ITEM 1. BUSINESS
General
We are a blank check company formed under the
laws of the State of Delaware on February 11, 2020. We were formed for the purpose of entering into a merger, share exchange, asset acquisition,
stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which
we refer to as a “target business.” Throughout this Annual Report on Form 10-K we will refer to this as our initial business
combination.
In February 2020, we issued an aggregate of 5,750,000
shares of our common stock, which we refer to in this Annual Report on Form 10-K as “founders’ shares,” for an aggregate
purchase price of $25,000, or approximately $0.004 per share, to our initial stockholders.
In February 2020, we also issued to designees
of EarlyBirdCapital, Inc. (“EarlyBirdCapital”) an aggregate of 200,000 shares of common stock, which we refer to in this
Form 10-K as “representative shares,” at a price of $0.0001 per share.
In July 2020, we closed our initial public offering
for the sale of an aggregate of 22,977,568 units at a price of $10.00 per unit, generating gross proceeds of $229,775,680. Simultaneously
with the consummation of the initial public offering, the company consummated the private placement of 594,551 private units at a price
of $10.00 per private unit, generating total proceeds of $5,945,513, to the company’s initial stockholders and EarlyBirdCapital,
the sole book-running manager of our initial public offering. A total of $229,775,680 of the net proceeds of the sale of the units in
our initial public offering and the sale of the private units was placed in a trust account (the “trust account”) located
in the United States.
Proposed Business Combination with FF Intelligent
Mobility Global Holdings Ltd.
Merger Agreement
On January 27, 2021, the company entered into
an Agreement and Plan of Merger (“Merger Agreement”) by and among the company, PSAC Merger Sub, Ltd., an exempted company
with limited liability incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of the company (“Merger Sub”),
and FF Intelligent Mobility Global Holdings Ltd., an exempted company with limited liability incorporated under the laws of the Cayman
Islands (“FF”). FF is a global mobility technology company that designs and engineers next-generation smart electric connected
vehicles.
Pursuant to the Merger Agreement, Merger Sub
will merge with and into FF, with FF surviving the merger (the “Merger” and, together with the other transactions contemplated
by the Merger Agreement, the “Transactions”). As a result of the Transactions, FF will become a wholly-owned subsidiary of
the company, with the stockholders of FF becoming stockholders of the company, which will be renamed “Faraday Future Intelligent
Electric, Inc.” (“New FF”).
Under the Merger Agreement, the outstanding FF
shares and the outstanding FF converting debt will be converted into a number of shares of new Class A common stock of the company following
the Transactions and, for FF Top Holdings Ltd. (“FF Top”), shares of new Class B common stock of the company (referred to
herein after the Transactions as “New FF common stock”) following the Transactions based on an exchange ratio (the “Exchange
Ratio”), the numerator of which is equal to (i)(A) the number of shares of Company common stock equal to $2,716,000,000 (plus net
cash of FF, less debt of FF, plus debt of FF that will be converted into shares of Company common stock, plus any additional bridge loan
in an amount not to exceed $100,000,000), (B) divided by $10, minus (ii) an additional 25,000,000 shares which may be issuable to FF stockholders
as additional consideration upon certain price thresholds, and the denominator of which is equal to the number of outstanding shares
of FF, including shares issuable upon exercise of vested FF options and vested FF warrants (in each case assuming cashless exercise)
and upon conversion of outstanding convertible notes.
Additionally, each FF option or FF warrant that
is outstanding immediately prior to the closing of the Merger (and by its terms will not terminate upon the closing of the Merger) will
remain outstanding and convert into the right to purchase a number of shares of Company Class A common stock equal to the number of FF
ordinary shares subject to such option or warrant multiplied by the Exchange Ratio at an exercise price per share equal to the current
exercise price per share for such option or warrant divided by the Exchange Ratio.
The Transactions are expected to be consummated
in the second quarter of 2021, after the required approval by the stockholders of and the fulfillment of certain other conditions.
Registration Rights Agreement
At the closing of the Merger, certain of FF’s
stockholders and other parties thereto will enter into an Amended and Restated Registration Rights Agreement (the “Registration
Rights Agreement”) pursuant to which the company will agree to file a shelf registration statement with respect to the registrable
securities under the Registration Rights Agreement. The company also will agree to provide customary “piggyback” registration
and underwritten offering rights. The Registration Rights Agreement also provides that the company will pay certain expenses relating
to such registrations and indemnify the stockholders against certain liabilities.
Shareholder Agreement
At the closing of the Merger, the company and
FF Top will enter into a Shareholder Agreement (the “Shareholder Agreement”), pursuant to which (a) the company and FF Top
will agree on the initial composition of New FF’s board of directors and (b) so long as FF Top beneficially owns shares of issued
and outstanding New FF common stock representing in excess of 5% voting power, FF Top will have the right to nominate a specified number
of directors on New FF’s board of directors, based on FF Top’s voting power of the issued and outstanding New FF common stock,
a sufficient number of which will be independent such that New FF’s board of directors would be comprised of a majority of independent
directors assuming the election of the FF Top designees and the other members of New FF’s board of directors.
Subscription Agreements
On January 27, 2021, in connection with and concurrently
with the execution of the Merger Agreement, the company entered into separate Subscription Agreements with certain accredited investors
or qualified institutional buyers (collectively, the “Subscription Investors”). Pursuant to the Subscription Agreements,
the Subscription Investors agreed to subscribe for and purchase, and the company agreed to issue and sell, to the Subscription Investors
an aggregate of 77,500,000 shares of common stock of the company for a purchase price of $10.00 per share, or an aggregate of approximately
$775 million, in a private placement. 17,500,000 of such shares ($175 million in net proceeds) will be issued to an anchor investor and
the issuance of such shares is subject to certain regulatory approvals. Also on January 27, 2021, the company entered into additional
Subscription Agreements with Subscription Investors in the amount of 2,000,000 shares of shares of common stock of the company for a
purchase price of $10.00 per share, or an aggregate of approximately $20 million, which increases the total amount of the private placement
pursuant to the Subscription Agreements to 79,500,000 shares of common stock of the company for a purchase price of $10.00 per share,
or an aggregate of approximately $795 million. The Subscription Agreements require the company to have an effective shelf registration
statement registering the resale of the shares of company common stock held by the Subscription Investors within 60 calendar days (or
90 calendar days if the SEC notifies the company that it will review the registration statement) following the closing of the Transactions.
The closing of the private placement will occur
on the date of and immediately prior to the consummation of the Transactions and is conditioned thereon and on other customary closing
conditions.
Shareholder Support Agreements
In connection with the execution of the Merger
Agreement, FF Top, Season Smart Ltd. and Founding Future Creditors Trust (the “Supporting FF Shareholders”) have entered
into support agreements pursuant to which each Supporting FF Shareholder has agreed, among other things, to approve or vote in favor
of the Transactions, against any action or proposal involving the company or any of its subsidiaries that is intended to, or would reasonably
be expected to, prevent, impede or adversely affect the Transactions in any material respect, and promptly execute the definitive documents,
agreements and filings (including with applicable governmental authorities) related to the Transactions reasonably required to be executed
by such Supporting FF Shareholder in furtherance of the Transactions subject to the terms and conditions set forth therein.
For additional information regarding the Transactions,
FF, the Merger Agreement, the Shareholder Agreement, the Registration Rights Agreement, the Subscription Agreements, the Shareholder
Support Agreements and the other agreements entered into in connection with the Transactions, including risk and uncertainties with respect
to FF and the parties’ ability to consummate the Transactions, see the Registration Statement on Form S-4, including a proxy statement/consent
solicitation statement/prospectus included therein, to be filed by the company with the SEC in connection with the Transactions.
Other than as specifically discussed, the disclosures
in this Annual Report on Form 10-K do not assume the closing of the Transactions.
Our Management Team
Our management team is led by co-Chief Executive
Officers Jordan Vogel and Aaron Feldman. With a combined 34 years of real estate experience, Messrs. Vogel and Feldman bring a unique
track record, entrepreneurial success, long-standing relationships and deep expertise that is suited to take advantage of acquisition
opportunities and to create shareholder value. Our management team’s contacts and relationships includes venture capital funds,
founders of technology enabled service providers, and entrepreneurs.
We anticipate that target business candidates
may be brought to our attention from various sources, including private equity and venture capital groups, investment banking firms,
consultants, legal and accounting firms and large business enterprises.
We have a highly accomplished and engaged team
of independent directors who are highly experienced in public company governance, executive leadership, operations oversight and capital
markets. Our board members have served as directors, officers, partners, executives and advisors for publicly-listed and privately-owned
companies and private equity and venture capital firms. Our directors have extensive experience with acquisitions, divestitures and corporate
strategy and possess relevant domain expertise in the sectors where we expect to source business combination targets. We believe their
collective expertise, contacts and relationships make us a highly desirable merger partner.
For more information on our executive officers
and directors, see Item 10 “Directors, Executive Officers and Corporate Governance” included in Part II of this Annual Report
on Form 10-K.
Notwithstanding the foregoing, past performance
of our management team is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that
we will be able to identify a suitable candidate for our initial business combination. You should not rely on the historical performance
record of our management team as indicative of our future performance. Additionally, in the course of their respective careers, members
of our management team have been involved in businesses and deals that were unsuccessful. Our officers and directors have no experience
with special purpose acquisition companies.
Competitive Strengths
Alternative Path to Becoming Public
We believe our structure will make us an attractive
business combination partner to prospective target businesses that desires to become a publicly listed company. A business combination
with us will offer a target business an alternative process to a public listing rather than the traditional initial public offering process.
We believe that target businesses may favor this alternative, which we believe is less expensive, while offering greater certainty of
execution than the traditional initial public offering. Furthermore, once a proposed business combination is approved by our shareholders
and the transaction is consummated, the target business will have effectively become public, whereas an initial public offering is always
subject to the underwriters’ ability to complete the offering, as well as general market conditions that could prevent the offering
from occurring. Once public, we believe the target business would have greater access to capital and additional means of creating management
incentives that are better aligned with shareholders’ interests than it would as a private company. A public company can offer
further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented management.
With public company corporate governance standards, a target business may become attractive to the public investors.
Strong and Stable Financial Position with
Flexibility
With funds and marketable securities in the trust
account of $229,884,479 (as of December 31, 2020) available to use for a business combination, we offer a target business a variety of
options such as providing the owners of a target business with shares in a public company and a public means to sell such shares, providing
capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because
we are able to consummate our initial business combination using our cash, debt or equity securities, or a combination of the foregoing,
we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target
business to fit its needs and desires. However, there can be no assurance that third-party financing will be available to us.
Effecting a Business Combination
General
We are not presently engaged in, and we will
not engage in, any substantive commercial business for an indefinite period of time. We intend to utilize cash derived from the proceeds
of the initial public offering and the private placement of private units, our capital stock, debt or a combination of these in effecting
a business combination. A business combination may involve the acquisition of, or merger with, a company which does not need substantial
additional capital, but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse
consequences of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and compliance
with various federal and state securities laws. In the alternative, we may seek to consummate a business combination with a company that
may be financially unstable or in its early stages of development or growth. While we may seek to effect simultaneous business combinations
with more than one target business, we will probably have the ability, as a result of our limited resources, to effect only a single
business combination.
Sources of Target Businesses
We believe based on our management’s business
knowledge and past experience that there are numerous potential candidates with which to consummate our initial business combination.
We expect that our principal means of identifying potential target businesses is 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 know what types
of businesses we are targeting.
Our officers and directors must present to us
all target business opportunities that have a fair market value of at least 80% of the assets held in the trust account at the time of
the agreement to enter into the initial business combination, subject to any pre-existing fiduciary or contractual obligations. While
we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions
on any formal basis (other than EarlyBirdCapital as described elsewhere in Annual Report of From 10-K), we may engage these firms or
other individuals in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined
in an arm’s length negotiation based on the terms of the transaction. In no event, however, will our sponsor, initial stockholders,
officers, directors or their respective affiliates be paid any compensation prior to, or for any services they render in order to effectuate,
the consummation of an initial business combination (regardless of the type of transaction that it is) other than the $10,000 per month
administrative fee payable to Benchmark Real Estate Group, an affiliate of our executive officers (described elsewhere in this Annual
Report on Form 10-K), the payment of consulting, success or finder fees in connection with the consummation of our initial business combination,
the repayment of a $150,000 loan made by our executive officers to us and reimbursement of any out-of-pocket expenses. Our audit committee
will review and approve all reimbursements and payments made to our sponsor, officers, directors or our or their respective affiliates,
with any interested director abstaining from such review and approval.
We have no present intention to enter into a
business combination with a target business that is affiliated with any of our officers, directors or sponsor. However, we are not restricted
from entering into any such transactions and may do so if (i) such transaction is approved by a majority of our disinterested independent
directors and (ii) we obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders
valuation opinions, that the business combination is fair to our unaffiliated stockholders from a financial point of view.
Selection of a Target Business and Structuring of a Business
Combination
Subject to our management team’s pre-existing
fiduciary obligations and the limitations that a target business have a fair market value of at least 80% of the balance in the trust
account at the time of the execution of a definitive agreement for our initial business combination, as described below in more detail,
and that we must acquire a controlling interest in the target business, our management will have virtually unrestricted flexibility in
identifying and selecting a prospective target business. We have not established any specific attributes or criteria (financial or otherwise)
for prospective target businesses. In evaluating a prospective target business, our management may consider a variety of factors, including
one or more of the following:
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financial
condition and results of operation;
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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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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.
After initially evaluating several companies
operating in the real estate and related industries, we expanded our search to include companies operating in other industries. In considering
the Transactions with FF, our board of directors determined that the business combination was an attractive business opportunity that
met the vast majority of the criteria and guidelines above, although not weighted or in any order of significance.
The time and costs required to select and evaluate
a target business and to structure and complete the business combination cannot presently be ascertained with any degree of certainty.
Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination
is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business combination.
Fair Market Value of Target Business
Nasdaq listing rules require that the target
business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in
the trust account at the time of the execution of a definitive agreement for our initial business combination. Notwithstanding the foregoing,
if we are not then listed on Nasdaq for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.
We currently anticipate structuring a business
combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination where we merge directly with the target business or a newly formed subsidiary or where we acquire less than 100%
of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders
or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or
more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it
not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns
or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own
a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination
transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the
outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result
of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own
less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests
or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business
or businesses that is owned or acquired is what will be valued for purposes of the 80% of trust account balance test.
The fair market value of the target will be determined
by our board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential
sales, earnings, cash flow and/or book value). The proxy solicitation materials or tender offer documents used by us in connection with
any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business, as well
as the basis for our determinations. If our board is not able to independently determine that the target business has a sufficient fair
market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that
commonly renders valuation opinions, with respect to the satisfaction of such criteria. We will not be required to obtain an opinion
from an investment banking firm as to the fair market value if our board of directors independently determines that the target business
complies with the 80% threshold.
Lack of Business Diversification
We may seek to effect a business combination
with more than one target business, although we expect to complete our business combination with just one business. Therefore, at least
initially, the prospects for our success may be entirely dependent upon the future performance of a single business operation. Unlike
other entities which may have the resources to complete several business combinations of entities operating in multiple industries or
multiple areas of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses. By consummating a business combination with only a single entity, our lack of diversification
may:
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subject
us to numerous economic, competitive and regulatory developments, any or all of which may
have a substantial adverse impact upon the particular industry in which we may operate subsequent
to a business combination, and
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result
in our dependency upon the performance of a single operating business or the development
or market acceptance of a single or limited number of products, processes or services.
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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. The decision as to whether we will seek stockholder approval of a proposed
business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion,
and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise
require us to seek stockholder approval. If we determine to engage in a tender offer, such tender offer will be structured so that each
stockholder may tender all of his, her or its shares rather than some pro rata portion of his, her or its shares. In that case, we will
file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial
business combination as is required under the SEC’s proxy rules. Whether we seek stockholder approval or engage in a tender offer,
we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 immediately prior to or
upon consummation of such business combination and, if we seek stockholder approval, a majority of the outstanding shares of common stock
voted are voted in favor of the business combination. We have no specified maximum percentage threshold for conversions in our amended
and restated certificate of incorporation and even those public stockholders who vote in favor of our initial business combination have
the right to convert their public shares. As a result, this may make it easier for us to consummate our initial business combination.
We chose our net tangible asset threshold of
$5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the U.S. Securities Act of 1933, as amended. However,
if we seek to consummate an initial business combination with a target business that imposes any type of working capital closing condition
or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination,
we may need to have more than $5,000,001 in net tangible assets immediately prior to or upon consummation and this may force us to seek
third party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such
initial business combination and we may not be able to locate another suitable target within the applicable time period, if at all. Public
stockholders may therefore have to wait 21 months from the closing of our initial public offering in order to be able to receive
a pro rata share of the trust account.
Our sponsor, initial stockholders, officers and
directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination, (2) not to
convert any shares of common stock in connection with a stockholder vote to approve a proposed initial business combination and (3) not
sell any shares of common stock in any tender in connection with a proposed initial business combination.
None of our officers, directors, sponsor, initial
stockholders or their affiliates has indicated any intention to purchase units or shares of common stock from persons in the open market
or in private transactions. However, 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 or that they wish to convert their shares, our officers,
directors, sponsor, initial stockholders or their affiliates could make such purchases in the open market or in private transactions
in order to influence the vote and reduce the number of conversions. 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 to our initial public offering or purchased by them in our initial public offering 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 nominal amount and it would be up to the broker whether or not to pass this cost on to the holder. However, this
fee would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to deliver shares
is a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However, in the
event we require stockholders seeking to exercise conversion rights prior to the consummation of the proposed business combination and
the proposed business combination is not consummated this may result in an increased cost to stockholders.
Any proxy solicitation materials we furnish to
stockholders in connection with a vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy
such certification and delivery requirements. Accordingly, a stockholder would have from the time the stockholder received our proxy
statement up until the vote on the proposal to approve 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.
Any request to convert such shares once made,
may be withdrawn at any time up to the vote on the proposed business combination or the expiration of the tender offer. Furthermore,
if a holder of public shares delivered his certificate in connection with an election of their conversion and subsequently decides prior
to the applicable date not to elect to exercise such rights, he may simply request that the transfer agent return the certificate (physically
or electronically).
If the initial business combination is not approved
or completed for any reason, then our public stockholders who elected to exercise their conversion rights would not be entitled to convert
their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any shares delivered by public
holders.
Liquidation if No Business Combination
Our amended and restated certificate of incorporation
provides that we will have only 21 months from the closing of our initial public offering to complete an initial business combination,
including the Transactions with FF. If we have not completed an initial business combination by such date, we will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem
100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
trust account, including any interest not previously released to us but net of taxes payable, divided by the number of then outstanding
public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to
receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in
the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other
applicable law.
Our sponsor, initial stockholders, officers and
directors have agreed that they will not propose any amendment to our amended and restated certificate of incorporation that would affect
our public stockholders’ ability to convert or sell their shares to us in connection with a business combination as described herein
or affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination
within 21 months from the closing of our initial public offering unless we provide our public stockholders with the opportunity
to convert their shares of common stock upon such approval at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account, including interest not previously released to us but net of franchise and income taxes payable,
divided by the number of then outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment,
whether proposed by our sponsor, initial stockholders, executive officers, directors or any other person.
Under the Delaware General Corporation Law, stockholders
may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public
shares in the event we do not complete our initial business combination within the required time period may be considered a liquidation
distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the Delaware General
Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period
during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may
reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders,
any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata
share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third
anniversary of the dissolution. It is our intention to redeem our public shares as soon as reasonably possible following our 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.
Furthermore, if the pro rata portion of our trust
account distributed to our public stockholders upon the redemption of 100% of our public shares in the event we do not complete our initial
business combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption
distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations
for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of
a liquidation distribution.
Because we will not be complying with Section
280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based
on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially
brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company,
and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be
from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We are required to seek to have all third parties
(including any vendors or other entities we engage) and any prospective target businesses enter into agreements with us waiving any right,
title, interest or claim of any kind they may have in or to any monies held in the trust account. As a result, the claims that could
be made against us will be limited, thereby lessening the likelihood that any claim would result in any liability extending to the trust.
We therefore believe that any necessary provision for creditors will be reduced and should not have a significant impact on our ability
to distribute the funds in the trust account to our public stockholders. Nevertheless, Marcum LLP, our independent registered public
accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in
the trust account. Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses will execute
such agreements. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse against the
trust account. Our sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced below $10.00
per share by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or
contracted for or products sold to us, but we cannot assure you that it will be able to satisfy its indemnification obligations if it
is required to do so. We have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified
whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities
of our company. Therefore, we believe it is unlikely that our sponsor will be able to satisfy its indemnification obligations if it is
required to do so. Additionally, the agreement our sponsor entered into specifically provides for two exceptions to the indemnity it
has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed
an agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account,
or (2) as to any claims for indemnification by the underwriters of our initial public offering against certain liabilities, including
liabilities under the Securities Act. As a result, if we liquidate, the per-share distribution from the trust account could be less
than $10.00 due to claims or potential claims of creditors.
We anticipate notifying the trustee of the trust
account to begin liquidating such assets promptly after our 21st month and anticipate it will take no more than 10 business
days to effectuate such distribution. The holders of the founders’ shares and private shares have waived their rights to participate
in any liquidation distribution from the trust account with respect to such shares. There will be no distribution from the trust account
with respect to our warrants, which will expire worthless. We will pay the costs of any subsequent liquidation from our remaining assets
outside of the trust account. If such funds are insufficient, our sponsor has contractually agreed to advance us the funds necessary
to complete such liquidation (currently anticipated to be no more than approximately $15,000) and has contractually agreed not to seek
repayment for such expenses.
If we are unable to complete an initial business
combination and expend all of the net proceeds of our initial public offering, other than the proceeds deposited in the trust account,
and without taking into account interest, if any, earned on the trust account, the initial per-share redemption price would be $10.00.
As discussed above, the proceeds deposited in the trust account could become subject to claims of our creditors that are in preference
to the claims of public stockholders.
Our public stockholders shall be entitled to
receive funds from the trust account only in the event of our failure to complete a business combination within the required time period,
if the stockholders seek to have us convert or purchase their respective shares upon a business combination which is actually completed
by us or upon certain amendments to our amended and restated certificate of incorporation prior to consummating an initial business combination.
In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.
If we are forced to file a bankruptcy case or
an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to
applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over
the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to
return to our public stockholders at least $10.00 per share.
If we are forced to file a bankruptcy case or
an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders could be viewed
under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.”
As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. Furthermore, because we intend to distribute
the proceeds held in the trust account to our public stockholders promptly after 21 months from the closing of our initial public
offering, 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 that will apply to us until the consummation of our initial business combination. These
provisions cannot be amended without the approval of a majority of our stockholders. If we seek to amend any provisions of our amended
and restated certificate of incorporation that would affect our public stockholders’ ability to convert or sell their shares to
us in connection with a business combination as described herein or affect the substance or timing of our obligation to redeem 100% of
our public shares if we do not complete a business combination within 21 months from the closing of our initial public offering,
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 immediately prior to or upon consummation of such business combination and,
if we seek stockholder approval, a majority of the outstanding shares of common stock voted
are voted in favor of the business combination;
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if
our initial business combination is not consummated within 21 months from the closing
of our initial public offering, 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 initial public offering 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 our initial public 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 654 Madison Avenue, Suite 1009, New York, New York 10065. The cost for this space is included in the $10,000 per-month fee
Benchmark Real Estate Group, an affiliate of our executive officers, charges us for general and administrative services pursuant to a
letter agreement between us and Benchmark Real Estate Group. We believe, based on rents and fees for similar services, that the fee charged
by Benchmark Real Estate Group is at least as favorable as we could have obtained from an unaffiliated person. 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 two executive officers. These individuals
are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they deem necessary
to our affairs. The amount of time they will devote in any time period will vary based on whether a target business has been selected
for 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 may spend more time investigating such target business and negotiating and processing
the business combination (and consequently spend more time on our affairs) than had been spent prior to locating a suitable target business.
We presently expect our executive officers to devote such amount of time as they reasonably believe is necessary to our business. We
do not intend to have any full-time employees prior to the consummation of a business combination.
Periodic Reporting and Audited Financial Statements
We have registered our units, common stock and
warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current
reports with the SEC. In accordance with the requirements of the Exchange Act, our annual report will contain financial statements audited
and reported on by our independent registered public accountants.
We will provide stockholders with audited financial
statements of the prospective target business as part of any proxy solicitation materials or tender offer documents sent to stockholders
to assist them in assessing the target business. These financial statements will need to be prepared in accordance with or reconciled
to United States generally accepted accounting principles or international financial reporting standards as promulgated by the International
Accounting Standards Board. We cannot assure you that any particular target business identified by us as a potential acquisition candidate
will have the necessary financial statements. To the extent that this requirement cannot be met, we may not be able to acquire the proposed
target business.
We may be required to have our internal control
procedures audited for the fiscal year ending December 31, 2021 as required by the Sarbanes-Oxley Act. A target
company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The
development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time
and costs necessary to complete any such acquisition.
ITEM 1A. RISK FACTORS
You should carefully consider all of the following
risk factors and all other information contained in this Annual Report on Form 10-K, including the financial statements. If any of the
following risks occur, our business, financial condition or results of operations may be materially and adversely affected. In that event,
the trading price of our securities could decline, and you could lose all or part of your investment. The risk factors described below
are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business.
In addition to the risks and uncertainties
set forth below, we face certain material risks and uncertainties related to the Transactions with FF. If we succeed in effecting the
Transactions with FF, we will face additional and different risks and uncertainties related to the business of FF. Such material risks
are to be set forth in a Registration Statement on Form S-4, including a proxy statement/consent solicitation statement/prospectus included
therein, to be filed by the company with the SEC.
The risks presented below assumes that we
will not consummate the Transactions with FF and then seek to find an alternative target with which to consummate and initial business
combination.
Risks Related to Searching for and Consummating
a Business Combination
We are an early stage company and you have
no basis on which to evaluate our ability to achieve our business objective.
We are an early stage company with no operating
results to date. Since we do not have an operating history, you have no basis upon which to evaluate our ability to achieve our business
objective of completing our initial business combination with one or more target businesses. We may be unable to complete our initial
business combination. If we fail to complete our initial business combination, we will never generate any operating revenues.
Our public stockholders may not be afforded
an opportunity to vote on our proposed business combination.
We will either (1) seek stockholder approval
of our initial business combination at a meeting called for such purpose at which public stockholders may seek to convert their shares,
regardless of whether they vote for or against the proposed business combination or don’t vote at all, into their pro rata share
of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our public stockholders with
the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount
equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject
to the limitations described elsewhere in this Annual Report on Form 10-K. Accordingly, it is possible that we will consummate our initial
business combination even if holders of a majority of our public shares do not approve of the business combination we consummate. The
decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their
shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing
of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. For instance, Nasdaq
rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder
approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination.
Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding shares, we would
seek stockholder approval of such business combination instead of conducting a tender offer.
If the funds held in trust are insufficient
to allow us to operate for at least 21 months following the initial public offering, we may be unable to complete a business combination.
If we use all of the funds held outside of the
trust account and all interest available to us, we may not have sufficient funds available with which to structure, negotiate or close
an initial business combination. In such event, we would need to borrow funds from our sponsor, officers or directors or their affiliates
to operate or may be forced to liquidate. Our sponsor, initial stockholders, officers, directors and their affiliates may, but are not
obligated to, loan us funds, from time to time or at any time, in whatever amount that they deem reasonable in their sole discretion
for our working capital needs. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of
our initial business combination, without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted
into units at a price of $10.00 per unit.
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 $9.20 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
Market Value is below $9.20 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 (as defined in our warrants) 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 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 we choose. Accordingly, there is no current basis for you to evaluate the possible merits or risks of the
particular industry in which we may ultimately operate or the target business which we may ultimately acquire. To the extent we complete
a business combination with a financially unstable company or an entity in its development stage, we may be affected by numerous risks
inherent in the business operations of those entities. If we complete a business combination with an entity in an industry 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 securities will not ultimately prove to be less
favorable to investors than a direct investment, if an opportunity were available, in a target business.
Our ability to successfully effect a business
combination and to be successful thereafter will be 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 is required to commit any specified amount
of time to our affairs and, accordingly, our officers will have conflicts of interest in allocating management time among various business
activities, including identifying potential business combinations and monitoring the related due diligence. We do not have employment
agreements with, or key-man insurance on the life of, any of our officers. The unexpected loss of the services of our key personnel
could have a detrimental effect on us.
The role of our key personnel after 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 with a target business in connection with a particular business combination. These agreements may provide for
them to receive compensation following a business combination and as a result, may cause them to have conflicts of interest in determining
whether a particular business combination is the most advantageous.
Our key personnel will be able to remain with
the company after the consummation of a business combination only if they are able to negotiate employment or consulting agreements or
other appropriate arrangements in connection with the business combination. Such negotiations would take place simultaneously with the
negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or
our securities for services they would render to the company after the consummation of the business combination. The personal and financial
interests of such individuals may influence their motivation in identifying and selecting a target business.
Our officers and directors will allocate
their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs.
This could have a negative impact on our ability to consummate a business combination.
Our officers and directors will not commit their
full time to our affairs. We presently expect each of our officers and directors to devote such amount of time as they reasonably believe
is necessary to our business. We do not intend to have any full-time employees prior to the consummation of our initial business
combination. The foregoing could have a negative impact on our ability to consummate our initial business combination.
Our officers and directors may have a conflict
of interest in determining whether a particular target business is appropriate for a business combination.
Our sponsor has waived its right to convert its
founders’ shares or any other shares purchased in in our initial public offering 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 tour initial public offering, as well as the private units and any warrants purchased by our officers
or directors in the aftermarket, will be worthless if we do not consummate a business combination. The personal and financial interests
of our directors and officers may influence their motivation in timely identifying and selecting a target business and completing a business
combination and in determining whether the terms, conditions and timing of a particular business combination are appropriate and in our
stockholders’ best interest.
Our officers and directors or their affiliates
have pre-existing fiduciary and contractual obligations and may in the future become affiliated with other entities engaged in business
activities similar to those intended to be conducted by us. Accordingly, they may have conflicts of interest in determining to which
entity a particular business opportunity should be presented.
Our officers and directors or their affiliates
have pre-existing fiduciary and contractual obligations to other companies. Accordingly, they may participate in transactions and
have obligations that may be in conflict or competition with our consummation of our initial business combination. As a result, a potential
target business may be presented by our management team to another entity prior to its presentation to us and we may not be afforded
the opportunity to engage in a transaction with such target business. Additionally, our officers and directors may in the future become
affiliated with entities that are engaged in a similar business, including another blank check company that may have acquisition objectives
that are similar to ours. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity
should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to other entities
prior to its presentation to us, subject to our officers’ and directors’ fiduciary duties under Delaware law.
Our officers and directors may not have
significant experience or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.
We may consummate a business combination with
a target business in any geographic location or industry we choose. We cannot assure you that our officers and directors will have enough
experience or have sufficient knowledge relating to the jurisdiction of the target or its industry to make an informed decision regarding
a business combination.
EarlyBirdCapital may have a conflict of
interest in rendering services to us in connection with our initial business combination.
We have engaged EarlyBirdCapital to assist us
in connection with our initial business combination. We will pay EarlyBirdCapital a cash fee for such services in an aggregate amount
equal to up to 3.5% of the total gross proceeds raised in our initial public offering only if we consummate our initial business combination.
The private units purchased by EarlyBirdCapital or its designees and the representative shares will also be worthless if we do not consummate
an initial business combination. These financial interests may result in EarlyBirdCapital having a conflict of interest when providing
the services to us in connection with an initial business combination.
The ability of our stockholders to exercise
their conversion rights or sell their shares to us in a tender offer may not allow us to effectuate the most desirable business combination
or optimize our capital structure.
If our business combination requires us to use
substantially all of our cash to pay the purchase price, because we will not know how many stockholders may exercise conversion rights
or seek to sell their shares to us in a tender offer, we may either need to reserve part of the trust account for possible payment upon
such conversion, or we may need to arrange third party financing to help fund our business combination. In the event that the acquisition
involves the issuance of our stock as consideration, we may be required to issue a higher percentage of our stock to make up for a shortfall
in funds. Raising additional funds to cover any shortfall may involve dilutive equity financing or incurring indebtedness at higher than
desirable levels. This may limit our ability to effectuate the most attractive business combination available to us.
In connection with any vote to approve
a business combination, we will offer each public stockholder the option to vote in favor of a proposed business combination and still
seek conversion of his, her or its shares.
In connection with any vote to approve a business
combination, we will offer each public stockholder (but not our sponsor, officers or directors) the right to have his, her or its shares
of common stock converted to cash (subject to the limitations described elsewhere in this Annual Report on Form 10-K) regardless of whether
such stockholder votes for or against such proposed business combination or does not vote at all. The ability to seek conversion while
voting in favor of our proposed business combination may make it more likely that we will consummate a business combination.
We do not have a specified maximum conversion
threshold. The absence of such a conversion threshold may make it easier for us to consummate a business combination even where a substantial
number of public stockholders seek to convert their shares to cash in connection with the vote on the business combination.
We have no specified percentage threshold for
conversion in our amended and restated certificate of incorporation. As a result, we may be able to consummate a business combination
even though a substantial number of our public stockholders do not agree with the transaction and have converted their shares. However,
in no event will we consummate an initial business combination unless we have net tangible assets of at least $5,000,001 immediately
prior to or upon consummation of our initial business combination.
In connection with any stockholder meeting
called to approve a proposed initial business combination, we may require stockholders who wish to convert their shares in connection
with a proposed 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
initial public offering, 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
this our initial public offering 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 initial public offering 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 initial stockholders control a substantial
interest in us and thus may influence certain actions requiring a stockholder vote.
Our initial stockholders own approximately 21%
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 such purchases in the open market or in private transactions, to the extent permitted by law, in order
to influence the vote or magnitude of the number of shareholders seeking to tender their shares to us. In connection with any vote for
a proposed business combination, our initial stockholders, as well as all of our officers and directors, have agreed to vote the shares
of common stock owned by them in favor of such proposed business combination. EarlyBirdCapital has also agreed to vote the representative
shares and private shares it is purchasing in favor of such proposed business combination.
Our board of directors is divided into three
classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. It
is unlikely that there will be an annual meeting of stockholders to elect new directors prior to the consummation of a business combination,
in which case all of the current directors will continue in office until at least the consummation of the business combination. Accordingly,
you may not be able to exercise your voting rights under corporate law for up to 21 months after our initial public offering. 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.
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 the proceeds of our initial public offering are 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 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.
Our search for an initial business combination,
and any target business with which we ultimately consummate an initial business combination, may be materially adversely affected by
the coronavirus (COVID-19) pandemic and other events, and the status of debt and equity markets.
The COVID-19 pandemic has adversely affected,
and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) could adversely
affect, the economies and financial markets worldwide, and the business of any potential target business with which we consummate an
initial business combination could be materially and adversely affected. Furthermore, we may be unable to complete an initial business
combination if concerns relating to COVID-19 continue to restrict travel, limit the ability to have meetings with potential investors
or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in
a timely manner. The extent to which COVID-19 impacts our search for an initial business combination will depend on future developments,
which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and
the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other events (such
as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) continue for an extensive period of time,
our ability to consummate an initial business combination, or the operations of a target business with which we ultimately consummate
an initial business combination, may be materially adversely affected.
In addition, our ability to consummate a transaction
may be dependent on the ability to raise equity and debt financing which may be impacted by COVID-19 and other events (such as terrorist
attacks, natural disasters or a significant outbreak of other infectious diseases), including as a result of increased market volatility,
decreased market liquidity in third-party financing being unavailable on terms acceptable to us or at all.
As the number of special purpose acquisition companies evaluating
targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase
the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business
combination.
In recent years and especially in the last several months, the number
of special purpose acquisition companies that have been formed has increased substantially. Many potential targets for special purpose
acquisition companies have already entered into an initial business combination, and there are still many special purpose acquisition
companies seeking targets for their initial business combination, as well as many such companies currently in registration. As a result,
at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable
target and to consummate an initial business combination.
In addition, because there are more special purpose acquisition companies
seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals
or business models may increase, which could cause targets companies to demand improved financial terms. Attractive deals could also
become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or increases in the cost of additional
capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or
otherwise complicate or frustrate our ability to find and consummate an initial business combination, and may result in our inability
to consummate an initial business combination on terms favorable to our investors altogether.
Changes in the market for directors and officers liability insurance
could make it more difficult and more expensive for us to negotiate and complete an initial business combination.
In recent months, the market for directors and officers liability
insurance for special purpose acquisition companies has changed. The premiums charged for such policies have generally increased and
the terms of such policies have generally become less favorable. There can be no assurance that these trends will not continue.
The increased cost and decreased availability of directors and officers
liability insurance could make it more difficult and more expensive for us to negotiate an initial business combination. In order to
obtain directors and officers liability insurance or modify its coverage as a result of becoming a public company, the post-business
combination entity might need to incur greater expense, accept less favorable terms or both. However, any failure to obtain adequate
directors and officers liability insurance could have an adverse impact on the post-business combination’s ability to attract and
retain qualified officers and directors.
In addition, even after we were to complete an initial business combination,
our directors and officers could still be subject to potential liability from claims arising from conduct alleged to have occurred prior
to the initial business combination. As a result, in order to protect our directors and officers, the post-business combination entity
will likely need to purchase additional insurance with respect to any such claims (“run-off insurance”). The need for run-off
insurance would be an added expense for the post-business combination entity, and could interfere with or frustrate our ability to consummate
an initial business combination on terms favorable to our investors.
The requirement that we complete an initial
business combination within 21 months from the closing of our initial public offering may give potential target businesses leverage
over us in negotiating a business combination.
We have 21 months from the closing of our
initial public offering to complete an initial business combination. Any potential target business with which we enter into negotiations
concerning a business combination will be aware of this requirement. Consequently, such target business may obtain leverage over us in
negotiating a business combination, knowing that if we do not complete a business combination with that particular target business, we
may be unable to complete a business combination with any other target business. This risk will increase as we get closer to the time
limit referenced above.
We may not obtain a fairness opinion with
respect to the target business that we seek to acquire and therefore you may be relying solely on the judgment of our board of directors
in 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.
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.
Compliance with the Sarbanes-Oxley Act
of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act
of 2002 requires that we evaluate and report on our system of internal controls and may require that we have such system of internal
controls audited beginning with our Annual Report on Form 10-K for the year ending December 31, 2021. If we fail to maintain
the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or stockholder litigation.
Any inability to provide reliable financial reports could harm our business. Section 404 of the Sarbanes-Oxley Act also requires
that our independent registered public accounting firm report on management’s evaluation of our system of internal controls. A
target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls.
The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time
and costs necessary to complete any such acquisition. Furthermore, any failure to implement required new or improved controls, or difficulties
encountered in the implementation of adequate controls over our financial processes and reporting in the future, could harm our operating
results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence
in our reported financial information, which could have a negative effect on the trading price of our stock.
There may be tax consequences to our business
combinations that may adversely affect us.
While we expect to undertake any merger or acquisition
so as to minimize taxes both to the acquired business and/or asset and us, such business combination might not meet the statutory requirements
of a tax-free reorganization, or the parties might not obtain the intended tax-free treatment upon a transfer of shares or
assets. A non-qualifying reorganization could result in the imposition of substantial taxes.
Risks Related to the Post Business Combination Company
We may only be able to complete one business
combination with the proceeds of our initial public offering, which will cause us to be solely dependent on a single business which may
have a limited number of products or services.
It is likely we will consummate a business combination
with a single target business, although we have the ability to simultaneously acquire several target businesses. By consummating a business
combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments.
Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike
other entities which may have the resources to complete several business combinations in different industries or different areas of a
single industry. Accordingly, the prospects for our success may be:
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solely
dependent upon the performance of a single business, or
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dependent
upon the development or market acceptance of a single or limited number of products, processes
or services.
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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.
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.
If we effect a business combination with
a company located in a foreign jurisdiction, we would be subject to a variety of additional risks that may negatively impact our operations.
If we consummate a business combination with
a target business in a foreign country, we would be subject to any special considerations or risks associated with companies operating
in the target business’ home jurisdiction, including any of the following:
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rules
and regulations or currency conversion or corporate withholding taxes on individuals;
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tariffs
and trade barriers;
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regulations
related to customs and import/export matters;
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tax
issues, such as tax law changes and variations in tax laws as compared to the United States;
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currency
fluctuations and exchange controls;
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challenges
in collecting accounts receivable;
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cultural
and language differences;
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employment
regulations;
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crime,
strikes, riots, civil disturbances, terrorist attacks and wars; and
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deterioration
of political relations with the United States.
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We cannot assure you that we would be able to
adequately address these additional risks. If we were unable to do so, our operations might suffer.
If we effect a business combination with
a company located outside of the United States, the laws applicable to such company will likely govern all of our material agreements
and we may not be able to enforce our legal rights.
If we effect a business combination with a company
located outside of the United States, the laws of the country in which such company operates will govern almost all of the material
agreements relating to its operations. We cannot assure you that the target business will be able to enforce any of its material agreements
or that remedies will be available in this new jurisdiction. The system of laws and the enforcement of existing laws in such jurisdiction
may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy
under any of our future agreements could result in a significant loss of business, business opportunities or capital. Additionally, if
we acquire a company located outside of the United States, it is likely that substantially all of our assets would be located outside
of the United States and some of our officers and directors might reside outside of the United States. As a result, it may
not be possible for investors in the United States to enforce their legal rights, to effect service of process upon our directors
or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors
and officers under federal securities laws.
If we acquire a company servicing the real
estate industry, our future operations may be subject to risks associated with this sector.
While we may pursue an initial business combination
target in any stage of its corporate evolution or in any industry or sector, we currently intend to concentrate our efforts in identifying
businesses that service the real estate industry. Because we have not yet identified or approached any specific target business, we cannot
provide specific risks of any business combination. However, risks inherent in investments in this sector may include, but are not limited
to, the following:
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adverse
changes in international, national, regional or local economic, demographic and market conditions;
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adverse
changes in financial conditions of buyers, sellers and tenants of properties;
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competition
from other companies and businesses that service the real estate industry;
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the
ability to develop successful new products or improve existing ones;
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the
disruption or failure of our networks, systems, platform or technology that frustrate or
thwart our users’ ability to access our products and services, which may cause our
users, advertisers, and partners to cut back on or stop using our products and services altogether,
which could harm our business;
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fluctuations
in interest rates, which could adversely affect the ability of buyers and tenants of properties
to obtain financing on favorable terms or at all;
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mobile
malware, viruses, hacking and phishing attacks, spamming, and improper or illegal use of
our products, which could harm our business and reputation;
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litigation
and other legal proceedings;
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the
ability to attract and retain highly skilled employees;
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environmental
risks; and
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civil
unrest, labor strikes, acts of God, including earthquakes, floods and other natural disasters
and acts of war or terrorism, which may result in uninsured losses.
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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 companies that service the real estate industry. Accordingly, if we acquire a target business in another industry, these risks we
will be subject to risks attendant with the specific industry in which we operate or target business which we acquire, which may or may
not be different than those risks listed above.
Risks Related to our Securities
If we are unable to consummate a business
combination, our public stockholders may be forced to wait more than 21 months before receiving distributions from the trust account.
We have 21 months from the closing of the
initial public offering in which to complete a business combination. We have no obligation to return funds to investors prior to such
date unless we consummate a business combination prior thereto and only then in cases where investors have sought to convert or sell
their shares to us. Only after the expiration of this full time period will public security holders be entitled to distributions from
the trust account if we are unable to complete a business combination. Accordingly, investors’ funds may be unavailable to them
until after such date and to liquidate your investment, public security holders may be forced to sell their public shares or warrants,
potentially at a loss.
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 50,000,000 shares of common stock, par value $.0001 per share, and 1,000,000 shares of preferred
stock, par value $.0001 per share. We may issue a substantial number of 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 shares of common stock or preferred stock:
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may
significantly reduce the equity interest of investors;
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may
subordinate the rights of holders of shares of common stock if we issue shares of preferred
stock with rights senior to those afforded to our shares of common stock;
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may
cause a change in control if a substantial number of shares of common stock are issued, which
may affect, among other things, our ability to use our net operating loss carry forwards,
if any, and could result in the resignation or removal of our present officers and directors;
and
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may
adversely affect prevailing market prices for our shares of common stock.
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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 Annual Report on 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 21 months from the closing of the initial public offering. If we do not complete
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.
Our directors may decide not to enforce
our sponsor’s indemnification obligations, resulting in a reduction in the amount of funds in the trust account available for distribution
to our public stockholders.
In the event that the proceeds in the trust account
are reduced below $10.00 per public share and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification
obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor
to enforce such indemnification obligations. It is possible that our independent directors in exercising their business judgment may
choose not to do so in any particular instance. Additionally, each of our independent directors is a member of our sponsor. As a result,
they may have a conflict of interest in determining whether to enforce our sponsor’s indemnification obligations. If our independent
directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution
to our public stockholders may be reduced below $10.00 per share.
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.
The private warrants may be exercised at
a time when the public warrants may not be exercised.
Once the private warrants become exercisable,
such warrants may immediately be exercised on a cashless basis, at the holder’s option, so long as they are held by the initial
purchasers or their permitted transferees. The public warrants, however, will only be exercisable on a cashless basis at the option of
the holders if we fail to register the shares issuable upon exercise of the warrants under the Securities Act within 90 days following
the closing of our initial business combination. Accordingly, it is possible that the holders of the private warrants could exercise
such warrants at a time when the holders of public warrants could not.
We may amend the terms of the warrants
in a manner that may be adverse to holders with the approval by the holders of at least a majority of the then outstanding public warrants.
Our warrants will be issued in registered form
under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement
provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective
provision. The warrant agreement requires the approval by the holders of at least a majority of the then outstanding public warrants
in order to make any change that adversely affects the interests of the registered holders.
Nasdaq may delist our securities from quotation
on its exchange which could limit investors’ ability to make transactions in our securities and subject us to additional trading
restrictions.
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 we expect that our units and eventually our common stock and warrants will be 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.
Our outstanding warrants may have an adverse
effect on the market price of our common stock and make it more difficult to effect a business combination.
We issued warrants to purchase 22,977,568 shares
of common stock as part of the units in our initial public offering and private warrants included within the private units to purchase
594,551 shares of common stock. We may also issue other units to our sponsor, initial stockholders, officers, directors or their affiliates
in payment of working capital loans made to us. To the extent we issue shares of common stock to effect a business combination, the potential
for the issuance of a substantial number of additional shares upon exercise of these warrants could make us a less attractive acquisition
vehicle in the eyes of a target business. Such securities, when exercised, will increase the number of issued and outstanding shares
of common stock and reduce the value of the shares issued to complete the business combination. Accordingly, our warrants may make it
more difficult to effectuate a business combination or increase the cost of acquiring the target business. Additionally, the sale, or
even the possibility of sale, of the shares underlying the warrants could have an adverse effect on the market price for our securities
or on our ability to obtain future financing. If and to the extent these warrants are exercised, you may experience dilution to your
holdings.
We may redeem your unexpired warrants prior
to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants
(excluding the private warrants and any warrants underlying additional units issued to our sponsor, officers or directors in payment
of working capital loans made to us) at any time after they become exercisable and prior to their expiration, at a price of $0.01 per
warrant, provided that the last reported sales price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits,
stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading-day period commencing at any
time after the warrants become exercisable and ending on the third business day prior to proper notice of such redemption provided that
on the date we give notice of redemption and during the entire period thereafter until the time we redeem the warrants, we have an effective
registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current
prospectus relating to them is available. If and when the warrants become redeemable by us, we may exercise our redemption right even
if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of
the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may
be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish
to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for
redemption, is likely to be substantially less than the market value of your warrants. None of the private warrants are redeemable by
us so long as they are held by the initial purchasers or their permitted transferees.
Our management’s ability to require
holders of our warrants to exercise such warrants on a cashless basis will cause holders to receive fewer shares of common stock upon
their exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If we call our public warrants for redemption
after the redemption criteria described elsewhere in this Annual Report on 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) 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 initial stockholders are entitled to make
a demand that we register the resale of the founders’ shares at any time commencing three months prior to the date on which their
shares may be released from escrow. Additionally, the holders of representative shares, the private units and any units and warrants
our sponsor, initial stockholders, officers, directors, or their affiliates may be issued in payment of working capital loans made to
us, are entitled to demand that we register the resale of the representative shares, private units and any other units and warrants we
issue to them (and the underlying securities) commencing at any time after we consummate 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.
General Risks
Our independent registered public accounting
firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going
concern.”
The Company’s business plan is dependent
on the completion of a business combination and the Company’s cash and working capital as of December 31, 2020 are not sufficient
to complete its planned activities. We cannot assure you that our plans to consummate an initial business combination will be successful.
These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements contained
in this Annual Report on Form 10-K do not include any adjustments that might result from the outcome of this uncertainty.
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.
You will not be entitled to protections
normally afforded to investors of blank check companies.
Since the net proceeds of our initial public
offering and the sale of the private units are intended to be used to complete a business combination with a target business that has
not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However,
since we will have net tangible assets in excess of $5,000,000 we are exempt from rules promulgated by the SEC to protect investors of
blank check companies such as Rule 419. Accordingly, investors are not afforded the benefits or protections of those rules which
would, for example, require us to complete a business combination within 21 months of the effective date of the initial public offering
registration statement and restrict the use of interest earned on the funds held in the trust account.
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.
Our amended and restated certificate of
incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive
forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us or our directors, officers, employees or stockholders.
Our amended and restated certificate of incorporation
requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and
employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware,
except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party
not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of
the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court
or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any
action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware
shall have concurrent jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock
shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.
This choice of forum provision may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers or employees,
which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance
with federal securities laws and the rules and regulations thereunder and may therefore bring a claim in another appropriate forum. We
cannot be certain that a court will decide that this provision is either applicable or enforceable, and if a court were to find the choice
of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action,
we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating
results and financial condition.
Our amended and restated certificate of incorporation
provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of
the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange
Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any
duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.