cases where investors have sought to convert
or sell their shares to us. Only after the expiration of this full time period will public security holders be entitled to distributions
from the trust account if we are unable to complete a business combination. Accordingly, investors’ funds may be unavailable to
them until after such date and to liquidate your investment, public security holders may be forced to sell their public shares or warrants,
potentially at a loss.
If
we determine to change our acquisition criteria or guidelines, many of the disclosures contained in this annual report will not be applicable
and you will be investing in our company without any basis on which to evaluate the potential target business we may acquire.
We
could seek to deviate from the acquisition criteria or guidelines disclosed in this annual report although we have no current intention
to do so. Accordingly, investors may be making an investment in our company without any basis on which to evaluate the potential target
business we may acquire. Regardless of whether or not we deviate from the acquisition criteria or guidelines in connection with any proposed
business combination, investors will always be given the opportunity to convert their shares or sell them to us in a tender offer in
connection with any proposed business combination as described in this annual report.
If
the net proceeds of our IPO not being held in the trust account are insufficient to allow us to operate for at least the
next 24 months, we may be unable to complete a business combination.
Of
the net proceeds of our IPO, only approximately $900,000 are available to us initially outside the trust account to fund our working
capital requirements. Additionally, effective as of November 4, 2021, upon approval of the Board, the Company entered into an
Expense Advancement Agreement with Goal Acquisitions Sponsor, LLC (the “Funding Party”). Pursuant to the Expense Advancement
Agreement, the Funding Party has agreed to advance to the Company from time to time, upon request by the Company, a maximum of $1,500,000
in the aggregate, in each instance issued pursuant to the terms of the form of promissory note as may be necessary to fund the Company’s
expenses relating to the investigation and selection of a target business and other working capital requirements prior to completion
of any potential Business Combination.
We
believe that such funds will be sufficient to allow us to operate for at least the next 24 months; however, we cannot assure you that
our estimate is accurate. Accordingly, if we use all of the funds held outside of the trust account and all interest available to us,
as well as the funds available under the Expense Advance Agreement, we may not have sufficient funds available with which to structure,
negotiate or close an initial business combination. In such event, we will need to borrow additional funds from our sponsor, officers
or directors or their affiliates to operate or may be forced to liquidate.
If
third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption
price received by stockholders may be less than $10.00.
Our placing of funds in the trust account
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 stockholders, 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 the trust account could be subject to claims
which could take priority over those of our public stockholders. If we are unable to complete a business combination and distribute the
proceeds held in the trust account to our public stockholders, our sponsor has agreed (subject to certain exceptions described
elsewhere in this annual report) 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, we have not asked our sponsor to reserve for such indemnification obligations, nor have
we 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. Therefore, we believe it is unlikely that our sponsor will be able to satisfy its indemnification
obligations if it is required to do so. As a result, the per-share distribution from the trust account may be less than $10.00, plus
interest, due to such claims.
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds
held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to
the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust
account, we may not be able to return to our public stockholders at least $10.00.
As
the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may
be more competition for attractive targets. This could increase the cost of our initial business combination and could even result in
our inability to find a target or to consummate an initial business combination.
In
recent years, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets
for special purpose acquisition companies have already entered into an initial business combination, and there are still many special
purpose acquisition companies seeking targets for their initial business combination, as well as many such companies currently in registration.
As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify
a suitable target and to consummate an initial business combination.
In
addition, because there are more special purpose acquisition companies seeking to enter into an initial business combination with available
targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause targets
companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry
sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate
targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and
consummate an initial business combination, and may result in our inability to consummate an initial business combination on terms favorable
to our investors altogether.
Our
stockholders may be held liable for claims by third parties against us to the extent of distributions received by them.
Our
amended and restated certificate of incorporation provides that we will continue in existence only until 24 months from the closing of
our IPO. If we have not completed a business combination by such date, we will (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares,
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not
previously released to us but net of taxes payable, divided by the number of then outstanding public shares, which redemption will completely
extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any),
subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under
Delaware law to provide for claims of creditors and the requirements of other applicable law. We cannot assure you that we will properly
assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to
the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary
of the date of distribution. Accordingly, we cannot assure you that third parties will not seek to recover from our stockholders amounts
owed to them by us.
If
we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions
received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer”
or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders promptly after expiration
of the time we have to complete an initial business combination, this may be viewed or interpreted as giving preference to our public
stockholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our board may be viewed
as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company
to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot
assure you that claims will not be brought against us for these reasons.
A
provision of our warrant agreement may make it more difficult for us to consummate our initial business combination.
If:
|
● |
we issue additional
shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business
combination at an issue price or effective issue price of less than $9.20 per share of common stock, |
|
|
|
|
● |
the aggregate gross proceeds
from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our
initial business combination on the date of the consummation of our initial business combination (net of redemptions), and |
|
|
|
|
● |
the Market Value is below
$9.20 per share, |
then
the exercise price of the warrants will be adjusted to be equal to 115% of the higher of the Market Value and the price at which we issue
the additional shares of common stock or equity-linked securities. This may make it more difficult for us to consummate an initial business
combination with a target business.
Since
we have not yet completed our initial 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 intend to focus on an acquisition in the sports industry, we may pursue an acquisition opportunity in any business industry or sector
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 our initial 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 our initial business combination with an entity in an industry characterized by a high level
of risk, we may be affected by the currently unascertainable risks of that industry. Although our management will endeavor to evaluate
the risks inherent in a particular industry or target business, we cannot assure you that we will properly ascertain or assess all of
the significant risk factors.
Our
ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon
the efforts of our key personnel, some of whom may join us following consummation of our initial business combination. While we
intend to closely scrutinize any individuals we engage after our initial business combination, we cannot assure you that our assessment
of these individuals will prove to be correct.
Our
ability to successfully effect our initial 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 is 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 consummation of our initial business combination, however, cannot presently be ascertained. Although
some of our key personnel serve in senior management or advisory positions following our initial business combination, it is likely
that most, if not all, of the management of the target business will remain in place. While we intend to closely scrutinize any individuals
we engage after our initial business combination, we cannot assure you that our assessment of these individuals will prove to
be correct. These individuals may be unfamiliar with the requirements of operating a 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
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 our initial 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 our initial business combination.
Our
key personnel may negotiate employment or consulting agreements with a target business in connection with our initial business
combination. These agreements may provide for them to receive compensation following our initial business combination and as a
result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous
for us.
Our
key personnel will be able to remain with the company after the consummation of our initial business combination only if they
are able to negotiate employment or consulting agreements or other appropriate arrangements in connection with our initial business
combination. Such negotiations will 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 will 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 our initial business combination.
Our
officers and directors will not commit their full time to our affairs. We presently expect each of our officers and directors 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 our
initial business combination.
Our
sponsor has waived its right to convert its founders’ shares or any other shares purchased in our IPO or thereafter, or to receive
distributions from the trust account with respect to its founders’ shares upon our liquidation if we are unable to consummate a
business combination. Accordingly, the shares acquired prior to our IPO, 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 our initial 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 our initial business combination and in determining whether the terms, conditions and timing of a particular business
combination are appropriate and in our stockholders’ best interest.
Our
officers and directors or their affiliates have pre-existing fiduciary and contractual obligations and may in the future become affiliated
with other entities engaged in business activities similar to those intended to be conducted by us. Accordingly, they 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. Additionally, our officers and
directors may in the future become affiliated with entities that are engaged in a similar business, including another blank check company
that may have acquisition objectives that are similar to ours. Accordingly, they may have conflicts of interest in determining to which
entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target
business may be presented to other entities prior to its presentation to us, subject to our officers’ and directors’ fiduciary
duties under Delaware law. For a more detailed description of our officers’ and directors’ business affiliations and the
potential conflicts of interest that you should be aware of, see the sections titled “Management — Directors and Executive
Officers” and “Management — Conflicts of Interest.”
EarlyBirdCapital
may have a conflict of interest in rendering services to us in connection with our initial business combination.
We
have engaged EarlyBirdCapital to assist us in connection with our initial business combination. We will pay EarlyBirdCapital a cash fee
for such services in an aggregate amount equal to up to 3.5% of the total gross proceeds raised in the offering only if we consummate
our initial business combination. The representative shares will also be worthless if we do not consummate an initial business combination.
These financial interests may result in EarlyBirdCapital having a conflict of interest when providing the services to us in connection
with an initial business combination.
We
may only be able to complete one business combination with the proceeds of our IPO, which will cause us to be solely dependent on a single
business which may have a limited number of products or services.
It
is likely we will consummate a business combination with a single target business, although we have the ability to simultaneously acquire
several target businesses. By consummating a business combination with only a single entity, our lack of diversification may subject
us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit
from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several
business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may
be:
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solely dependent
upon the performance of a single business, or |
|
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dependent upon the development
or market acceptance of a single or limited number of products, processes or services. |
This
lack of diversification may subject us to numerous economic, competitive and regulatory developments, any or all of which may have a
substantial adverse impact upon the particular industry in which we may operate subsequent to a business combination.
Alternatively,
if we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for each
of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations,
which may make it more difficult for us, and delay our ability, to complete the business combination. With multiple business combinations,
we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence
investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations
and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks,
it could negatively impact our profitability and results of operations.
The
ability of our stockholders to exercise their conversion rights or sell their shares to us in a tender offer may not allow us to effectuate
the most desirable business combination or optimize our capital structure.
If
our business combination requires us to use substantially all of our cash to pay the purchase price, because we will not know how many
stockholders may exercise conversion rights or seek to sell their shares to us in a tender offer, we may either need to reserve part
of the trust account for possible payment upon such conversion, or we may need to arrange third party financing to help fund our business
combination. In the event that the acquisition involves the issuance of our stock as consideration, we may be required to issue a higher
percentage of our stock to make up for a shortfall in funds. Raising additional funds to cover any shortfall may involve dilutive equity
financing or incurring indebtedness at higher than desirable levels. This may limit our ability to effectuate the most attractive business
combination available to us.
In
connection with any vote to approve a business combination, we will offer each public stockholder the option to vote in favor of a proposed
business combination and still seek conversion of his, her or its shares.
In
connection with any vote to approve a business combination, we will offer each public stockholder (but not our sponsor, officers or directors)
the right to have his, her or its shares of common stock converted to cash (subject to the limitations described elsewhere in this annual
report) regardless of whether such stockholder votes for or against such proposed business combination or does not vote at all. The ability
to seek conversion while voting in favor of our proposed business combination may make it more likely that we will consummate a business
combination.
We
do not have a specified maximum conversion threshold. The absence of such a conversion threshold may make it easier for us to consummate
a business combination even where a substantial number of public stockholders seek to convert their shares to cash in connection with
the vote on the business combination.
We
have no specified percentage threshold for conversion in our amended and restated certificate of incorporation. As a result, we may be
able to consummate a business combination even though a substantial number of our public stockholders do not agree with the transaction
and have converted their shares. However, in no event will we consummate an initial business combination unless we have net tangible
assets of at least $5,000,001 immediately prior to or upon consummation of our initial business combination.
In
connection with any stockholder meeting called to approve a proposed initial business combination, we may require stockholders who wish
to convert their shares in connection with a proposed initial business combination to comply with specific requirements for conversion
that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights.
In
connection with any stockholder meeting called to approve a proposed initial business combination, each public stockholder will have
the right, regardless of whether he is voting for or against such proposed business combination or does not vote at all, to demand that
we convert his 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 stockholders who wish to convert 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 DWAC (Deposit/Withdrawal At Custodian) System, at the holders’ option, in each case prior to a
date set forth in the tender offer documents or proxy materials sent in connection with the proposal to approve the business combination.
In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and our transfer agent will
need to act to facilitate this request. It is our understanding that stockholders should generally allot at least two weeks to obtain
physical certificates from the transfer agent. However, because we do not have any control over this process or over the brokers or DTC,
it may take significantly longer than two weeks to obtain a physical 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 stockholders to deliver their shares, stockholders who wish to convert may be unable to meet the deadline for exercising their conversion
rights and thus may be unable to convert their shares.
If,
in connection with any stockholder meeting called to approve a proposed business combination, we require public stockholders who wish
to convert their shares to comply with specific requirements for conversion, such converting stockholders may be unable to sell their
securities when they wish to in the event that the proposed business combination is not approved.
If
we require public stockholders who wish to convert their shares to comply with specific requirements for conversion and such proposed
business combination is not consummated, we will promptly return such certificates to the tendering public stockholders. Accordingly,
investors who attempted to convert their shares in such a circumstance will be unable to sell their securities after the failed acquisition
until we have returned their securities to them. The market price for our shares of common stock may decline during this time and you
may not be able to sell your securities when you wish to, even while other stockholders that did not seek conversion may be able to sell
their securities.
Because
of our structure, other companies may have a competitive advantage and we may not be able to consummate an attractive business combination.
We
expect to encounter intense competition from entities other than blank check companies having a business objective similar to ours, including
venture capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these entities are well established
and have extensive experience in identifying and effecting business combinations directly or through affiliates. Many of these competitors
possess greater technical, human and other resources than we do and our financial resources are relatively limited when contrasted with
those of many of these competitors. While we believe that there are numerous potential target businesses that we could acquire with the
net proceeds of our IPO, our ability to compete in acquiring certain sizable target businesses is limited by our available financial
resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore,
seeking stockholder approval or engaging in a tender offer in connection with any proposed business combination may delay the consummation
of such a transaction. Additionally, our outstanding warrants, and the future dilution they potentially represent, may not be viewed
favorably by certain target businesses. Any of the foregoing may place us at a competitive disadvantage in successfully negotiating a
business combination.
We
may be unable to obtain additional financing, if required, to consummate our initial business combination or to fund the operations
and growth of the target business, which could compel us to restructure or abandon a particular business combination.
Although
we believe that the net proceeds of our IPO are sufficient to allow us to consummate our initial business combination, because
we have not yet consummated any business combination, we cannot ascertain the capital requirements for any particular transaction.
If the net proceeds of our IPO prove to be insufficient, either because of the size of the business combination, the depletion of the
available net proceeds in search of a target business, or the obligation to convert into cash a significant number of shares from dissenting
stockholders, we will be required to seek additional financing. Such financing may not be available on acceptable terms, if at all. To
the extent that additional financing proves to be unavailable when needed to consummate a particular business combination, we will be
compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business
candidate. In addition, if we consummate a business combination, we may require additional financing to fund the operations or growth
of the target business. The failure to secure additional financing could have a material adverse effect on the continued development
or growth of the target business. None of our sponsor, officers, directors or stockholders is required to provide any financing to us
in connection with or after a business combination.
Our
outstanding warrants may have an adverse effect on the market price of our common stock and make it more difficult to effect our initial
business combination.
We
issued warrants to purchase 22,500,000 shares of common stock as part of the units offered in our IPO and private warrants included within
the private units to purchase 600,000 shares of common stock. We may also issue other units to our sponsor, initial stockholders, officers,
directors or their affiliates in payment of working capital loans made to us as described in this annual report. To the extent we issue
shares of common stock to effect our initial 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 shares of common stock and reduce the value of the shares issued to
complete the business combination. Accordingly, our warrants 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 and to the extent
these warrants are exercised, you may experience dilution to your holdings.
Our
search for an initial business combination, and any target business with which we ultimately consummate an initial business combination,
may be materially adversely affected by the coronavirus (COVID-19) pandemic and other events, and the status of debt and equity markets.
The
COVID-19 pandemic has adversely affected, and other events (such as terrorist attacks, natural disasters or a significant outbreak of
other infectious diseases) could adversely affect, the economies and financial markets worldwide, and the business of any potential target
business with which we consummate an initial business combination could be materially and adversely affected. The COVID-19 pandemic has
adversely affected, and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases)
could adversely affect, the economies and financial markets worldwide, and the business of any potential target business with which we
consummate an initial business combination could be materially and adversely affected. Furthermore, we may be unable to complete an initial
business combination if concerns relating to COVID-19 continue to restrict travel, limit the ability to have meetings with potential
investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction
in a timely manner. The extent to which COVID-19 impacts our search for an initial business combination will depend on future developments,
which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and
the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other events (such as terrorist
attacks, natural disasters or a significant outbreak of other infectious diseases) continue for an extensive period of time, our ability
to consummate an initial business combination, or the operations of a target business with which we ultimately consummate an initial
business combination, may be materially adversely affected.
In
addition, our ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted
by COVID-19 and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases), including
as a result of increased market volatility, decreased market liquidity in third-party financing being unavailable on terms acceptable
to us or at all.
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 stock price, which could cause you to lose some or all of your investment.
We
must conduct a due diligence investigation of the target businesses we intend 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 common stock. 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 our initial business combination within 24 months from the closing of our IPO may give potential
target businesses leverage over us in negotiating a business combination.
We
have 24 months from the closing of our IPO to complete our 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 approving a proposed business combination.
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 sponsor, initial stockholders, officers, directors or their affiliates. 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 approving
a proposed business combination.
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 will 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 will
result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire
or merge with another business.
Compliance
with the Sarbanes-Oxley Act of 2002 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 of 2002 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 December 31, 2022.
If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties
and/or stockholder 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 stock.
If
we effect a business combination with a company located in a foreign jurisdiction, we will be subject to a variety of additional risks
that may negatively impact our operations.
If
we consummate a business combination with a target business in a foreign country, we will 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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longer payment cycles; |
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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. |
We
cannot assure you that we will be able to adequately address these additional risks. If we were unable to do so, our operations might
suffer.
If
we effect a business combination with a company located outside of the United States, the laws applicable to such company will likely
govern all 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 govern almost all 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
will 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, to effect service of process upon our directors
or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors
and officers under federal securities laws.
Because
we must furnish our stockholders with target business financial statements prepared in accordance with U.S. generally accepted accounting
principles or international financial reporting standards, we will not be able to complete a business combination with prospective target
businesses unless their financial statements are prepared in accordance with U.S. generally accepted accounting principles or international
financial reporting standards.
The
federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance
tests include historical and/or pro forma financial statement disclosure in periodic reports. These financial statements may be required
to be prepared in accordance with, or be reconciled to, U.S. GAAP, or international financial reporting standards, or IFRS, depending
on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the Public
Company Accounting Oversight Board (United States), or PCAOB. We will include the same financial statement disclosure in connection with
any tender offer documents we use, whether or not they are required under the tender offer rules. Additionally, to the extent we furnish
our stockholders with financial statements prepared in accordance with IFRS, such financial statements will need to be audited in accordance
with U.S. GAAP at the time of the consummation of the business combination. These financial statement requirements may limit the pool
of potential target businesses we may acquire.
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 assets and us, such business
combination might not meet the statutory requirements of a tax-deferred reorganization, or the parties might not obtain the intended
tax-deferred treatment upon a transfer of shares or assets. A non-qualifying reorganization could result in the imposition of substantial
taxes.
We
may face risks related to businesses in the sports and media sectors.
Business
combinations with companies in the sports and media sectors entail special considerations and risks, including potential limitations
and restrictions on our ability to complete business combinations imposed by professional sports leagues that prospective target businesses
may be associated with. If we are successful in completing a business combination with such a target business, we may be subject to,
and possibly adversely affected by, the following risks:
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The popularity
of any sports franchises that we control or have partnerships with, and, in varying degrees, the ability of those franchises achieving
competitive success, depends on the viability and the popularity of the sports leagues and sports that such franchises are associated
with, which can generate or impact supporter enthusiasm, resulting in increased or decreased revenues; |
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An inability to build or
maintain strong brand identity and reputation and improve customer and supporter satisfaction and loyalty, |
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A dependence in part on
relationships with third parties and an inability to attract or retain sponsorships, advertisers or partners; |
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An inability to attract
or retain key personnel, including players for any sports franchises we may control, and an inability of professional sports leagues
to maintain labor relations or successfully negotiate new collective bargaining agreements with unionized players, referees or other
employees on favorable terms; |
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An inability to negotiate
and control pricing of key media contracts for any sports franchises we may control; |
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An inability of any sports
franchises that we control or have partnerships with to qualify for playoffs or certain competitions; |
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Changes in pricing, including
changes in the demand for tickets, media rights or consumer products associated with our target business; |
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An inability to sell, license,
market, protect and enforce the intellectual property and other rights on which our target business may depend; |
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Seasonality and weather
conditions that may cause our operating results to vary from quarter to quarter; |
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Potential liability for
negligence, copyright, or trademark infringement or other claims based on the nature and content of materials that we may distribute; |
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Special rules and regulations
imposed by sports leagues on franchises, including rules and regulations regarding confidentiality, investments and sales of interests
in sports franchises, financing transactions (including the ability to incur indebtedness, make distributions or engage in other
liquidity transactions) and insolvency and bankruptcy; |
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The ability of the member
teams of sports leagues to take actions contrary to the interests of sports franchises, including asserting control over certain
matters such as telecast rights, licensing rights, the length and format of the playing season, the operating territories of member
teams, admission of new members, franchise relocations, labor relations with players associations, collective bargaining, free agency,
and luxury taxes and revenue sharing, and the imposition of sanctions or suspension on sports franchises; and |
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Business interruptions
due to natural disasters, terrorist incidents, outbreak of disease (including the recent COVID-19 pandemic and related shelter-in-place
orders, travel, social distancing and quarantine policies, boycotts, curtailment of trade and other business restrictions), and other
events; |
Any
of the foregoing risks, and others, could have an adverse impact on our operations following a business combination. Our efforts in identifying
prospective target businesses will not be limited to the sports and entertainment sectors. Accordingly, if we acquire a target business
in another industry, these risks will likely not affect us and we will be subject to other risks attendant with the specific industry
in which we operate or target businesses which we acquire, none of which can be presently ascertained.
Risks
Relating to Investing in our Securities
You
will not be entitled to protections normally afforded to investors of blank check companies.
Since
the net proceeds of our IPO 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 have net tangible
assets in excess of $5,000,001, we are exempt from rules promulgated by the SEC to protect investors of blank check companies such as
Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules which completely restrict the transferability
of our securities, require us to complete a business combination within 24 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, we have a longer period of time to consummate an initial business combination and we are entitled to withdraw amounts
from the funds held in the trust account prior to the completion of a business combination.
The
securities in which we invest the proceeds held in the trust account could bear a negative rate of interest, which could reduce the interest
income available for payment of taxes or reduce the value of the assets held in the trust account such that the per share
redemption amount received by public stockholders may be less than $10.00 per share.
The
net proceeds of our IPO and certain proceeds from the sale of the private placement warrants, in the amount of $258,750,000, have been
held in an interest-bearing trust account. The proceeds held in the trust account may only be invested in direct U.S. government securities
with a maturity of 185 days or less, or in certain money market funds which invest only in direct U.S. Treasury obligations. While short-term
U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in
recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the
Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event
of very low or negative yields, the amount of interest income (which we may withdraw to pay income taxes) will be reduced. In the event
that we are unable to complete our initial business combination, our public stockholders are entitled to receive their share of the proceeds
held in the trust account, plus any interest income. If the balance of the trust account is reduced below $258,750,000 as a result of
negative interest rates, the amount of funds in the trust account available for distribution to our public stockholders may be reduced
below $10.00 per share.
We
may issue shares of our capital stock or debt securities to complete a business combination, which would reduce the equity interest of
our stockholders and likely cause a change in control of our ownership.
Our amended
and restated certificate of incorporation will authorize the issuance of up to 100,000,000 shares of common stock, par value $.0001 per
share, and 1,000,000 shares of preferred stock, par value $.0001 per share. After our IPO and the purchase of the private units, including
the exercise of over-allotment options, there was 40,296,250 authorized but unissued shares of common stock available for
issuance (after appropriate reservation for the issuance of the shares underlying the private units and public and private warrants).
Although we have no commitment as of the date of this annual report, we may issue a substantial number of additional shares of common
stock or shares of preferred stock, or a combination of common stock and preferred stock, to complete a business combination. The issuance
of additional shares of common stock will not reduce the per-share conversion amount in the trust account. The issuance of additional
shares of common stock or preferred stock:
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may significantly
reduce the equity interest of our existing investors; |
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may subordinate the rights
of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of
common stock; |
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may cause a change in control
if a substantial number of shares of common stock are issued, which may affect, among other things, our ability to use our net operating
loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and |
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may adversely affect prevailing
market prices for our shares of common stock. |
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. |
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 conversion amount in the trust account.
If
we do not file and maintain a current and effective prospectus relating to the common stock 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 prospectus relating to the common stock 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” provided
that an exemption from registration is available. As a result, the number of shares of common stock 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 will not be able to exercise on a cashless basis and will only be able to exercise their warrants for cash
if a current and effective prospectus relating to the common stock 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
prospectus relating to the common stock 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 potential “upside” of the holder’s investment
in our company may be reduced or the warrants may expire worthless.
An
investor will only be able to exercise a warrant if the issuance of shares of common stock 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 are exercisable and we will not be obligated to issue shares of common stock unless the shares of common stock 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 shares of common stock 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.
The
private warrants may be exercised at a time when the public warrants may not be exercised.
Once
the private warrants become exercisable, such warrants may immediately be exercised on a cashless basis, at the holder’s option,
so long as they are held by the initial purchasers or their permitted transferees. The public warrants, however, will only be exercisable
on a cashless basis at the option of the holders if we fail to register the shares issuable upon exercise of the warrants under the Securities
Act within 90 days following the closing of our initial business combination. Accordingly, it is possible that the holders of the private
warrants could exercise such warrants at a time when the holders of public warrants could not.
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 a majority
of the then outstanding public warrants.
Our
warrants are 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 a majority of the then outstanding
public warrants in order to make any change that adversely affects the interests of the registered holders.
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.
Although
we expect to meet on a pro forma basis Nasdaq’s minimum initial listing standards, which generally only requires that we meet certain
requirements relating to stockholders’ equity, market capitalization, aggregate market value of publicly held shares and distribution
requirements, 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. Nasdaq will also have discretionary
authority to not approve our listing if Nasdaq determines that the listing of the company to be acquired is against public policy at
that time.
If
Nasdaq delists our securities from trading on its exchange, or we are not listed in connection with our initial business combination,
we 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
shares of common stock are “penny stock” which will require brokers trading in our shares of common stock to adhere to
more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares of
common stock; |
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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. |
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, common stock and warrants are
listed on Nasdaq, our units, common stock 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.
Our
initial stockholders control a substantial interest in us and thus may influence certain actions requiring a stockholder vote.
Our initial stockholders own approximately
21.5% of our issued and outstanding shares of common stock. None of our sponsor, officers, directors, advisors, initial stockholders
or their affiliates has indicated any intention to purchase any units or shares of common stock from persons in the open market or in
private transactions. However, our sponsor, officers, directors, advisors, initial stockholders 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 initial stockholders, as well as all of our officers and directors, have agreed to vote the shares of common
stock owned by them in favor of such proposed business combination. EarlyBirdCapital has also agreed to vote the representative shares
in favor of such proposed business combination. As a result, we will need only 9,327,536 of the 25,875,000 public shares, or approximately
36%, sold in our IPO to be voted in favor of a business combination in order to have such business combination approved (assuming
our initial stockholders, officers, directors and EarlyBirdCapital do not purchase shares in the aftermarket).
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 stockholders 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. Accordingly, you may not be able to exercise your voting rights under corporate law for up
to 24 months. 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 sponsor, because of their ownership position, will have considerable influence
regarding the outcome. Accordingly, our initial stockholders will continue to exert control at least until the consummation of a business
combination.
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) at any time after they become exercisable and prior
to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the common stock equals or exceeds
$18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within
a 30 trading-day period commencing at any time after the warrants become exercisable and ending on the third business day prior to proper
notice of such redemption provided that on the date we give notice of redemption and during the entire period thereafter until the time
we redeem the warrants, we have an effective registration statement under the Securities Act covering the shares of common stock issuable
upon exercise of the warrants and a current prospectus relating to them is available. If and when the warrants become redeemable by us,
we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable
state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price
therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when
you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants
are called for redemption, is likely to be substantially less than the market value of your warrants. None of the private warrants are
redeemable by us so long as they are held by the initial purchasers 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 shares of common stock 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 described elsewhere in this annual report have been satisfied,
our management will have the option to require any holder that wishes to exercise his warrant (including any private warrants) 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 shares of common stock 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.
If
our security holders exercise their registration rights, it may have an adverse effect on the market price of our shares of common stock
and the existence of these rights may make it more difficult to effect our initial business combination.
Our
initial stockholders are entitled to make a demand that we register the resale of the founders’ shares at any time commencing three
months prior to the date on which their shares may be released from escrow. Additionally, the holders of representative shares, the private
units and any units and warrants our sponsor, initial stockholders, 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 representative shares, private units and
any other units and warrants we issue to them (and the underlying securities) commencing at any time after we consummate our initial
business combination. The presence of these additional securities 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 our initial business
combination or increase the cost of acquiring the target business, as the stockholders 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 shares of common stock.
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 will be deemed an investment company under the Investment
Company Act, as amended, or 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 the trust account 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 185 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. |
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. |
Compliance
with these additional regulatory burdens would require additional expense for which we have not allotted.
Provisions
in our amended and restated certificate of incorporation and bylaws and Delaware law may inhibit a takeover of us, which could limit
the price investors might be willing to pay in the future for our common stock and could entrench management.
Our
amended and restated certificate of incorporation and bylaws contain provisions that may discourage unsolicited takeover proposals that
stockholders may consider to be in their best interests. Our board of directors is divided into three classes, each of which will generally
serve for a term of three years with only one class of directors being elected in each year. As a result, at a given annual meeting only
a minority of the board of directors may be considered for election. Since our “staggered board” may prevent our stockholders
from replacing a majority of our board of directors at any given annual meeting, it may entrench management and discourage unsolicited
stockholder proposals that may be in the best interests of stockholders. Moreover, our board of directors has the ability to designate
the terms of and issue new series of preferred stock.
We
are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions
may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over
prevailing market prices for our securities.
A
market for our securities may not develop or may not be sustained, which will adversely affect the liquidity and price of our
securities.
The
price of our securities may vary significantly due to one or more potential business combinations and general market or economic conditions.
Furthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable
to sell your securities unless a market can be established and sustained.
Our
amended and restated certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State
of Delaware is the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability
to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our
amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in
our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only
in the Court of Chancery in the State of Delaware, except any action (A) as to which the Court of Chancery in the State of Delaware determines
that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent
to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive
jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction,
or (D) any action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District
of Delaware shall have concurrent jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our
capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.
This
choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes
with us or any of our directors, officers or employees, which may discourage lawsuits with respect to such claims, although our stockholders
will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder and may therefore
bring a claim in another appropriate forum. We cannot be certain that a court will decide that this provision is either applicable or
enforceable, and if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation
to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions,
which could harm our business, operating results and financial condition.
Our
amended and restated certificate of incorporation provides that the exclusive forum provision will be applicable to the fullest extent
permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce
any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision
will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal
courts have exclusive jurisdiction.
Risks
Relating to our Sponsor and Management Team
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 stockholders.
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 will
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. Additionally, each of our independent
directors is a member of our sponsor. As a result, they may have a conflict of interest in determining whether to enforce our sponsor’s
indemnification obligations. 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 stockholders may be reduced below $10.00 per share.
General
Risk Factors
We
have no operating history and, accordingly, you will not have any basis on which to evaluate our ability to achieve our business
objective.
We
have no operating results to date. Therefore, our ability to commence operations is dependent upon obtaining financing through
the public offering of our securities. Since we do not have an operating history, you will have no basis upon which to evaluate our
ability to achieve our business objective, which is to acquire an operating business. We have neither engaged in any operations unrelated
to our search for business combination candidates nor generated any revenue to date. We will not generate any revenues until,
at the earliest, after the consummation of our initial business combination.
We
are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth
companies will make our shares of common stock 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 or revenues exceeds $1.07 billion, or the market
value of our shares of common stock 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 stockholder 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 shares of common stock less attractive because we may rely on these provisions. If some investors find our shares of common stock
less attractive as a result, there may be a less active trading market for our shares and our share price may be more volatile.
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.
We
have identified a material weakness in our internal control over financial reporting as of September 30, 2021. If we are unable to develop
and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial
results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and
operating results.
In
light of guidance provided by the SEC in late 2021, our management re-evaluated our application of ASC 480-10-S99-3A to our accounting
classification of public shares. After consultation with our independent registered public accounting firm, our management and our audit
committee concluded that it was appropriate to restate our previously issued audited balance sheet, dated February 16, 2021, included
as an exhibit to our current report on Form 8-K filed with the SEC on February 22, 2021, and our unaudited interim financial statements
included in our quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2021 and June 30, 2021, filed with the SEC on
May 28, 2021 and August 16, 2021, respectively. As part of such process, we identified a material weakness in our internal control over
financial reporting.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is
a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected
and corrected on a timely basis.
Effective
internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate
the identified material weaknesses. These remediation measures may be time consuming and costly and there is no assurance that these
initiatives will ultimately have the intended effects.
If
we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent
or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial
statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic
reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our
stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the
future, will be sufficient to avoid potential future material weaknesses.
We,
and following our initial business combination, the post-business combination company, may face litigation and other risks as a result
of the material weaknesses in our internal control over financial reporting.
As
part of the restatements of our previously issued financial statements, we identified a material weakness in our internal control
over financial reporting. As a result of such material weakness, the restatements, the changes in accounting for our public shares
and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which
may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from
the restatements and material weakness in our internal control over financial reporting and the preparation of our financial
statements. As of the date of this annual report, we have no knowledge of any such litigation or dispute. However, we can provide no
assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not,
could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a
business combination.