Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
The aggregate market value of the common
stock outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the
closing price for the common stock as of the last business day of the registrant’s most recently completed second fiscal
quarter ($9.82 as of June 30, 2020), as reported on the Nasdaq Capital Market, was approximately $169,395,000.
As of March 10, 2021, 21,892,500 shares
of common stock, par value $0.0001 per share, were issued and outstanding.
PART I
ITEM 1. BUSINESS
In this Annual Report
on Form 10-K (the “Form 10-K”), references to the “Company” and to “we,” “us,”
and “our” refer to Greenrose Acquisition Corp.
We are a blank check
company formed under the laws of the State of Delaware on August 26, 2019. We were formed for the purpose of entering into a merger,
share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with
one or more businesses or entities. Our efforts to identify a prospective target business will not be limited to a particular industry
or geographic location, although we are currently focusing our search for target businesses in the cannabis industry.
In August 2019, we issued
an aggregate of 4,312,500 shares of our common stock (the “Founder’s Shares”) for an aggregate purchase price
of $25,000, or approximately $0.006 per share, to our sponsor, Greenrose Associates LLC, a New York limited liability company (“Sponsor”).
On February 13, 2020,
we consummated our initial public offering (the “IPO”) of 15,000,000 of our units (the “Public Units”).
Each Public Unit consists of one share of common stock and one redeemable warrant, with each warrant entitling the holder to purchase
one share of common stock at a price of $11.50 per share. The Public Units were sold at an offering price of $10.00 per Public
Unit, generating gross proceeds of $150,000,000.
Simultaneously with
the consummation of the IPO, we consummated the private placement (“Private Placement”) of 300,000 units (the “Private
Units”) at a price of $10.00 per Private Unit and 1,500,000 warrants (the “Private Warrants”) at a price of $1.00
per Private Warrant, generating total proceeds of $4,500,000. The Private Units and Private Warrants were sold to the Sponsor and
Imperial Capital, LLC. The Private Units and Private Warrants are identical to the Public Units and warrants sold in the IPO, except
that the Private Warrants and the warrants underlying the Private Units are non-redeemable and may be exercised on a cashless basis,
in each case so long as they continue to be held by the initial purchasers or their permitted transferees.
On February 14, 2020,
we consummated the sale of an additional 2,250,000 Public Units that were subject to the underwriters’ over-allotment option
at $10.00 per Public Unit, generating gross proceeds of $22,500,000. Simultaneously with the closing of the sale of the additional
Public Units, we consummated the sale of an additional 30,000 Private Units at $10.00 per Private Unit and 150,000 Private Warrants,
at a price of $1.00 per Private Warrant, generating total proceeds of $450,000. Following the closing of the over-allotment option
and sale of additional Private Units and Private Warrants, an aggregate amount of $172,500,000 has been placed in the trust account
established in connection with the IPO.
Transaction costs amounted
to $4,419,274 consisting of $3,450,000 of underwriting fees and $969,274 of other offering costs. In addition, $1,354,414 of cash
was held outside of the trust account established in connection with the IPO, which is available for the payment of offering costs
and for working capital purposes.
As a result of the underwriters’
exercise of the over-allotment option in full, 562,500 of the Founder’s Shares are no longer subject to forfeiture.
Effecting a Business Combination
General
We are not presently
engaged in, and we will not engage in, any substantive commercial business for an indefinite period of time. We intend to utilize
cash derived from the proceeds of our IPO and the Private Placement of Private Units, our capital stock, debt or a combination
of these in effecting a one or more business combinations which have not yet been completed. Accordingly, investors in our securities
are investing 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.
We Have Not Entered Into Definitive
Agreements with Potential Target Businesses
Subject to our management
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 entered into definitive
agreements with any prospective target businesses. Accordingly, there is no basis for investors in our securities to evaluate the
possible merits or risks of the target business(es) with which we may ultimately complete a business combination. To the extent
we effect a business combination with a financially unstable company or an entity in its early stage of development or growth,
including entities without established records of sales or earnings, we may be affected by numerous risks inherent in the business
and operations of financially unstable and early stage or potential emerging growth companies. 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
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. These
sources may also introduce us to target businesses they think we may be interested in on an unsolicited basis, since many of these
sources will have read our prospectus and know what types of businesses we are targeting. Our Sponsor, initial stockholders, officers
and directors, as well as their affiliates, may also bring to our attention target business candidates that they become aware of
through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending
trade shows or conventions. 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 (excluding deferred underwriting commissions and taxes payable on
the income accrued 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. We may engage the services of professional firms or other individuals
that specialize in business acquisitions on a formal basis, in which event we may pay a finder’s fee, consulting fee or other
compensation to be determined in an arm’s length negotiation based on the terms of the transaction.
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 Target Business and Structuring of a Business
Combination
Subject to the limitations
that a target business have a fair market value of at least 80% of the balance in the trust account (excluding taxes payable on
the income earned on the trust account) at the time of the execution of a definitive agreement for our initial business combination,
as described below in more detail, and that we must acquire a controlling interest in the target business, our management has 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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brand recognition and potential;
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experience and skill of management and availability of additional personnel;
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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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the target business’s compliance with U.S. federal law, including the Controlled Substances Act;
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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.
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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 (excluding taxes payable on the income earned on the trust account) at the time
of the execution of a definitive agreement for our initial business combination, although we may acquire a target business whose
fair market value significantly exceeds 80% of the trust account balance. 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 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.
In order to consummate
such an acquisition, we may issue a significant amount of our debt or equity securities to the sellers of such businesses and/or
seek to raise additional funds through a private offering of debt or equity securities. Since we have no specific business combination
under consideration, we have not entered into any such fundraising arrangement and have no current intention of doing so. The fair
market value of the target will be determined by our board of directors based upon one or more standards generally accepted by
the financial community (such as actual and potential sales, earnings, cash flow and/or book value). 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, and there is no required minimum valuation standard for any single target
at the time of such acquisition. 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. If we are able to complete
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.
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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. If we determine
to engage in a tender offer, such tender offer will be structured so that each stockholder may tender all of his, her or its shares
rather than some pro rata portion of his, her or its shares. The decision as to whether we will seek stockholder approval of a
proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely
in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the
transaction would otherwise require us to seek stockholder approval. Unlike other blank check companies which require stockholder
votes and conduct proxy solicitations in conjunction with their initial business combinations and related conversions of public
shares for cash upon consummation of such initial business combination even when a vote is not required by law, we will have the
flexibility to avoid such stockholder vote and allow our stockholders to sell their shares pursuant to Rule 13e-4 and Regulation
14E of the Exchange Act which regulate issuer tender offers. In that case, we will file tender offer documents with the SEC which
will contain substantially the same financial and other information about the initial business combination as is required under
the SEC’s proxy rules. We will consummate our initial business combination only if we have net tangible assets of at least
$5,000,001 upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted
are voted in favor of the 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 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.
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.
If we hold a meeting
to approve a proposed business combination and a significant number of stockholders vote, or indicate an intention to vote, against
such proposed business combination, our officers, directors, Sponsor, initial stockholders or their affiliates could make purchases
of our securities in the open market or in private transactions in order to influence the vote. Notwithstanding the foregoing,
our officers, directors, Sponsor, initial stockholders and their affiliates will not make purchases of shares of common stock if
the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential
manipulation of a company’s stock.
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 will not have conversion rights with respect to any shares of common stock owned by
them, directly or indirectly, whether acquired prior our IPO or purchased by them in the IPO or in the aftermarket. Additionally,
the holders of the representative shares will 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 fee 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 the 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.
The foregoing is different
from the procedures historically used by some blank check companies. Traditionally, in order to perfect conversion rights in connection
with a blank check company’s business combination, the company would distribute proxy materials for the stockholders’
vote on an initial business combination, and a holder could simply vote against a proposed business combination and check a box
on the proxy card indicating such holder was seeking to exercise his conversion rights. After the business combination was approved,
the company would contact such stockholder to arrange for him to deliver his certificate to verify ownership. As a result, the
stockholder then had an “option window” after the consummation of the business combination during which he could monitor
the price of the company’s stock in the market. If the price rose above the conversion price, he could sell his shares in
the open market before actually delivering his shares to the company for cancellation. As a result, the conversion rights, to which
stockholders were aware they needed to commit before the stockholder meeting, would become a “continuing” right surviving
past the consummation of the business combination until the holder delivered its certificate. The requirement for physical or electronic
delivery prior to the meeting ensures that a holder’s election to convert his shares is irrevocable once the business combination
is approved.
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 a public share of common stock 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 as of two business
days prior to the consummation of the initial business combination. In such case, we will promptly return any shares delivered
by public holders.
Liquidation if No Business Combination
Our amended and restated
certificate of incorporation provides that we will have only until August 13, 2021, subject to our Sponsor’s right to extend
that time for up to an additional 3 months by depositing $569,250 for each additional month in our trust account, 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 by August 13, 2021, subject to our Sponsor’s right to extend that time for up
to an additional 3 months by depositing $569,250 for each additional month in our trust account, 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.
Furthermore, if the
pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public shares in
the event we do not complete our initial business combination within the required time period is not considered a liquidation distribution
under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General
Corporation Law, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution,
instead of three years, as in the case of a liquidation distribution. If we are unable to complete a business combination within
the prescribed time frame, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest but net of franchise
and income 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. Accordingly, it is our intention
to redeem our public shares as soon as reasonably possible following our 21st 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.
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) 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 our IPO, 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 will distribute to all of our public stockholders, in proportion to their respective
equity interests, an aggregate sum equal to the amount in the trust account, inclusive of any interest (subject to our obligations
under Delaware law to provide for claims of creditors as described below).
We anticipate notifying
the trustee of the trust account to begin liquidating such assets promptly after such date 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 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 the 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. The proceeds deposited in the trust account could, however, 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 August
13, 2021, subject to our Sponsor’s right to extend that time for up to an additional 3 months by depositing $569,250 for
each additional month in our trust account, 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 by August 13, 2021, subject to our Sponsor’s right to extend that time for up to an additional 3 months by depositing
$569,250 for each additional month in our trust account, 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 director nominee, 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 upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination;
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if our initial business combination is not consummated by August 13, 2021, subject to our Sponsor’s right to extend that time for up to an additional 3 months by depositing $569,250 for each additional month in our trust account, then we will redeem all of the outstanding public shares and thereafter liquidate and dissolve our company;
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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.
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Competition
In identifying, evaluating and selecting
a target business, we may encounter intense competition from other entities having a business objective similar to ours. Many of
these entities are well established and have extensive experience identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources
will be relatively limited when contrasted with those of many of these competitors. While we believe there may be numerous potential
target businesses that we could acquire with the net proceeds of this offering, our ability to compete in acquiring certain sizable
target businesses may be limited by our available financial resources.
The following also may not be viewed favorably
by certain target businesses:
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our obligation to seek stockholder approval of a business combination or engage in a tender offer may delay the completion of a transaction;
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our obligation to convert or repurchase shares of common stock held by our public stockholders may reduce the resources available to us for a business combination; and
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our outstanding warrants, and the potential future dilution they represent.
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Any of these factors may place us at a
competitive disadvantage in successfully negotiating a business combination. Our management believes, however, that our status
as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately-held entities
having a similar business objective as ours in acquiring a target business with significant growth potential on favorable terms.
If we succeed in effecting a business combination,
there will be, in all likelihood, intense competition from competitors of the target business. We cannot assure you that, subsequent
to a business combination, we will have the resources or ability to compete effectively.
Facilities
We currently maintain our principal executive
offices at 111 Broadway, Amityville, NY 11701. The cost for this space is included in the $10,000 per-month fee Greenrose
Associates LLP, our Sponsor, has been charging us for general and administrative services. We consider our current office space,
combined with the other office space otherwise available to our executive officers, adequate for our current operations.
Employees
We have five executive officers. These
individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they
deem necessary to our affairs. The amount of time they will devote in any time period will vary based on whether a target business
has been selected for the business combination and the stage of the business combination process the company is in. Accordingly,
once a suitable target business to acquire has been located, management will spend more time investigating such target business
and negotiating and processing the business combination (and consequently spend more time on our affairs) than had been spent prior
to locating a suitable target business. We 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 a business
combination.
ITEM 1A. 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 will not generate any revenues until, at the earliest, after
the consummation of a business combination.
If we are unable to consummate a
business combination, our public stockholders may be forced to wait until after August 13, 2021 before receiving distributions
from the trust account.
We have until August
13, 2021, subject to our Sponsor’s right to extend such date for up to 3 months provided that it deposits $569,250 for each
additional month in our trust account, 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.
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). 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.
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 authorizes the issuance of up to 70,000,000 shares of common stock, par value $0.0001 per share,
and 1,000,000 shares of preferred stock, par value $0.0001 per share. 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 investors in our common stock;
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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.
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Similarly, if we issue debt securities,
it could result in:
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default and foreclosure on our assets if our operating revenues after a business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and
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our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding.
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If we incur indebtedness, our lenders will
not have a claim on the cash in the trust account and such indebtedness will not decrease the per-share conversion amount
in the trust account.
If third parties bring claims against
us, the proceeds held in trust could be reduced and the per-share redemption price received by stockholders may be less than $10.00.
Our placing of funds
in trust may not protect those funds from third party claims against us. Although we will seek to have all vendors and service
providers we engage and prospective target businesses we negotiate with execute agreements with us waiving any right, title, interest
or claim of any kind in or to any monies held in the trust account for the benefit of our public 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 trust 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 trust to our public stockholders, our Sponsor has agreed (subject to certain exceptions described elsewhere in
this Form 10-K) 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.
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 August 13, 2021, subject to our Sponsor’s
right to extend such date by up to an additional three months by depositing additional funds in our trust account. 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 franchise and income 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.
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 would not be able to exercise on a cashless basis and would only be able to exercise
their warrants for cash if a current and effective 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 will be
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.
A provision of our warrant agreement
may make it more difficult for us to consummate an initial business combination.
If:
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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 $9.50 per share of common stock,
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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
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the volume weighted average trading price of our common stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our initial business combination (such price, the “Market Value”) is below $9.50 per share,
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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 selected a
particular industry or target business with which to complete a business combination, we are unable to currently ascertain the
merits or risks of the industry or business in which we may ultimately operate.
We may pursue an acquisition
opportunity in any business industry or sector, although we are currently focusing on companies in the cannabis industry. Accordingly,
there is no current basis for you to evaluate the possible merits or risks of the particular industry in which we may ultimately
operate or the target business which we may ultimately acquire. To the extent we complete a business combination with a financially
unstable company or an entity in its development stage, we may be affected by numerous risks inherent in the business operations
of those entities. If we complete a business combination with an entity in an industry 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. We also cannot assure you that an investment in our units will not ultimately prove to be less
favorable to investors than a direct investment, if an opportunity were available, in a target business.
Our ability to successfully effect
a business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of
whom may join us following a business combination. While we intend to closely scrutinize any individuals we engage after a business
combination, we cannot assure you that our assessment of these individuals will prove to be correct.
Our ability to successfully
effect a business combination is dependent upon the efforts of our key personnel. We believe that our success depends on the continued
service of our key personnel, at least until we have consummated our initial business combination. We cannot assure you that any
of our key personnel will remain with us for the immediate or foreseeable future. In addition, none of our officers are required
to commit any specified amount of time to our affairs and, accordingly, our officers will have conflicts of interest in allocating
management time among various business activities, including identifying potential business combinations and monitoring the related
due diligence. We do not have employment agreements with, or key-man insurance on the life of, any of our officers. The unexpected
loss of the services of our key personnel could have a detrimental effect on us.
The role of our key
personnel after a business combination, however, cannot presently be ascertained. Although some of our key personnel serve in senior
management or advisory positions following a business combination, it is likely that most, if not all, of the management of the
target business will remain in place. While we intend to closely scrutinize any individuals we engage after a business combination,
we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with
the requirements of operating a public company which could cause us to have to expend time and resources helping them become familiar
with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely
affect our operations.
Our key personnel may negotiate employment
or consulting agreements in connection with a particular business combination. These agreements may provide for them to receive
compensation following a business combination and as a result, may cause them to have conflicts of interest in determining whether
a particular business combination is the most advantageous.
Our key personnel will
be able to remain with the company after the consummation of a business combination only if they are able to negotiate employment
or consulting agreements or other appropriate arrangements in connection with the business combination. Such negotiations would
take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation
in the form of cash payments and/or our securities for services they would render to the company after the consummation of the
business combination. The personal and financial interests of such individuals may influence their motivation in identifying and
selecting a target business.
Our officers and directors will allocate
their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our
affairs. This could have a negative impact on our ability to consummate a business combination.
Our officers and directors
do not commit their full time to our affairs. We 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 a 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 securities and any warrants purchased by
our officers or directors in the aftermarket, will be worthless if we do not consummate a business combination. The personal and
financial interests of our directors and officers may influence their motivation in timely identifying and selecting a target business
and completing a business combination. Consequently, our directors’ and officers’ discretion in identifying and selecting
a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of a
particular business combination are appropriate and in our 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.
Nasdaq may delist our securities
from quotation on its exchange which could limit investors’ ability to make transactions in our securities and subject us
to additional trading restrictions.
Our securities are listed
on Nasdaq, a national securities exchange. 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.
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The National Securities
Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain
securities, which are referred to as “covered securities.” Because our units, common stock and warrants are listed
on Nasdaq, our units, common stock and warrants will be 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.
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.
We may only be able to complete one
business combination with the proceeds from 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 possible 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.
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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 certain limitations) 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.
In connection with any stockholder
meeting called to approve a proposed initial business combination, we may require stockholders who wish to convert their shares
in connection with a proposed business combination to comply with specific requirements for conversion that may make it more difficult
for them to exercise their conversion rights prior to the deadline for exercising their rights.
In connection with any
stockholder meeting called to approve a proposed initial business combination, each public stockholder will have the right, regardless
of whether he is voting for or against such proposed business combination 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 will be 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 will be
limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition
of certain target businesses. Furthermore, 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 complete a 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, together with interest earned on the funds held in the trust account available to us, will be
sufficient to allow us to consummate a business combination, because we have not yet identified any prospective target business,
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 would 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 Sponsor controls a substantial
interest in us and thus may influence certain actions requiring a stockholder vote.
Our Sponsor, Greenrose
Associates LLC, owns approximately 20.7% of our issued and outstanding shares of common stock. Our Sponsor, officers, directors,
initial stockholders or their affiliates could determine in the future to make purchases of our securities 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 immediately before our
IPO as well as any shares of common stock acquired in the IPO or in the aftermarket in favor of such proposed business combination.
Our board of directors
is and will be 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 until August 13, 2021. 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 included in the Private Units 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 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 included in the Private Units will be 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 Form 10-K have been satisfied, our management
will have the option to require any holder that wishes to exercise his warrant (including any private warrants included in the
Private Units) 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 a business combination.
Our Sponsor is 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 securities 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 securities
and any other units and warrants we issue to them (and the underlying securities) commencing at any time after we consummate an
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 a 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 would 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 trust may be invested by the trustee
only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act
having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act which invest only in direct U.S. government treasury obligations. By restricting the investment of the
proceeds to these instruments, we intend to meet the requirements for the exemption provided in Rule 3a-1 promulgated under
the Investment Company Act.
If we are nevertheless
deemed to be an investment company under the Investment Company Act, we may be subject to certain restrictions that may make it
more difficult for us to complete a business combination, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities.
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In addition, we may
have imposed upon us certain burdensome requirements, including:
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registration as an investment company;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy, compliance policies and procedures and disclosure requirements and other rules and regulations.
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Compliance with these
additional regulatory burdens would require additional expense for which we have not allotted.
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
an initial business combination by August 13, 2021 may give potential target businesses leverage over us in negotiating a business
combination.
We have until August
13, 2021 to complete an initial business combination, subject to our Sponsor’s right to extend such date by up to an additional
3 months by depositing $569,250 for each additional month in our trust account. 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 would not be recoverable. Furthermore, even if an agreement is reached relating to a specific
target business, we may fail to consummate the business combination for any number of reasons including those beyond our control.
Any such event 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.
Our search for a business combination,
and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the
recent coronavirus (COVID-19) outbreak.
In December 2019, a
novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China
and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak
of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S.
Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare
community in responding to COVID-19. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread
health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target
business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may
be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability
to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable
to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business
combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information
which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.
If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability
to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination,
may be materially adversely affected.
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.
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, accounting principles generally accepted in the United States of America, or
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.
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 will be required to comply with certain
SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming
and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes
could have a material adverse effect on our business, investments and results of operations. 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.
There may be tax consequences to
our business combinations that may adversely affect us.
While we expect to undertake
any merger or acquisition so as to minimize taxes both to the acquired business and/or asset and us, such business combination
might not meet the statutory requirements of a tax-free reorganization, or the parties might not obtain the intended tax-free treatment
upon a transfer of shares or assets. A non-qualifying reorganization could result in the imposition of substantial taxes.
There are risks related to the cannabis
industry to which we may be subject.
Business combinations
with companies with operations in the cannabis industry entail special considerations and risks. If we are successful in completing
a business combination with a target business with operations in the cannabis industry, we will be subject to, and possibly adversely
affected by, the following risks:
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The cannabis industry is extremely speculative and its legality is uncertain, making it subject to inherent risk;
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Use of cannabis that is not in compliance with the Controlled Substances Act is illegal under federal law, and therefore, strict enforcement of federal laws regarding the use, cultivation, processing and/or sale of cannabis would likely result in our inability to execute a business plan in the cannabis industry;
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Changes in the current policies of the Trump Administration and the Department of Justice resulting in heightened enforcement of federal cannabis laws may negatively impact our ability to pursue our prospective business operations and/or generate revenues;
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Federal courts may refuse to recognize the enforceability of contracts pertaining to any business operations that are deemed illegal under federal law and, as a result, cannabis-related contracts could prove unenforceable in such courts;
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Consumer complaints and negative publicity regarding cannabis related products and services could lead to political pressure on states to implement new laws and regulations that are adverse to the cannabis industry or to reverse current favorable laws and regulations relating to cannabis;
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Assets leased to cannabis businesses may be forfeited to the federal government in connection with government enforcement actions under federal law;
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U.S. Food and Drug Administration regulation of cannabis and the possible registration of facilities where cannabis is grown could negatively affect the cannabis industry, which could directly affect our financial condition;
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Due to our proposed involvement in the regulated cannabis industry, we may have a difficult time obtaining the various insurance policies that are needed to operate our business, which may expose us to additional risks and financial liabilities;
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The cannabis industry may face significant opposition from other industries that perceive cannabis products and services as competitive with their own, including but not limited to the pharmaceutical industry, adult beverage industry and tobacco industry, all of which are have powerful lobbying and financial resources;
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Many national and regional banks have been resistant to doing business with cannabis companies because of the uncertainties presented by federal law and, as a result, we may have difficulty accessing the service of banks, which may inhibit our ability to open bank accounts, obtain financing in the future, or otherwise utilize traditional banking services;
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Laws and regulations affecting the regulated cannabis industry are varied, broad in scope and subject to evolving interpretations, and may restrict the use of the properties we acquire or require certain additional regulatory approvals, which could materially adversely affect our operations;
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Securities exchanges may not list companies engaged in the cannabis industry; and
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Section 280E of the Internal Revenue Code, which disallows a tax deduction for any amount paid or incurred in carrying on any trade or business that consists of trafficking in controlled substances prohibited by federal or state law, may prevent us from deducting certain business expenditures, which would increase our net taxable income.
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Any of the foregoing
could have an adverse impact on our operations following a business combination. However, our efforts in identifying prospective
target businesses will not be limited to the cannabis industry. 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 business which we acquire, none of which can be presently ascertained.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTY
We currently maintain
our principal executive offices at 111 Broadway, Amityville, NY 11701. The cost for this space is included in the $10,000 per-month
fee our Sponsor charges us for general and administrative services. We consider our current office space, combined with the other
office space otherwise available to our executive officers, adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART
III
ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
and Executive Officers
Our
current directors and executive officers are as follows:
Name
|
|
Age
|
|
Position
|
William Harley III
|
|
57
|
|
Chief Executive Officer, Director
|
Paul Wimer
|
|
56
|
|
President and Chief Operating Officer
|
Jeffrey Stegner
|
|
64
|
|
Chief Financial Officer
|
Daniel Harley
|
|
56
|
|
Executive Vice President, Business Development,
Director
|
Brendan Sheehan
|
|
50
|
|
Executive Vice President, Corporate Strategy
and Investor Relations, Director
|
Steven Cummings
|
|
57
|
|
Director
|
John Falcon
|
|
72
|
|
Chairman
|
Thomas Megale
|
|
61
|
|
Director
|
John Torrance, III
|
|
45
|
|
Director
|
William
(Mickey) Harley III has served as our Chief Executive Officer and Director since our inception. Mr. Harley has over 30 years
of experience in agriculture, real estate and finance. Mr. Harley currently serves as a managing member of our sponsor. From 2012
through 2018 Mr. Harley served as President of Bhavanna Berries LLC, a vertically integrated branded organic blueberry business
located on the North Fork of Long Island. From 2010 to 2012, Mr. Harley was the Chief Executive Officer of National Pecan Company,
which became the largest, vertically integrated pecan company in the world, and was later acquired by Diamond Foods, Inc. in 2017.
Since 2011, Mr. Harley has been the Managing Member and majority owner of The Arsenal Group, which is involved in the acquisition,
remediation and redevelopment of a “brownfield” industrial real estate project. In 2012, HRK Holdings, LLC and HRK
Industries, LLC, entities partially owned by The Arsenal Group, both filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy
Court for the Middle District of Florida and emerged from bankruptcy protection in 2017. Prior to these endeavors Mr. Harley spent
nearly twenty years in asset management. Mr. Harley holds a Master’s Degree in Public and Private Management from Yale University’s
School of Management and received a BS degree in Chemical Engineering and a BA in Economics from Yale University. We believe Mr.
Harley is well-qualified to serve as a member of the board due to his agriculture and business experience, as well as his contacts
and relationships.
Paul
Wimer has served as our President and Chief Operating Officer since our inception. Since 2017 Mr. Wimer has served as the
Chief Experience & Strategy Officer of Tivity Health, Inc., a publicly traded health and wellness company, where he is responsible
for the company’s innovation, product management, digital marketing, business development, corporate development and call
center operations. From 2010 through 2017 he served as a Senior Principal of Clareo Inc., a management consulting firm where he
was responsible for business development, client management and project delivery. From 2010 to present he serves as the founder
of Aspen Lane LLC, a strategic grow advisory firm. Mr. Wimer holds a BS in Chemical Engineering from Yale University and a Master
of Business Administration from Harvard University.
Jeffrey
Stegner has served as our Chief Financial Officer since our inception. Mr. Stegner has over 30 years of experience in the
finance industry. From July 1988 through August 2019, Mr. Stegner worked as a banker at Citigroup Inc., most recently as a Director
and Senior Credit Officer, where he was tasked with oversight of commercial loans and determining their risks. From January 1986
through July 1988, Mr. Stegner was a Banker, Account Executive for the Bank of Nova Scotia and between June 1978 and January 1986
he worked as a licensed engineer. Mr. Stegner holds a Master of Business Administration in Banking, Finance and Investments from
Hofstra University and a BS in Civil/Structural Engineering from New York University.
Daniel
Harley has served as our Executive Vice President, Business Development and a Director since our inception. Mr. Harley has
over 25 years of investment experience, having invested in private and public companies both domestically and internationally.
He currently serves as a managing member of our sponsor. From 2016 through 2018 he served as a Portfolio Manager at Narmo Capital
Management, a Saudi family office based out of Bahrain, where he was responsible for the concept, formation and launch of a global
event driven fund. From 2010 through 2016 he was the Founder, Principal and Portfolio Manager of Unqua Capital Management (and
its predecessor Bannon Alternative Strategies). Mr. Harley began his career as an associate investment banker at Ryan Beck &
Associates from 1991 through 1993 where he participated in a full range of investment banking and corporate services. From 1993
through 1998 he worked at Allen & Company Inc. as an OTC Market Maker trading in post-bankruptcy equities and warrants, and
then managed the company’s special situations fund. In 1999 he joined his brother, Mickey Harley, our Chief Executive Officer
to form HBV Alternative Strategies and its successor companies, where he helped grow assets from $5 million to a peak of over
$1.3 billion. Mr. Harley received a Master of Business Administration in Finance from St. Joseph’s University and a
BS in Biology from the University of Delaware. We believe Mr. Harley is well-qualified to serve as a member of the board due to
his business experience, as well as his contacts and relationships.
Brendan
Sheehan has served as our Executive Vice President, Corporate Strategy and Investor Relations and a Director since our inception.
Mr. Sheehan has over 25 years of experience in business development, sales and operations in the finance, technology and healthcare
industries. He currently serves as a managing member of our sponsor. Mr. Sheehan has an extensive network of family offices and
high net-worth individuals with whom he has raised funds for the cannabis industry. Since 2015 he has served as the founder of
Greenrose Associates, an executive recruiter for hedge funds and fintech firms as well as for companies in the cannabis industry.
Between 2010 and 2014 he served as a bond broker at Tullet Prebon (now part of TP ICAP plc) and prior to that served in similar
positions with leading firms such as Tradition Securities and Futures and GFI Group. Mr. Sheehan began his finance career as a
hedge fund analyst at Mellon HBV, specializing in distressed asset evaluations. Mr. Sheehan received a Master of Business Administration
from New York University and a BA from Yale University. We believe Mr. Sheehan is well-qualified to serve as a member of the board
due to his business experience, as well as his contacts and relationships.
Steven
Cummings has served as a member of our Board of Directors since October 2019. Since 2017 Mr. Cummings has served as the Vice
President of Business Development Munitions and Government of Day & Zimmermann, a privately held company in the fields of
construction, engineering, staffing and ammunition manufacture, operating out of 150 locations worldwide. From 2016 through
2017, Mr. Cummings was the President of Chemring Group US, and a member of its United States board of directors, and Chemring
Sensors and Electronic Systems. In this capacity, Mr. Cummings had profit and loss responsibility for Chemring’s wide range
of critical and lifesaving chemical, biological, and improvised explosive device (IED) detection systems. Beginning in 2015, Mr.
Cummings was the Chemring Group Vice President of Global Business Development and prior to that, Vice President of Business Development
for North America responsible for customer relations and growing the business. Prior to entering private industry, Mr. Cummings
had a distinguished 28-year career in the US Army retiring at the rank of Colonel. Mr. Cummings served in a number of significant
Army leadership positions including Project Manager Close Combat Systems at PEO Ammunition, where he was responsible for procurement
and management of more than 200 ammunition items and counter-IED equipment. He also personally led the training teams that were
fielding that equipment in Afghanistan in 2011. Mr. Cummings holds multiple educational degrees, including a BS from the US Military
Academy at West Point, a Master of Business Administration from Clemson University and a Master’s Degree in Strategic Studies
from the US Army War College. Mr. Cummings’ military awards include the Defense Superior Service Medal, two awards of the
Legion of Merit, the Bronze Star for service in Afghanistan, the Army Staff Identification Badge and Airborne wings. We believe
Mr. Cummings is well-qualified to serve as a member of the board due to his business experience serving in prominent leadership
roles in both the private and public sectors as well as his business contacts.
John
(Jack) Falcon has served as our Chairman since October 2019. He has over 40 years of experience working with manufacturing
and automotive industries and has helped turn around numerous underperforming companies. From 2014 to 2017 Mr. Falcon served as
the President & Chief Executive Officer of U.S. Manufacturing Corporation, a provider of critical axle components with approximately
$400M of revenue and 1,500 employees. During his time at U.S. Manufacturing, Mr. Falcon oversaw the reorganization of the company
and prepared it for a sale. From 2011 through 2017, Mr. Falcon has also served as the Chairman, President and Chief Executive
Officer of JAC Products Inc., a global leader of roof racking systems with approximately $400M of revenue and 1,250 employees.
At JAC Products Mr. Falcon took the company’s business from a deficit to achieving record margins and assisted in the sale
of the company in 2016. From 2009 through 2010, he served as the Chairman, President, Chief Operating Officer and Co-Founder of
Bannon Automotive, one of the world’s premiere sellers of electric cars. Mr. Falcon was instrumental in all aspects of technical
and operational activities, including the sale of the company to a large Indian multinational corporation. Mr. Falcon has served
on the board of directors of several public and private companies, including Huntingdon International Holdings and Shiloh Industries,
both of which are traded on Nasdaq and currently serves on the board of directors of Beacon and Bridges, a private company and
is a member of the operations group of Center Rock Capital Partners, LP, a private equity firm. Mr. Falcon earned his BA from
Muskingum College, where he majored in Communications and minored in Economics. We believe Mr. Falcon is well-qualified to serve
as a member of our board of directors due to his business experience as well as business contacts and relationships.
Thomas
Megale has served as a member of our Board of Directors since October 2019. He has over 30 years of experience as a Certified
Public Accountant. Since 1996, Mr. Megale has been the owner and managing member of TJ Megale CPA PLLC, where he has advised both
individuals and private companies on tax planning and compliance. From 1986 through 2006, Mr. Megale was a partner at the accounting
firm of Abbate + Megale, Certified Public Accountants, LLP. Mr. Megale received his BS from the School of Management of Boston
College and has been a Certified Public Accountant licensed in the State of New York since 1985. We believe Mr. Megale is well-qualified
to serve as a member of the board due to his accounting experience as well as his business contacts.
John
Torrance, III has served as a member of our Board of Directors since October 2019. He has over 20 years of experience in the
specialty chemical and alternative energy sectors. Since 2016, Mr. Torrance has been working for Element Solutions (formerly Platform
Specialty Products) a publicly held corporation serving the consumer electronics, automotive, graphic solutions & offshore
drilling industries with proprietary specialty chemicals and application expertise. Mr. Torrance is currently the Vice President
of Supply Chain of North & South America leading the integration of 5 legacy businesses with 12 plants in the US, Canada,
Mexico & Brazil. Prior to his role at Element Solutions, Mr. Torrance spent 15 years with increasing levels of responsibility
in Operations and Manufacturing for an alternative energy start-up Proton Onsite. He spent time designing, building and outfitting
the company’s turnkey global headquarters in Wallingford, CT while also developing the business processes and software systems
to support late stage commercialization of their patented Polymer Exchange Membrane (PEM) based technology. The company was founded
in 1996 and grew to the global leader in onsite hydrogen generation for commercial & industrial markets and oxygen generation
for military & aerospace applications. Mr. Torrance has a B.S. in Chemical Engineering from Bucknell University while also
studying abroad at the University of Nottingham. We believe Mr. Torrance is well-qualified to serve as a member of our board of
directors due to his business experience as well as business contacts and relationships.
Director
Independence
Our
board has determined that each of Steven Cummings, John Falcon, Thomas Megale and John Torrance is an “independent director”
under the Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings
at which only independent directors are present.
Any
affiliated transactions will be on terms no less favorable to us than could be obtained from independent parties. Our board of
directors will review and approve all affiliated transactions with any interested director abstaining from such review and approval.
Audit
Committee
Effective
February 13, 2020, we established an audit committee of the board of directors, in accordance with Section 3(a)(58)(A) of the
Exchange Act, which consists of Steven Cummings, John Falcon and John Torrance, each of whom is an independent director under
Nasdaq’s listing standards. The audit committee’s duties, which are specified in our Audit Committee Charter, include,
but are not limited to:
|
●
|
reviewing
and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board
whether the audited financial statements should be included in our Form 10-K;
|
|
●
|
discussing
with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation
of our financial statements;
|
|
●
|
discussing
with management major risk assessment and risk management policies;
|
|
●
|
monitoring
the independence of the independent auditor;
|
|
●
|
verifying
the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law;
|
|
●
|
reviewing
and approving all related-party transactions;
|
|
●
|
inquiring
and discussing with management our compliance with applicable laws and regulations;
|
|
●
|
pre-approving
all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of
the services to be performed;
|
|
●
|
appointing
or replacing the independent auditor;
|
|
●
|
determining
the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management
and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related
work;
|
|
●
|
establishing
procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls
or reports which raise material issues regarding our financial statements or accounting policies; and
|
|
●
|
approving
reimbursement of expenses incurred by our management team in identifying potential target businesses.
|
Financial
Experts on Audit Committee
The
audit committee will at all times be composed exclusively of “independent directors” who are “financially literate”
as defined under Nasdaq’s listing standards. In addition, we must certify to Nasdaq that the committee has, and will continue
to have, at least one member who has past employment experience in finance or accounting, requisite professional certification
in accounting, or other comparable experience or background that results in the individual’s financial sophistication. The
board of directors has determined that John Falcon qualifies as an “audit committee financial expert,” as defined
under rules and regulations of the SEC.
Nominating
Committee
Effective
February 13, 2020, we established a nominating committee of the board of directors, which consists Steven Cummings, John Falcon
and John Torrance, each of whom is an independent director under Nasdaq’s listing standards. The nominating committee is
responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating committee
considers persons identified by its members, management, shareholders, investment bankers and others.
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified in the Nominating Committee Charter, generally provide that persons to
be nominated:
|
●
|
should
have demonstrated notable or significant achievements in business, education or public service;
|
|
●
|
should
possess the requisite intelligence, education and experience to make a significant contribution to the board of directors
and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and
|
|
●
|
should
have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of
the shareholders.
|
The
Nominating Committee will consider a number of qualifications relating to management and leadership experience, background, and
integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating
committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that
arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse
mix of board members. The nominating committee does not distinguish among nominees recommended by shareholders and other persons.
There
have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.
Compensation
Committee
Effective
February 13, 2020, we established a compensation committee of the board of directors, which consists of John Falcon, John Torrance
and Thomas Megale, each of whom is an independent director under Nasdaq’s listing standards. The compensation committee’s
duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
|
●
|
reviewing
and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation,
evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving
the remuneration (if any) of our Chief Executive Officer based on such evaluation;
|
|
●
|
reviewing
and approving the compensation of all of our other executive officers;
|
|
●
|
reviewing
our executive compensation policies and plans;
|
|
●
|
implementing
and administering our incentive compensation equity-based remuneration plans;
|
|
●
|
assisting
management in complying with our proxy statement and annual report disclosure requirements;
|
|
●
|
approving
all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive
officers and employees;
|
|
●
|
if
required, producing a report on executive compensation to be included in our annual proxy statement; and
|
|
●
|
reviewing,
evaluating, and recommending changes, if appropriate, to the remuneration for directors.
|
Code
of Ethics
Effective
February 13, 2020, we adopted a code of ethics that applies to all of our executive officers, directors, and employees. The code
of ethics codifies the business and ethical principles that govern all aspects of our business.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our officers, directors, and persons who own more than ten percent of a registered class of
our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers,
directors, and ten percent stockholders are required by regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on copies of such forms received or written representations from certain reporting persons that no Form 5s were required
for those persons, we believe that, during the fiscal year ended December 31, 2020, all filing requirements applicable to our
officers, directors, and greater than ten percent beneficial owners were complied with.
ITEM
11. EXECUTIVE COMPENSATION
Executive
Compensation
No
executive officer has received any cash compensation for services rendered to us. Until consummation of an initial business combination,
we will pay our Sponsor, an aggregate fee of $10,000 per month for providing us with office space and certain office and secretarial
services. However, this arrangement is solely for our benefit and is not intended to provide any of our officers or directors
with compensation in lieu of a salary. We may also pay consulting, success or finder fees to our sponsor, officers, directors,
initial stockholders or their affiliates in connection with the consummation of our initial business combination. They will also
receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying
potential target businesses, performing business due diligence on suitable target businesses and business combinations, as well
as traveling to and from the offices, plants, or similar locations of prospective target businesses to examine their operations.
There is no limit on the amount of out-of-pocket expenses reimbursable by us.
After
our initial business combination, members of our management team who remain with us may be paid consulting, management, or other
fees from the combined company with any and all amounts being fully disclosed to shareholders, to the extent then known, in the
proxy solicitation materials furnished to our shareholders. The amount of such compensation may not be known at the time of a
shareholder meeting held to consider an initial business combination, as it will be up to the directors of the post-combination
business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the
time of its determination in a Current Report on Form 8-K, as required by the SEC.
Since
our formation, we have not granted any stock options or stock appreciation rights or any other awards under long-term incentive
plans to any of our executive officers or directors.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The
following table sets forth information regarding the beneficial ownership of our common stock by:
|
●
|
each
person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
|
|
●
|
each
of our officers and directors; and
|
|
●
|
all
of our officers and directors as a group.
|
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them. The following table does not reflect record of beneficial ownership of the
warrants included in the units offered in the IPO or the Private Units or Private Warrants as the warrants are not exercisable
within 60 days of the date hereof.
Name and Address of Beneficial Owner (1)
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
|
Approximate
Percentage of
Outstanding
Shares
|
|
|
|
|
|
|
|
|
William F. Harley III
|
|
|
0
|
(2)
|
|
|
0
|
|
Daniel Harley
|
|
|
0
|
(2)
|
|
|
0
|
|
Brendan Sheehan
|
|
|
0
|
(2)
|
|
|
0
|
|
Paul Wimer
|
|
|
0
|
(3)
|
|
|
0
|
|
Jeffrey Stegner
|
|
|
0
|
(3)
|
|
|
0
|
|
Steven Cummings
|
|
|
0
|
(3)
|
|
|
0
|
|
Thomas Megale
|
|
|
0
|
|
|
|
0
|
|
John Falcon
|
|
|
0
|
(3)
|
|
|
0
|
|
John Torrance, III
|
|
|
0
|
(3)
|
|
|
0
|
|
Greenrose Associates LLC
|
|
|
4,532,500
|
(4)
|
|
|
20.7
|
|
All directors and executive officers as a group (nine individuals)
|
|
|
4,532,500
|
|
|
|
20.7
|
%
|
|
(1)
|
Unless
otherwise indicated, the business address of each of the individuals is 111 Broadway, Amityville, NY 11701.
|
|
(2)
|
Does
not include any securities held by Greenrose Associates LLC, of which each person is a manager and member. Under the so-called
“rule of three”, if voting and dispositive decisions regarding an entity’s securities are made by three or more
individuals, and a voting or dispositive decision requires the approval of a majority of those individuals, then none of the individuals
is deemed a beneficial owner of the entity’s securities. Based on the foregoing, no individual of the committee exercises
voting or dipositive control over any of the securities held by such entity, even those in which he directly owns a pecuniary
interest. Accordingly, none of them will be deemed to have or share beneficial ownership of such shares. Each such person disclaims
beneficial ownership of the reported shares other than to the extent of his ultimate pecuniary interest therein.
|
|
(3)
|
Does
not include any securities held by Greenrose Associates LLC, of which each person is directly or indirectly a member. Each such
person disclaims beneficial ownership of the reported shares other than to the extent of his ultimate pecuniary interest therein.
|
|
(4)
|
Does
not include securities issuable upon exercise of Notes in the principal amount of $2,000,000, which may be converted into units
at a price of $10.00 per unit and/or warrants at a price of $1.00 per warrant.
|
All
of the Founder’s Shares outstanding prior to the IPO have been placed in escrow with Continental Stock Transfer & Trust
Company, as escrow agent, until (i) with respect to 50% of such shares, the earlier of one year after the date of the consummation
of our initial business combination and the date on which the closing price of our common stock equals or exceeds $12.50 per share
(as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading
day period commencing after our initial business combination and (ii) with respect to the remaining 50% of such shares, one year
after the date of the consummation of our initial business combination, or earlier if, subsequent to our initial business combination,
we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having
the right to exchange their shares of common stock for cash, securities or other property.
During
the escrow period, the holders of these shares will not be able to sell or transfer their securities except for transfers, assignments
or sales (i) among our initial stockholders or to our initial stockholders’ members, officers, directors, consultants or
their affiliates, (ii) to a holder’s stockholders or members upon its liquidation, (iii) by bona fide gift to a member of
the holder’s immediate family or to a trust, the beneficiary of which is the holder or a member of the holder’s immediate
family, for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified
domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial business
combination, or (vii) in connection with the consummation of a business combination at prices no greater than the price at which
the shares were originally purchased, in each case (except for clause (vi) or with our prior consent) where the transferee agrees
to the terms of the escrow agreement and to be bound by these transfer restrictions, but will retain all other rights as our stockholders,
including, without limitation, the right to vote their shares of common stock and the right to receive cash dividends, if declared.
If dividends are declared and payable in shares of common stock, such dividends will also be placed in escrow. If we are unable
to effect a business combination and liquidate, there will be no liquidation distribution with respect to the Founder’s
Shares.
Our
executive officers and Sponsor are our “promoters,” as that term is defined under the federal securities laws.
Equity
Compensation Plans
As
of December 31, 2020, we had no compensation plans (including individual compensation arrangements) under which equity securities
of the registrant were authorized for issuance.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
In
August 2019, we issued an aggregate of 4,312,500 shares of our common stock (the “Founder’s Shares”) for an
aggregate purchase price of $25,000, or approximately $0.006 per share, to our sponsor, Greenrose Associates LLC, a New York limited
liability company (“Sponsor”).
On
February 13, 2020, we consummated our initial public offering (the “IPO”) of 15,000,000 of our units (the “Public
Units”). Each Public Unit consists of one share of common stock and one redeemable warrant, with each warrant entitling
the holder to purchase one share of common stock at a price of $11.50 per share. The Public Units were sold at an offering price
of $10.00 per Public Unit, generating gross proceeds of $150,000,000.
Simultaneously
with the consummation of the IPO, we consummated the private placement (“Private Placement”) of 300,000 units (the
“Private Units”) at a price of $10.00 per Private Unit and 1,500,000 warrants (the “Private Warrants”)
at a price of $1.00 per Private Warrant, generating total proceeds of $4,500,000. The Private Units and Private Warrants were
sold to the Sponsor and Imperial Capital, LLC. The Private Units and Private Warrants are identical to the Public Units and warrants
sold in the IPO, except that the Private Warrants and the warrants underlying the Private Units are non-redeemable and may be
exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees.
On
February 14, 2020, we consummated the sale of an additional 2,250,000 Public Units that were subject to the underwriters’
over-allotment option at $10.00 per Public Unit, generating gross proceeds of $22,500,000. Simultaneously with the closing of
the sale of the additional Public Units, we consummated the sale of an additional 30,000 Private Units at $10.00 per Private Unit
and 150,000 Private Warrants, at a price of $1.00 per Private Warrant, generating total proceeds of $450,000. Following the closing
of the over-allotment option and sale of additional Private Units and Private Warrants, an aggregate amount of $172,500,000 has
been placed in the trust account established in connection with the IPO.
In
order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Insiders,
or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required.
If we complete our initial Business Combination, we would repay such loaned amounts. In the event that our initial Business Combination
does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no
proceeds from our Trust Account would be used for such repayment. Up to $2,000,000 of notes may be convertible into Private Units,
at a price of $10.00 per Private Unit, and/or Private Warrants, at a price of $1.00 per Private Warrant. The units and warrants
would be identical to the Private Units and Private Warrants sold in the Private Placement. On March 26, 2020, we issued 2020
Note in the principal amount of $1,000,000 to the Sponsor. The 2020 Note is non-interest bearing and payable upon the consummation
of a Business Combination. The 2020 Note may be converted into units at a price of $10.00 per unit and/or warrants at a price
of $1.00 per warrant. The units would be identical to the Private Units and the warrants would be identical to the Private Warrants.
On January 29, 2021, we issued the 2021 Note in the principal amount of $1,000,000 to the Sponsor. The 2021 Note is non-interest
bearing and payable upon the consummation of a Business Combination. The 2021 Note may be converted into units at a price of $10.00
per unit and/or warrants at a price of $1.00 per warrant. The units would be identical to the Private Units and the warrants would
be identical to the Private Warrants.
The
holders of our founders’ shares, as well as the holders of the Private Units, Private Warrants and any units our Sponsor,
initial stockholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us (and
all underlying securities), are entitled to registration rights pursuant to an agreement signed in connection with the IPO. The
holders of a majority of these securities are entitled to make up to two demands that we register such securities. The holders
of the majority of the founders’ shares can elect to exercise these registration rights at any time commencing three months
prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the private
units and units issued in payment of working capital loans made to us (or underlying securities) can elect to exercise these registration
rights at any time after we consummate a business combination. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We
will bear the expenses incurred in connection with the filing of any such registration statements.
Our
Sponsor has agreed that, until the earlier of our consummation of our initial business combination or our liquidation, it will
make available to us certain general and administrative services, including office space, utilities and administrative support,
as we may require from time to time. We have agreed to pay our Sponsor $10,000 per month for these services. We believe, based
on rents and fees for similar services in the New York metropolitan area, that the fee charged by our Sponsor is at least as favorable
as we could have obtained from an unaffiliated person.
Related
Party Policy
Our
Code of Ethics, which we adopted upon consummation of the IPO, requires us to avoid, wherever possible, all related party transactions
that could result in actual or potential conflicts of interests, except under guidelines approved by the board of directors (or
the audit committee). Related-party transactions are defined as transactions in which (1) the aggregate amount involved will or
may be expected to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant, and (3) any (a) executive
officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our shares of common stock, or
(c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material
interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict
of interest situation can arise when a person takes actions or has interests that may make it difficult to perform his or her
work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her family, receives
improper personal benefits as a result of his or her position.
We
also require each of our directors and executive officers to annually complete a directors’ and officers’ questionnaire
that elicits information about related party transactions.
Our
audit committee, pursuant to its written charter, is responsible for reviewing and approving related-party transactions to the
extent we enter into such transactions. All ongoing and future transactions between us and any of our officers and directors or
their respective affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated
third parties. Such transactions will require prior approval by our audit committee and a majority of our uninterested “independent”
directors, or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense,
to our attorneys or independent legal counsel. We will not enter into any such transaction unless our audit committee and a majority
of our disinterested “independent” directors determine that the terms of such transaction are no less favorable to
us than those that would be available to us with respect to such a transaction from unaffiliated third parties. Additionally,
we require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that
elicits information about related party transactions.
These
procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents
a conflict of interest on the part of a director, employee or officer.
Director
Independence
Nasdaq
rules require that a majority of the board of directors of a company listed on Nasdaq must be composed of “independent directors.”
An “independent director” is defined generally as a person other than an officer or employee of the company or its
subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would
interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. We have
determined that John Falcon, Steen Cummings, John Torrance, III and Thomas Megale are independent directors under the Nasdaq rules
and Rule 10A-3 of the Exchange Act. Our independent directors have regularly scheduled meetings at which only independent directors
are present.
Item
14. Principal Accountant Fees and Services.
The
following is a summary of fees paid or to be paid to Marcum LLP, or Marcum, for services rendered.
Audit
Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements
and services that are normally provided by Marcum in connection with regulatory filings. The aggregate fees billed by Marcum for
professional services rendered for the audit of our annual financial statements, review of the financial information included
in our Forms 10-Q for the respective periods and other required filings with the SEC for the year ended December 31, 2020 and
for the period from August 26, 2019 (inception) through December 31, 2019 totaled $53,045 and $36,807, respectively. The above
amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related
Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance
of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include
attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting
standards. We did not pay Marcum for consultations concerning financial accounting and reporting standards for the year ended
December 31, 2020 and for the period from August 26, 2019 (inception) through December 31, 2019.
Tax
Fees. We did not pay Marcum for tax planning and tax advice for the year ended December 31, 2020 and for the period from August
26, 2019 (inception) through December 31, 2019.
All
Other Fees. We did not pay Marcum for other services for the year ended December 31, 2020 and for the period from August 26,
2019 (inception) through December 31, 2019.
Pre-Approval
Policy
Our
audit committee was formed upon the consummation of our Initial Public Offering. As a result, the audit committee did not pre-approve
all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our
board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will
pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees
and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved
by the audit committee prior to the completion of the audit).
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Greenrose
Acquisition Corp. (the “Company”) was incorporated in Delaware on August 26, 2019. The Company was formed for the
purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar
business combination with one or more businesses or entities (the “Business Combination”).
Although
the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company
intends to focus its search on companies in the cannabis industry. The Company is an early stage and emerging growth company and,
as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As
of December 31, 2020, the Company had not commenced any operations. All activity through December 31, 2020 relates to the Company’s
formation, the initial public offering (“Initial Public Offering”), which is described below, and identifying a target
company or companies for a Business Combination. The Company will not generate any operating revenues until after the completion
of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the
proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on February 10, 2020. On February
13, 2020, the Company consummated the Initial Public Offering of 15,000,000 units (the “Units” and, with respect to
the shares of common stock included in the Units sold, the “Public Shares”), generating gross proceeds of $150,000,000,
which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 300,000 units (the “Private Units”)
and 1,500,000 warrants (the “Private Warrants” and, together with the Private Units, the “Private Securities”)
at a price of $10.00 per Private Unit and $1.00 per Private Warrant in a private placement to Greenrose Associates LLC (the “Sponsor”)
and Imperial Capital, LLC (“Imperial”), generating gross proceeds of $4,500,000, which is described in Note 4.
Following
the closing of the Initial Public Offering on February 13, 2020, an amount of $150,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering and the sale of the Private Securities was placed in a trust account (the
“Trust Account”) located in the United States, which will be only invested in U.S. government securities, within the
meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”),
with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund
selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until
the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the funds in the Trust Account to
the Company’s stockholders, as described below.
On
February 14, 2020, the underwriters notified the Company of their intention to exercise their over-allotment option in full. As
such, on February 14, 2020, the Company consummated the sale of an additional 2,250,000 Units, at $10.00 per Unit, and the sale
of an additional 30,000 Private Units, at $10.00 per Private Unit, and 150,000 Private Warrants, at $1.00 per Private Warrant,
generating total gross proceeds of $22,950,000. A total of $22,500,000 of the net proceeds was deposited into the Trust Account,
bringing the aggregate proceeds held in the Trust Account to $172,500,000.
Transaction
costs amounted to $4,419,274 consisting of $3,450,000 of underwriting fees and $969,274 of other offering costs.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and the sale of the Private Securities, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination
successfully. The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets
held in the Trust Account (excluding taxes payable on income earned on the Trust Account) at the time of the agreement to enter
into an initial Business Combination. The Company will only complete a 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.
The
Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity
to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with
a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether
the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely
in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount
then in the Trust Account ($10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and
not previously released to the Company to pay its franchise and income tax obligations. There will be no redemption rights upon
the completion of a Business Combination with respect to the Company’s warrants.
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation
of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of
the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote
for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the
“Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of
the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain
stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection
with a Business Combination, the Company’s Sponsor and Imperial have agreed to vote their Founder’s Shares (as defined
in Note 5), Private Shares (as defined in Note 4), and any Public Shares purchased during or after the Initial Public Offering
in favor of approving a Business Combination and not to convert any shares in connection with a stockholder vote to approve a
Business Combination or sell any shares to the Company in a tender offer in connection with a Business Combination. Additionally,
each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed
transaction or don’t vote at all.
The
Sponsor and Imperial have agreed (a) to waive their redemption rights with respect to their Founder’s Shares, Private Shares
and Public Shares held by it in connection with the completion of a Business Combination, (b) to waive their rights to liquidating
distributions from the Trust Account with respect to the Founder’s Shares and Private Shares if the Company fails to consummate
a Business Combination, and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would
affect a public stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination
or affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not
complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public
Shares in conjunction with any such amendment.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Company will have until August 13, 2021 (subject to its right to extend the period of time to consummate a Business Combination
for up to an additional three months if the Sponsor agrees to deposit $569,250 in the Trust Account for each one month extension)
to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the
Trust Account and not previously released to the Company to pay franchise and income taxes, divided by the number of then outstanding
Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right
to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board
of directors, dissolve and liquidate, subject (in each case of (ii) and (iii) above) to the Company’s obligations under
Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights
or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails
to complete a Business Combination within the Combination Period.
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent
any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which
the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below $10.00
per Public Share, except as to any claims by a third party who executed a valid and enforceable agreement with the Company waiving
any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account and except as to any
claims under the Company’s indemnity of the underwriters of Initial Public Offering against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed
waiver is deemed to be unenforceable against a third party, none of the Company’s officers or directors, the Sponsor, Imperial
or their respective officers, directors, shareholder or members (collectively, the “Insiders”) will be responsible
to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Insiders
will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right,
title, interest or claim of any kind in or to monies held in the Trust Account.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company,
the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Liquidity
As
of December 31, 2020, the Company had $309,849 in its operating bank accounts, $173,656,603 in marketable securities held in the
Trust Account to be used for a Business Combination or to repurchase or redeem stock in connection therewith and working capital
of $172,401, which excludes franchise taxes payable of $187,500, of which such amount will be paid from interest earned on the
Trust Account and $29,955 of franchise taxes paid and not yet reimbursed from the trust. As of December 31, 2020, approximately
$1,156,603 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s
tax obligations.
The
Company may raise additional capital through loans or additional investments from the Sponsor or its stockholders, officers, directors,
or third parties. The Company’s officers and directors and the Sponsor may, but are not obligated to (except as described
above), loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the
Company’s working capital needs. Based on the foregoing, the Company believes it will have sufficient cash to meet its needs
through the earlier of consummation of a Business Combination or August 13, 2021, the deadline to complete a Business Combination
pursuant to the Company’s Amended and Restated Certificate of Incorporation (unless otherwise amended by stockholders).
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging
Growth Company
The
Company is 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 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to,
not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of
the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements,
and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval
of any golden parachute payments not previously approved.
Further,
Section 102(b)(l) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
financial statements with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use
of Estimates
The
preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of December 31, 2020 and 2019.
Marketable
Securities Held in Trust Account
At
December 31, 2020, substantially all of the assets held in the Trust Account were held in money market funds which invest U.S.
Treasury securities.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Common
Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption
is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common
stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are
considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common
stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheets.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more
likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for
interest and penalties as of December 31, 2020 and 2019. The Company is currently not aware of any issues under review that could
result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations
by major taxing authorities since inception.
On
March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The
CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit
for certain net operating losses (“NOL) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five
prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum
tax credits, generally loosen the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other
technical corrections included in the Tax Cuts and JOBS Act tax provisions. The enactment of the CARES Act did not have a material
impact on the Company’s income tax accounts or profile.
Net Income (Loss) per Common Share
Net income (loss) per share is
computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, excluding
shares of common stock subject to forfeiture. At December 31, 2019, weighted average shares were reduced for the effect of
an aggregate of 562,500 shares of common stock that were subject to forfeiture if the over-allotment option was not exercised by
the underwriters (see Note 5). The Company has not considered the effect of the warrants sold in the Initial Public Offering and
private placement to purchase an aggregate of 19,230,000 shares in the calculation of diluted loss per share, since the exercise
of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s statement
of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar
to the two-class method of income (loss) per share. Net income (loss) per common share, basic and diluted, for Common stock subject
to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the
Trust Account, net of applicable franchise and income taxes, by the weighted average number of Common stock subject to possible
redemption outstanding since original issuance.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Net loss per share, basic and
diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable
securities attributable to Common stock subject to possible redemption, by the weighted average number of non-redeemable common
stock outstanding for the period.
Non-redeemable common stock includes
Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features. Non-redeemable common
stock participates in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.
The following table reflects the
calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
|
Year Ended
December 31,
|
|
|
For the
Period from
August 26,
2019
(Inception)
Through
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
Numerator: Earnings allocable to Common stock subject to possible redemption
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
$
|
1,117,741
|
|
|
$
|
—
|
|
Less: interest available to be withdrawn for payment of taxes
|
|
|
(210,148
|
)
|
|
|
—
|
|
Net income
|
|
$
|
907,593
|
|
|
$
|
—
|
|
Denominator: Weighted Average Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
16,763,781
|
|
|
|
—
|
|
Basic and diluted net income per share, Common stock subject to possible redemption
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
Numerator: Net Loss minus Net Earnings
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(441,978
|
)
|
|
$
|
(2,199
|
)
|
Less: Income attributable to Common stock subject to possible redemption
|
|
|
(907,593
|
)
|
|
|
—
|
|
Non-redeemable net loss
|
|
$
|
(1,349,571
|
)
|
|
$
|
(2,199
|
)
|
Denominator: Weighted Average Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common Stock
|
|
|
5,030,595
|
|
|
|
3,750,000
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share, Common Stock
|
|
$
|
(0.27
|
)
|
|
$
|
(0.00
|
)
|
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal Depository Insurance Coverage limit of $250,000. The Company has not experienced losses
on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair
Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their
short-term nature.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s financial statements.
NOTE
3 — PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 17,250,000 Units, which includes a full exercise by the underwriters of their
over-allotment option in the amount of 2,250,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of common
stock and one warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share of common
stock at a price of $11.50 per share, subject to adjustment (see Note 7).
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
4 — PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor and Imperial purchased an aggregate of 300,000 Private Units at a
price of $10.00 per Private Unit and 1,500,000 Private Warrants at a price of $1.00 per Private Warrant, for an aggregate
purchase price of $4,500,000. The Sponsor purchased 200,000 Private Units and 1,000,000 Private Warrants and Imperial purchased
100,000 Private Units and 500,000 Private Warrants. As a result of the underwriters’ election to fully exercise their over-allotment
option on February 14, 2020, the Sponsor and Imperial purchased an additional 30,000 Private Units, at a purchase price of $10.00
per Private Unit, and 150,000 Private Warrants, at a purchase price of $1.00 per Private Warrant, for an aggregate purchase price
of $450,000. Each Private Unit consists of one share of common stock (“Private Share”) and one warrant. Each Private
Warrant is exercisable to purchase one share of common stock at an exercise price of $11.50 per share, subject to adjustment
(see Note 7). The proceeds from the Private Securities were added to the proceeds from the Initial Public Offering held in the
Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale
of the Private Securities will be used to fund the redemption of the Public Shares (subject to the requirements of applicable
law), and the Private Shares will expire worthless.
NOTE
5 — RELATED PARTY TRANSACTIONS
Founder’s
Shares
In
August 2019, the Sponsor purchased 4,312,500 shares (the “Founder’s Shares”) of the Company’s common stock
for an aggregate price of $25,000. The Founder’s Shares included an aggregate of up to 562,500 shares subject to forfeiture
by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Sponsor
would collectively own 20% of the Company’s issued and outstanding shares after the Initial Public Offering (excluding the
Private Shares underlying the Private Securities). On February 14, 2020, as a result of the underwriters’ election to fully
exercise their over-allotment option, 562,500 Founder’s Shares are no longer subject to forfeiture.
The
Sponsor has agreed that, subject to certain limited exceptions, it will not transfer, assign or sell any of the Founder’s
Shares until (i) with respect to 50% of the Founder’s Shares, for a period ending on the earlier of the one-year anniversary
of the date of the consummation of the Business Combination and the date on which the closing price of the Company’s common
stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations)
for any 20 trading days within a 30-trading day period following the consummation of the Business Combination and (ii) with respect
to the remaining 50% of the Founder’s Shares, for a period ending on the one-year anniversary of the date of the consummation
of the Business Combination, or earlier if, subsequent to the Business Combination, the Company consummates a liquidation, merger,
stock exchange or other similar transaction which results in all of its stockholders having the right to exchange their shares
of common stock for cash, securities or other property. The limited exceptions include transfers, assignments or sales (i) to
the Company’s or Sponsor’s officers, directors, consultants or their affiliates, (ii) to an entity’s members
upon its liquidation, (iii) to relatives and trusts for estate planning purposes, (iv) by virtue of the laws of descent and distribution
upon death, (v) pursuant to a qualified domestic relations order, (vi) to the Company for no value for cancellation in connection
with the consummation of a Business Combination, or (vii) in connection with the consummation of a Business Combination at prices
no greater than the price at which the shares were originally purchased, in each case (except for clause (vi) or with the Company’s
prior consent) where the transferee agrees to the terms of the escrow agreement and to be bound by these transfer restrictions.
In
addition, the Sponsor has agreed not to sell, transfer, pledge, hypothecate or otherwise dispose of all or any part of the Founder’s
Shares unless, prior to (a) a registration statement on the appropriate form under the Securities Act and applicable state securities
laws with respect to the Founder’s Shares proposed to be transferred shall then be effective or (b) the Company has received
an opinion from counsel reasonably satisfactory to the Company, that such registration is not required because such transaction
is exempt from registration under the Securities Act and the rules promulgated by the SEC thereunder and with all applicable state
securities laws.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Advances
— Related Party
During
the year ended December 31, 2019, the Sponsor advanced an aggregate of $631,366 on the Company’s behalf to cover certain
expenses (the “Advances”). An additional $164,753 was advanced as of February 2020. The Advances were non-interest
bearing and due on demand. Total advances of $796,119 were repaid on March 9, 2020.
Related
Party Loans
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, or certain of the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out
of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of
funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $2,000,000 of the Working Capital Loans
may be convertible into units at a price of $10.00 per unit and/or warrants at a price of $1.00 per warrant. The units would be
identical to the Private Units and the warrants would be identical to the Private Warrants.
On
March 26, 2020, the Company issued an unsecured promissory note (the “Note”) in the principal amount of $1,000,000
to the Sponsor. The Note is non-interest bearing and payable upon the consummation of a Business Combination. Up to $1,000,000
of such loans may be convertible into units at a price of $10.00 per unit and/or warrants at a price of $1.00 per warrant. The
units would be identical to the Private Units and the warrants would be identical to the Private Warrants.
Administrative
Support Agreement
The
Company entered into an agreement whereby, commencing on the February 10, 2020, through the earlier of the Company’s consummation
of a Business Combination and its liquidation, the Company will pay the Sponsor a total of $10,000 per month for office space,
utilities and secretarial and administrative support. For the year ended December 31, 2020, the Company incurred and paid $110,000
in fees for these services.
NOTE
6 — COMMITMENTS
Registration
Rights
Pursuant
to a registration rights agreement entered into on February 11, 2020, the holders of the Founder’s Shares, Private Units,
Private Warrants, and any units or warrants that may be issued upon conversion of Working Capital Loans (and all underlying securities)
are entitled to registration rights. The holders of the majority of these securities are entitled to make up to two demands that
the Company register such securities. The holders of the majority of the Founder’s Shares can elect to exercise these registration
rights at any time commencing three months prior to the date on which the Founder’s Shares are to be released from escrow.
The holders of a majority of the Private Units or units issued in payment of Working Capital Loans made to the Company (or underlying
securities) can elect to exercise these registration rights at any time commencing after the Company consummates a Business Combination.
Notwithstanding anything to the contrary, Imperial may only make a demand on one occasion and only during the five-year period
beginning on the effective date of the Initial Public Offering. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination; provided,
however, that Imperial may participate in a “piggy-back” registration only during the seven-year period beginning
on the effective date of the Initial Public Offering. The Company will bear the expenses incurred in connection with the filing
of any such registration statements.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Underwriting
Agreement
The
Initial Public Offering underwriting agreement provides that in the event the Company completes a financing transaction similar
to the Initial Public Offering or Business Combination, or enters into a statement or letter of intent that results in such a
transaction, within 18 months following its termination, Imperial shall be entitled to receive any expense reimbursement due to
it along with payment in full of its applicable fee of either (i) 2% of the gross proceeds of the offering, of which 1% will be
in cash and 1% will be in equity of the Company for a financing transaction, or (ii) an amount equal to 5% of the face amount
of any equity securities and 3% of the face amount of any debt sold or arranged as part of the Business Combination (exclusive
of any applicable finders’ fees which might become payable). Additionally, Imperial has the right to act as a book-runner
and managing underwriter for all underwritten follow-on offerings for 18 months following completion of the Initial Public Offering
and the right to approve any co-lead managing underwriter or co-book runner.
Business
Combination Marketing Agreement
The
Company has engaged Imperial as an advisor in connection with a Business Combination to assist the Company in holding meetings
with its shareholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company
to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination,
assist the Company in obtaining shareholder approval for the Business Combination and assist the Company with its press releases
and public filings in connection with the Business Combination. The Company will pay Imperial a cash fee for such services upon
the consummation of a Business Combination in an amount equal to 4.5% of the gross proceeds of Initial Public Offering, or $7,762,500
(exclusive of any applicable finders’ fees which might become payable); provided that up to 20% of the fee may be allocated
at the Company’s sole discretion to other FINRA members that assist the Company in identifying and consummating a Business
Combination.
Additionally,
the Company has agreed to pay Imperial a cash fee for assisting it in obtaining financing for the Business Combination in an amount
equal to 5% of the face amount of any equity securities and 3% of the face amount of any debt sold or arranged as part of the
Business Combination (exclusive of any applicable finders’ fees which might become payable).
NOTE
7 — STOCKHOLDERS’ EQUITY
Preferred
Stock — On February 10, 2020, the Company amended its certificate of incorporation such that the Company is authorized
to issue up to 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences
as may be determined from time to time by the Company’s board of directors. At December 31, 2020 and 2019, there were no
shares of preferred stock issued or outstanding.
Common
Stock — On February 10, 2020, the Company amended its certificate of incorporation such that the Company is authorized
to issue up to 70,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the common stock are entitled
to one vote for each share. At December 31, 2020 and 2019, there were 5,222,105 and 4,312,500 shares of common stock issued and
outstanding, excluding 16,670,395 and no shares of common stock subject to possible redemption, respectively.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Warrants
— The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
or (b) 12 months from the closing of the Initial Public Offering. No warrants will be exercisable for cash unless the Company
has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants
and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering
the shares of common stock issuable upon exercise of the public warrants is not effective within a specified period following
the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on
a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is
available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a
cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation.
Once
the warrants become exercisable, the Company may redeem the Public Warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
upon
not less than 30 days’ prior written notice of redemption;
|
|
●
|
if,
and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading
days within a 30-trading day period ending on the third business day prior to the notice of redemption to the warrant holders;
and
|
|
●
|
if,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the warrants.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The
Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the
Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable
or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private
Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they
are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the
initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such
holders on the same basis as the Public Warrants.
The
exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances
including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants
will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company
be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination
Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds
with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust
Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
In
addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes
in connection with the closing of an initial Business Combination at an issue price or effective issue price of less than $9.50
per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s
board of directors, and in the case of any such issuance to the Sponsor, initial stockholders or their affiliates, without taking
into account any Founder Shares held by them prior to such issuance), (y) the aggregate gross proceeds from such issuances represent
more than 60% of the total equity proceeds, and interest thereon, available for the funding of an initial Business Combination
on the date of the consummation of an initial Business Combination (net of redemptions), and (z) the volume weighted average trading
price of the common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates
an initial Business Combination (such price, the “Market Value”) is below $9.50 per share, the exercise price of the
warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at
which the Company issues the additional shares of common stock or equity-linked securities.
NOTE
8 — INCOME TAX
The
Company’s net deferred tax assets at December 31, 2020 and 2019 as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred tax assets
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
96,417
|
|
|
$
|
462
|
|
Total deferred tax assets
|
|
|
96,417
|
|
|
|
462
|
|
Valuation allowance
|
|
|
(96,417
|
)
|
|
|
(462
|
)
|
Deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The
income tax provision for the year ended December 31, 2020 and for the period from August 26, 2019 (inception) through December
31, 2019 consists of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Federal
|
|
|
|
|
|
|
Current
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred
|
|
|
(91,955
|
)
|
|
|
(462
|
)
|
|
|
|
|
|
|
|
|
|
State and Local
|
|
|
|
|
|
|
|
|
Current
|
|
|
—
|
|
|
|
—
|
|
Deferred
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
91,955
|
|
|
|
462
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
—
|
|
|
$
|
—
|
|
As
of December 31, 2020 and 2019, the Company had $440,083 and $2,199, respectively of U.S. federal net operating loss carryovers
available to offset future taxable income. The net operating loss carryovers are subject to an indefinite period of utilization.
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
In
assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion
of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which temporary differences representing net future deductible amounts
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and
tax planning strategies in making this assessment. After consideration of all of the information available, management believes
that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established
a full valuation allowance. For the year ended December 31, 2020, the change in the valuation allowance was $91,955.
A
reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2020 and 2019 is as follows:
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
State taxes, net of federal tax benefit
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Meals
|
|
|
(0.2
|
)%
|
|
|
0.0
|
%
|
Valuation allowance
|
|
|
(20.8
|
)%
|
|
|
(21.0
|
)%
|
Income tax provision
|
|
|
0.0
|
%
|
|
|
21.0
|
%
|
The
Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities.
The Company’s tax returns for the year ended December 31, 2020 and 2019 remain open and subject to examination. The Company
considers New York to be a significant state tax jurisdiction.
NOTE
9 — FAIR VALUE MEASUREMENTS
The
Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value
at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets
and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and
to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
|
|
|
|
|
Level 2:
|
Observable inputs
other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable inputs
based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
GREENROSE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair
value:
Description
|
|
Level
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
$
|
173,656,603
|
|
NOTE
10 — SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial
statements were issued. Based upon this review, the Company identified the following subsequent events that would have required
adjustment or disclosure in the financial statements.
On
January 29, 2021, the Company issued an unsecured promissory note (the “Note”) in the principal amount of $1,000,000
to the Sponsor. The Note is non-interest bearing and payable upon the consummation of a Business Combination. Up to $1,000,000
of such loans may be convertible into units at a price of $10.00 per unit and/or warrants at a price of $1.00 per warrant. The
units would be identical to the Private Units and the warrants would be identical to the Private Warrants.
F-19