UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 2)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 001-39793
Senior Connect
Acquisition Corp. I
(Exact name of registrant as specified in its charter)
|
Delaware |
|
85-2816458 |
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S.
Employer
Identification Number) |
| 7114
East Stetson Drive, Suite 400 |
|
|
|
Scottsdale,
Arizona |
|
85251 |
| (Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s telephone number, including area code: (480)
948-9200
Securities registered pursuant to Section 12(b) of the Act:
|
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
| Units,
each consisting of one share of Class A common stock and one-half
of one redeemable warrant |
|
SNRHU |
|
The
Nasdaq Stock Market LLC |
| Class
A common stock, par value $0.0001 per share |
|
SNRH |
|
The
Nasdaq Stock Market LLC |
| Warrants,
each whole warrant exercisable for one share of Class A common
stock, each at an exercise price of $11.50 per share |
|
SNRHW |
|
The
Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No
☒
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
No ☒
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant (1) has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required
to file such reports) and has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act. (Check one):
|
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
| |
|
|
|
|
|
Emerging
growth company |
☒ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit
report. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes ☒ No ☐
The registrant was not a public company at June 30, 2020, the last
business day of the registrant’s most recently completed second
fiscal quarter, and therefore it cannot calculate the aggregate
market value of its voting and non-voting common equity held by
non-affiliates at such date. The registrant’s units began trading
on the Nasdaq Capital Market on December 11, 2020 and the
registrant’s Class A common stock began separate trading on the
Nasdaq Capital Market on February 1, 2021. The aggregate market
value of the registrant’s Class A common stock outstanding, other
than shares held by persons who may be deemed affiliates of the
registrant, at February 2, 2021, computed by reference to the
closing price for the Class A common stock on such date, as
reported on the Nasdaq Capital Market, was $420,210,000.
As of December 27, 2021, the Registrant had 41,400,000 shares of
its Class A common stock, $0.0001 par value per share, and
10,350,000 shares of its Class B common stock, $0.0001 par value
per share, outstanding.
EXPLANATORY NOTE
References throughout this Amendment No. 2 to the Annual Report
on Form 10-K to “we,” “us,” the “Company” or “our company” are to
Senior Connect Acquisition Corp. I, unless the context otherwise
indicates.
This Amendment No. 2 (“Amendment No. 2”) to the Annual Report on
Form 10-K amends the Amendment No. 1 to the Annual Report on Form
10-K of Senior Connect Acquisition Corp. I, as filed with the
Securities and Exchange Commission (“SEC”) on July 15, 2021, for
the fiscal year ended December 31, 2020, as filed with the SEC on
March 31, 2021 (the “Original Filing”).
In preparation of the Company’s unaudited condensed financial
statements as of and for quarterly period ended September 30, 2021,
the Company concluded it should restate its financial statements to
classify all Class A common stock subject to possible redemption in
temporary equity. In accordance with the SEC and its staff’s
guidance on redeemable equity instruments in ASC 480-10-S99,
redemption provisions not solely within the control of the Company
require common stock subject to redemption to be classified outside
of permanent equity. The Company had previously classified a
portion of its Class A common stock in permanent equity, or total
stockholders’ equity. Although the Company did not specify a
maximum redemption threshold, its Amended and Restated Certificate
of Incorporation currently provides that the Company will not
redeem its public shares in an amount that would cause its net
tangible assets to be less than $5,000,001. Previously, the Company
did not consider redeemable shares classified as temporary equity
as part of net tangible assets. The Company revised this
interpretation to include temporary equity in net tangible
assets.
Therefore, on November 29, 2021, the Company’s management and the
audit committee of the Company’s board of directors (the “Audit
Committee”), after consultation with Marcum LLP, the Company’s
independent registered public accounting firm, concluded that the
Company’s previously issued (i) audited balance sheet as of
December 15, 2020, as previously revised in the Company’s Annual
Report on Form 10-K, as amended, for the fiscal year ended December
31, 2020, filed with the SEC on July 15, 2021 (the “2020 Form
10-K/A No. 1”); (ii) audited financial statements included in the
Company’s 2020 Form 10-K/A No. 1 should be restated to report all
Public Shares as temporary equity and should no longer be relied
upon.
We do not expect any of the above changes will have any impact on
the Company’s cash position and cash held in the trust account
established in connection with the IPO (the “Trust Account”).
The Company’s management has concluded that in light of the
classification error described above, a material weakness exists in
the Company’s internal control over financial reporting and that
the Company’s disclosure controls and procedures were not
effective.
In accordance with Rule 12b-15 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), Item 1A, Risk Factors, is
hereby amended to add additional risk factors, and Item 7,
Management’s Discussion and Analysis of Financial Condition and
Results of Operation. Item 8, Financial Statements and
Supplementary Data and Item 9A, Controls and Procedures, of the
Original Filing are hereby amended and restated in their entirety
with modifications as necessary to reflect this restatement
necessitated by the SEC Staff Statement. This Amendment No. 2
should be read in conjunction with the Original Filing and the 2020
Form 10-K/A No. 1 and with our filings with the SEC subsequent to
the Original Filing 2020 Form 10-K/A No.1. In addition, new
certifications by the Company’s principal executive officer and
principal financial officer are filed as exhibits (in Exhibits 31.1
and 32.1) to this Amendment No. 2.
This Amendment No. 2 reflects events occurring after the filing of
the Original Filing, and, except as described above, does not
modify or update any other disclosures in the Original Filing.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTOR
SUMMARY
The statements contained in this report that are not purely
historical are forward-looking statements. Our forward- looking
statements include, but are not limited to, statements regarding
our or our management team’s expectations, hopes, beliefs,
intentions or strategies regarding the future. In addition, any
statements that refer to projections, forecasts or other
characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements. The words
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intends,” “may,” “might,” “plan,” “possible,” “potential,”
“predict,” “project,” “should,” “would” and similar expressions may
identify forward- looking statements, but the absence of these
words does not mean that a statement is not forward-looking.
Forward- looking statements in this Amended Report on Form 10-K
(the “Annual Report on Form 10-K” or “Annual Report”) may include,
for example, statements about:
| |
● |
our
ability to select an appropriate target business or
businesses; |
| |
● |
our
ability to complete our initial business combination; |
| |
● |
our
success in retaining or recruiting, or changes required in, our
officers, key employees or directors following our initial business
combination; |
| |
● |
our
officers and directors allocating their time to other businesses
and potentially having conflicts of interest with our business or
in approving our initial business combination, as a result of which
they would then receive expense reimbursements; |
| |
● |
our
potential ability to obtain additional financing to complete our
initial business combination; |
| |
● |
our
pool of prospective target businesses; |
| |
● |
the
ability of our officers and directors to generate a number of
potential investment opportunities; |
| |
● |
our
public securities’ potential liquidity and trading; |
| |
● |
the
lack of a market for our securities; |
| |
● |
the
use of proceeds not held in the Trust Account (as described herein)
or available to us from interest income on the Trust Account
balance; or |
| |
● |
our
financial performance. |
The forward-looking statements contained in this report are based
on our current expectations and beliefs concerning future
developments and their potential effects on us. There can be no
assurance that future developments affecting us will be those that
we have anticipated. These forward-looking statements involve a
number of risks, uncertainties (some of which are beyond our
control) or other assumptions that may cause actual results or
performance to be materially different from those expressed or
implied by these forward-looking statements. These risks and
uncertainties include, but are not limited to, those factors
described under the heading “Risk Factors” in this Annual Report.
Should one or more of these risks or uncertainties materialize, or
should any of our assumptions prove incorrect, actual results may
vary in material respects from those projected in these
forward-looking statements. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required
under applicable securities laws.
Summary of Risk Factors
An investment in our securities involves a high degree of risk. The
occurrence of one or more of the events or circumstances described
in the section titled “Risk Factors,” alone or in combination with
other events or circumstances, may materially adversely affect our
business, financial condition and operating results. In that event,
the trading price of our securities could decline, and you could
lose all or part of your investment. Such risks include, but are
not limited to:
| |
● |
We
are a recently incorporated company with no operating history and
no revenues, and you have no basis on which to evaluate our ability
to achieve our business objective. |
| |
● |
Our
public stockholders may not be afforded an opportunity to vote on
our proposed initial business combination, and even if we hold a
vote, holders of our founder shares will participate in such vote,
which means we may complete our initial business combination even
though a majority of our public stockholders do not support such a
combination. |
| |
● |
Your
only opportunity to effect your investment decision regarding a
potential business combination may be limited to the exercise of
your right to redeem your shares from us for cash. |
| |
● |
If we
seek stockholder approval of our initial business combination, our
initial stockholders and management team have agreed to vote in
favor of such initial business combination, regardless of how our
public stockholders vote. |
| |
● |
The
ability of our public stockholders to redeem their shares for cash
may make our financial condition unattractive to potential business
combination targets, which may make it difficult for us to enter
into a business combination with a target. |
| |
● |
The
ability of our public stockholders to exercise redemption rights
with respect to a large number of our shares may not allow us to
complete the most desirable business combination or optimize our
capital structure. |
| |
● |
The
requirement that we complete our initial business combination
within the completion window may give potential target businesses
leverage over us in negotiating a business combination and may
limit the time we have in which to conduct due diligence on
potential business combination targets, in particular as we
approach our dissolution deadline, which could undermine our
ability to complete our initial business combination on terms that
would produce value for our stockholders. |
| |
● |
Our
search for a business combination, and any target business with
which we ultimately consummate a business combination, may be
materially adversely affected by the recent coronavirus (COVID-19)
outbreak and the status of debt and equity markets, as well as
protectionist legislation in our target markets. |
| |
● |
If we
seek stockholder approval of our initial business combination, our
sponsor, initial stockholders, directors, officers, advisors and
their affiliates may elect to purchase shares or public warrants
from public stockholders, which may influence a vote on a proposed
business combination and reduce the public “float” of our Class A
common stock or public warrants. |
| |
● |
If a
stockholder fails to receive notice of our offer to redeem our
public shares in connection with our initial business combination,
or fails to comply with the procedures for submitting or tendering
its shares, such shares may not be redeemed. |
| |
● |
You
will not have any rights or interests in funds from the trust
account, except under certain limited circumstances. Therefore, to
liquidate your investment, you may be forced to sell your public
shares or warrants, potentially at a loss. |
| |
● |
Nasdaq
may delist our securities from trading on its exchange, which could
limit investors’ ability to make transactions in our securities and
subject us to additional trading restrictions. |
| |
● |
You
will not be entitled to protections normally afforded to investors
of many other blank check companies. |
| |
● |
Because
of our limited resources and the significant competition for
business combination opportunities, it may be more difficult for us
to complete our initial business combination. If we have not
completed our initial business combination within the completion
window, our public stockholders may receive only approximately
$10.00 per share, or less in certain circumstances, on the
liquidation of our trust account, and our warrants will expire
worthless. |
| |
● |
If
the net proceeds of this offering and the sale of the private
placement warrants not being held in the trust account are
insufficient to allow us to operate for at least the duration of
the completion window, it could limit the amount available to fund
our search for a target business or businesses and complete our
initial business combination, and we will depend on loans from our
sponsor, its affiliates or our management team to fund our search
and to complete our initial business combination. |
| |
● |
Past
performance by our management team and their affiliates, including
investments and transactions in which they have participated and
businesses with which they have been associated, may not be
indicative of future performance of an investment in the
company. |
| |
● |
Unlike
some other similarly structured special purpose acquisition
companies, our initial stockholders will receive additional Class A
common stock if we issue certain shares to consummate an initial
business combination. |
| |
● |
We
may reincorporate in another jurisdiction in connection with our
initial business combination and such reincorporation may result in
taxes imposed on stockholders or warrant holders. |
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● |
Our
initial business combination and our structure thereafter may not
be tax-efficient to our stockholders and warrant holders. As a
result of our business combination, our tax obligations may be more
complex, burdensome and uncertain. |
PART I
References in this report to “we,” “us” or the “Company” refer to
Senior Connect Acquisition Corp. I. References to our “management”
or our “management team” refer to our officers and directors, and
references to the “Sponsor” refer to Health Connect Acquisitions
Holdings LLC, a Delaware limited liability company. References to
our “initial stockholders” refer to the Sponsor.
ITEM 1.
BUSINESS.
Introduction
We are a blank check company incorporated on August 27, 2020 as a
Delaware corporation formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more
businesses. We have neither engaged in any operations nor generated
any revenue to date. Based on our business activities, the Company
is a “shell company” as defined under the Exchange Act of 1934 (the
“Exchange Act”) because we have no operations and nominal assets
consisting almost entirely of cash.
On December 15, 2020, we consummated our initial public offering
(the “Public Offering”) of 41,400,000 units, including the issuance
of 5,400,000 units as a result of the underwriters’ exercise of
their over-allotment option in full. Each unit consists of one
share of Class A common stock and one-half of one redeemable
warrant. Each whole warrant entitles the holder thereof to purchase
one share of Class A common stock at a price of $11.50 per share.
The units were sold at an offering price of $10.00 per unit,
generating gross proceeds, before expenses, of $414,000,000. Prior
to the consummation of the Public Offering, on August 27, 2020, the
Sponsor purchased 10,062,500 shares of Class B common stock (the
“Founder Shares”) par value $0.0001 per share in exchange for a
capital contribution of $25,000, or $0.002 per share. On November
23, 2020, the Sponsor surrendered 1,437,500 shares of Class B
common stock to the Company for cancellation for no consideration,
resulting in the Sponsor holding 8,625,000 Founder Shares. On
December 10, 2020, we effected a 1:1.2 stock split of our Class B
common stock, resulting in an aggregate of 10,350,000 Founder
Shares outstanding, all of which are held by the Sponsor. The
number of Founder Shares outstanding was determined based on the
expectation that the Public Offering would be a maximum of
41,400,000 units and therefore that such Founder Shares would
represent, on an as-converted basis, 20% of the outstanding shares
of Class A common stock under the Public Offering.
Simultaneously with the consummation of the Public Offering, we
consummated the private placement of an aggregate of 10,280,000
private placement warrants, each exercisable to purchase one share
of Class A common stock at $11.50 per share, to the Sponsor at a
price of $1.00 per warrant, generating gross proceeds, before
expenses, of approximately $10,280,000 (the “Private Placement”).
The warrants sold in the Private Placement, or the private
placement warrants, are identical to the warrants included in the
units sold in the Public Offering, except that, so long as they are
held by their initial purchasers or their permitted transferees,
(i) they will not be redeemable by the Company, (ii) they
(including the shares of Class A common stock issuable upon
exercise of these warrants) may not, subject to certain limited
exceptions, be transferred, assigned or sold until 30 days after
the Company completes its initial business combination and (iii)
they may be exercised by the holders on a cashless basis.
Upon the closing of the Public Offering and the Private Placement,
$414,000,000 was placed in a trust account with Continental Stock
Transfer & Trust Company acting as trustee (the “Trust
Account”). Except for the withdrawal of interest to pay taxes, our
amended and restated certificate of incorporation (the “Charter”)
provides that none of the funds held in trust will be released from
the Trust Account until the earlier of (i) the completion of our
initial business combination; (ii) the redemption of any of the
shares of Class A common stock sold as part of the units sold in
our Public Offering (“public shares”) properly submitted in
connection with a stockholder vote to amend the Charter to modify
the substance or timing of our obligation to redeem 100% of the
public shares if we do not complete an initial business combination
by December 15, 2022 or with respect to any other material
provisions relating to stockholders’ rights or pre-initial business
combination activity or (iii) the redemption of 100% of the public
shares if we are unable to complete an initial business combination
by December 15, 2022. The proceeds held in the Trust Account may
only be invested in direct United States government treasury
obligations within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the “Investment Company
Act”), having a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act which invest only in direct U.S.
government treasury obligations.
After the payment of underwriting discounts and commissions
(excluding the deferred portion of $14,490,000 in underwriting
discounts and commissions, which amount will be payable upon
consummation of our initial business combination if consummated)
and approximately $1,000,000 in expenses relating to the Public
Offering, approximately $1,000,000 of the net proceeds of the
Public Offering and Private Placement was not deposited into the
Trust Account and was retained by us for working capital purposes.
The net proceeds deposited into the Trust Account remain on deposit
in the Trust Account earning interest. As of December 31, 2020,
there was $414.0 million in investments and cash held in the Trust
Account and approximately $0.9 million of cash held outside the
Trust Account available for working capital purposes.
Effecting Our Initial Business Combination
General
We are not presently engaged in, and we will not engage in, any
operations for an indefinite period of time. We intend to
effectuate our initial business combination using cash held in the
Trust Account, our equity, debt or a combination of these as the
consideration to be paid in our initial business combination. We
may seek to complete our initial business combination with a
company or business that may be financially unstable or in its
early stages of development or growth, which would subject us to
the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or
debt securities, or not all of the funds released from the Trust
Account are used for payment of the consideration in connection
with our initial business combination or used for redemptions of
our shares of Class A common stock, we may apply the balance of the
cash released to us from the Trust Account for general corporate
purposes, including for maintenance or expansion of operations of
the post-transaction company, the payment of principal or interest
due on indebtedness incurred in completing our initial business
combination, to fund the purchase of other companies or for working
capital.
Selection of Target Businesses
While we may pursue an initial business combination with a company
in any sector or geography, we intend to focus our search on
businesses serving the senior market or capable of being
repositioned to do so. Our Charter prohibits us from effectuating a
business combination with another blank check company or similar
company with nominal operations.
In accordance with Nasdaq listing rules, our initial business
combination must occur with one or more target businesses that
together have an aggregate fair market value of at least 80% of the
assets held in the trust account (excluding the deferred
underwriting commissions and taxes payable on the interest earned
on the trust account) at the time of signing the agreement to enter
into the initial business combination. We refer to this as the 80%
of fair market value test. The fair market value of the target or
targets will be determined by our Board based upon one or more
standards generally accepted by the financial community (such as
actual and potential sales, earnings, cash flow and/or book value).
Even though our Board will rely on generally accepted standards,
our Board will have discretion to select the standards employed. In
addition, the application of the standards generally involves a
substantial degree of judgement. Accordingly, investors will be
relying on the business judgment of the board of directors in
evaluating the fair market value of the target or targets. The
proxy solicitation materials or tender offer documents used by us
in connection with any proposed transaction will provide public
stockholders with our analysis of our satisfaction of the 80% of
fair market value test, as well as the basis for our
determinations. If our Board is not able to independently determine
the fair market value of the target business or businesses, we will
obtain an opinion from an independent investment banking firm that
is a member of the Financial Industry Regulatory Authority
(“FINRA”) or an independent valuation or appraisal firm with
respect to satisfaction of such criteria. If our Board is not able
to independently determine the fair market value of the target
business or businesses, or if we are considering an initial
business combination with an affiliated entity, we will obtain an
opinion with respect to the satisfaction of such criteria from an
independent investment bank or an independent valuation or
accounting firm. We do not intend to purchase multiple businesses
in unrelated industries in conjunction with our initial business
combination. Subject to this stipulation, our management will have
virtually unrestricted flexibility in identifying and selecting one
or more prospective businesses, although we will not be permitted
to effectuate our initial business combination with another blank
check company or a similar company with nominal operations.
We anticipate structuring our initial business combination so that
the post-transaction company in which our public shareholders own
shares will own or acquire 100% of the equity interests or assets
of the target business or businesses. We may, however, structure
our initial business combination such that the post-transaction
company owns or acquires less than 100% of such interests or assets
of the target business, in order to meet certain objectives of the
prior owners of the target business, 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 of 1940, as amended, or
the Investment Company Act. Even if the post-transaction company
owns or acquires 50% or more of the voting securities of the
target, our shareholders prior to the business combination may
collectively own a minority interest in the post-transaction
company, depending on valuations ascribed to the target and us in
the business combination transaction. For example, we could pursue
a transaction in which we issue a substantial number of new shares
in exchange for all of the outstanding capital stock of a target.
In this case, we would acquire a 100% controlling interest in the
target. However, as a result of the issuance of a substantial
number of new shares, our shareholders immediately prior to our
initial business combination could own less than a majority of our
outstanding shares subsequent to our initial business combination.
If less than 100% of the equity interests or assets of a target
business or businesses are owned or acquired by the
post-transaction company, the portion of such business or
businesses that is owned or acquired is what will be valued for
purposes of the 80% of fair market value test. If the business
combination involves more than one target business, the 80% of fair
market value test will be based on the aggregate value of all of
the target businesses and we will treat the target businesses
together as the initial business combination for purposes of a
tender offer or for seeking shareholder approval, as
applicable.
To the extent we effect our initial business combination with a
company or companies that may be financially unstable or in early
stages of development or growth, we may be affected by numerous
risks inherent in such a situation. Although our management will
endeavor to evaluate the risks inherent in a particular target
business, we cannot assure you that we will properly ascertain or
assess all significant risk factors.
We will craft a priority list of companies based on the acquisition
criteria above. These companies will primarily be sourced through
our management team’s long-standing, extensive network of industry
executives, investment firms, consultants, and intermediaries.
In evaluating a prospective target business, we expect to conduct a
due diligence review which may encompass, among other things,
meetings with management, document reviews, primary research,
policy research, on-site visits, and a review of financial and
other information about the target and its industry. We will lean
heavily upon the decades of our management team’s experience
conducting diligence on a broad set of private and publicly held
healthcare companies. We expect this experience to allow our
management to quickly focus on the key, material investment drivers
and reach the most insightful experts for the issue(s) at hand.
The time required to select and evaluate a target business and to
structure and complete our initial business combination, and the
costs associated with this process, are not currently ascertainable
with any degree of certainty. Any costs incurred with respect to
the identification and evaluation of a prospective target business
with which our initial business combination is not ultimately
completed will result in our incurring losses and will reduce the
funds we can use to complete another business combination.
Permitted Purchases of Our Securities
If we seek stockholder approval of our initial business combination
and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our
initial stockholders, directors, officers, advisors or their
respective affiliates may purchase shares or public warrants in
privately negotiated transactions or in the open market either
prior to or following the completion of our initial business
combination. There is no limit on the number of shares our initial
stockholders, directors, officers, advisors or their respective
affiliates may purchase in such transactions, subject to compliance
with applicable law and Nasdaq rules. However, they have no current
commitments, plans or intentions to engage in such transactions and
have not formulated any terms or conditions for any such
transactions. None of the funds in the trust account will be used
to purchase shares or public warrants in such transactions. If they
engage in such transactions, they will be restricted from making
any such purchases when they are in possession of any material
non-public information not disclosed to the seller or if such
purchases are prohibited by Regulation M under the Exchange
Act.
In the event that our initial stockholders, directors, officers,
advisors or their respective affiliates purchase shares in
privately negotiated transactions from public stockholders who have
already elected to exercise their redemption rights, such selling
stockholders would be required to revoke their prior elections to
redeem their shares. We do not currently anticipate that such
purchases, if any, would constitute a tender offer subject to the
tender offer rules under the Exchange Act or a going-private
transaction subject to the going-private rules under the Exchange
Act; however, if the purchasers determine at the time of any such
purchases that the purchases are subject to such rules, the
purchasers will comply with such rules.
The purpose of any such purchases of shares could be to (i) vote
such shares in favor of the business combination and thereby
increase the likelihood of obtaining stockholder approval of the
business combination or (ii) to satisfy a closing condition in an
agreement with a target that requires us to have a minimum net
worth or a certain amount of cash at the closing of our initial
business combination, where it appears that such requirement would
otherwise not be met. The purpose of any such purchases of public
warrants could be to reduce the number of public warrants
outstanding or to vote such warrants on any matters submitted to
the warrant holders for approval in connection with our initial
business combination. Any such purchases of our securities may
result in the completion of our initial business combination that
may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our
Class A common stock or public warrants may be reduced and the
number of beneficial holders of our securities may be reduced,
which may make it difficult to maintain or obtain the quotation,
listing or trading of our securities on a national securities
exchange.
Our initial stockholders, officers, directors and/or their
respective affiliates anticipate that they may identify the
stockholders with whom our initial stockholders, officers,
directors or their respective affiliates may pursue privately
negotiated purchases by either the stockholders contacting us
directly or by our receipt of redemption requests submitted by
stockholders (in the case of Class A common stock) following our
mailing of proxy materials in connection with our initial business
combination. To the extent that our sponsor, officers, directors,
advisors or their respective affiliates enter into a private
purchase, they would identify and contact only potential selling
stockholders who have expressed their election to redeem their
shares for a pro rata share of the trust account or vote against
our initial business combination, whether or not such stockholder
has already submitted a proxy with respect to our initial business
combination but only if such shares have not already been voted at
the stockholder meeting related to our initial business
combination. Our sponsor, officers, directors, advisors or any of
their respective affiliates will select which stockholders to
purchase shares from based on a negotiated price and number of
shares and any other factors that they may deem relevant, and will
only purchase shares if such purchases comply with Regulation M
under the Exchange Act and the other federal securities laws. Our
sponsor, officers, directors and/or their respective affiliates
will be restricted from making purchases of shares if the purchases
would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. We
expect any such purchases will be reported pursuant to Section 13
and Section 16 of the Exchange Act to the extent such purchases are
subject to such reporting requirements.
Redemption Rights for Public Stockholders upon Completion of
Our Initial Business Combination
We will provide our public stockholders with the opportunity to
redeem all or a portion of their public shares upon the completion
of our initial business combination at a per share price, payable
in cash, equal to the aggregate amount then on deposit in the trust
account calculated as of two business days prior to the
consummation of our initial business combination, including
interest earned on the funds held in the trust account and not
previously released to us to pay our taxes, divided by the number
of then outstanding public shares, subject to the limitations and
on the conditions described herein. The amount in the trust account
is initially anticipated to be $10.00 per public share. The per
share amount we will distribute to investors who properly redeem
their shares will not be reduced by the deferred underwriting
commissions we will pay to the underwriters. There will be no
redemption rights upon the completion of our initial business
combination with respect to our warrants. Our initial stockholders,
officers and directors have entered into a letter agreement with
us, pursuant to which they have agreed to waive their redemption
rights with respect to any founder shares they hold and any public
shares they may acquire during or after the Public Offering in
connection with the completion of our initial business
combination.
Limitations on Redemptions
Our amended and restated certificate of incorporation provides that
in no event will we redeem our public shares in an amount that
would cause our net tangible assets to be less than $5,000,001. In
addition, our proposed initial business combination may impose a
minimum cash requirement for: (i) cash consideration to be
paid to the target or its owners, (ii) cash for working
capital or other general corporate purposes or (iii) the
retention of cash to satisfy other conditions. In the event the
aggregate cash consideration we would be required to pay for all
shares of Class A common stock that are validly submitted for
redemption plus any amount required to satisfy cash conditions
pursuant to the terms of the proposed initial business combination
exceed the aggregate amount of cash available to us, we will not
complete the initial business combination or redeem any shares in
connection with such initial business combination, and all shares
of Class A common stock submitted for redemption will be
returned to the holders thereof. We may, however, raise funds
through the issuance of equity-linked securities or through
loans, advances or other indebtedness in connection with our
initial business combination, including pursuant to forward
purchase agreements or backstop arrangements we may enter into
following consummation of the Public Offering, in order to, among
other reasons, satisfy such net tangible assets or minimum cash
requirements.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to
redeem all or a portion of their public shares upon the completion
of our initial business combination either (i) in connection
with a stockholder meeting called to approve the initial business
combination or (ii) without a stockholder vote by means of a
tender offer. The decision as to whether we will seek stockholder
approval of a proposed initial business combination or conduct 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 require
us to seek stockholder approval under applicable law or stock
exchange listing requirements. Asset acquisitions and stock
purchases would not typically require stockholder approval while
direct mergers with our company where we do not survive and any
transactions where we issue more than 20% of our outstanding common
stock or seek to amend our amended and restated certificate of
incorporation would require stockholder approval. So long as we
obtain and maintain a listing for our securities on Nasdaq, we will
be required to comply with Nasdaq’s stockholder approval rules.
The requirement that we provide our public stockholders with the
opportunity to redeem their public shares by one of the two methods
listed above will be contained in provisions of our amended and
restated certificate of incorporation and will apply whether or not
we maintain our registration under the Exchange Act or our listing
on Nasdaq. Such provisions may be amended if approved by holders of
65% of our common stock entitled to vote thereon.
If we provide our public stockholders with the opportunity to
redeem their public shares in connection with a stockholder
meeting, we will:
| |
● |
conduct
the redemptions in conjunction with a proxy solicitation pursuant
to Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies, and not pursuant to the tender offer
rules, and |
| |
● |
file
proxy materials with the SEC. |
If we seek stockholder approval, we will complete our initial
business combination only if a majority of the outstanding shares
of common stock voted are voted in favor of the initial business
combination. A quorum for such meeting will consist of the holders
present in person or by proxy of shares of outstanding capital
stock of the company representing a majority of the voting power of
all outstanding shares of capital stock of the company entitled to
vote at such meeting. Our initial stockholders will count towards
this quorum and, pursuant to the letter agreement, our sponsor,
officers and directors have agreed to vote any founder shares they
hold and any public shares purchased during or after the Public
Offering (including in open market and
privately-negotiated transactions) in favor of our initial
business combination. For purposes of seeking approval of the
majority of our outstanding shares of common stock voted,
non-votes will have no effect on the approval of our initial
business combination once a quorum is obtained. As a result, in
addition to our initial stockholders’ founder shares, we would need
only 13,500,001, or 37.5% (assuming all issued and outstanding
shares are voted), or 2,250,001, or 6.25% (assuming only the
minimum number of shares representing a quorum are voted), of the
36,000,000 public shares sold in the Public Offering to be voted in
favor of an initial business combination in order to have our
initial business combination approved (assuming the
over-allotment option was not exercised). These quorum and
voting thresholds, and the voting agreements of our initial
stockholders, may make it more likely that we will consummate our
initial business combination. Each public stockholder may elect to
redeem its public shares irrespective of whether they vote for or
against the proposed transaction or whether they were a stockholder
on the record date for the stockholder meeting held to approve the
proposed transaction.
If a stockholder vote is not required and we do not decide to hold
a stockholder vote for business or other reasons, we will:
| |
● |
conduct
the redemptions pursuant to Rule 13e-4 and
Regulation 14E of the Exchange Act, which regulate issuer
tender offers, and |
| |
● |
file
tender offer documents with the SEC prior to completing our initial
business combination, which contain substantially the same
financial and other information about the initial business
combination and the redemption rights as is required under
Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies. |
In the event we conduct redemptions pursuant to the tender offer
rules, our offer to redeem will remain open for at least 20
business days, in accordance with Rule 14e-1(a) under the
Exchange Act, and we will not be permitted to complete our initial
business combination until the expiration of the tender offer
period. In addition, the tender offer will be conditioned on public
stockholders not tendering more than a specified number of public
shares, which number will be based on the requirement that we may
not redeem public shares in an amount that would cause our net
tangible assets to be less than $5,000,001. If public stockholders
tender more shares than we have offered to purchase, we will
withdraw the tender offer and not complete the initial business
combination.
Upon the public announcement of our initial business combination,
if we elect to conduct redemptions pursuant to the tender offer
rules, we or our sponsor will terminate any plan established in
accordance with Rule 10b5-1 to purchase shares of our
Class A common stock in the open market, in order to comply
with Rule 14e-5 under the Exchange Act.
We intend to require our public stockholders seeking to exercise
their redemption rights, whether they are record holders or hold
their shares in “street name,” to, at the holder’s option, either
deliver their stock certificates to our transfer agent or deliver
their shares to our transfer agent electronically using The
Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian)
system, prior to the date set forth in the proxy materials or
tender offer documents, as applicable. In the case of proxy
materials, this date may be up to two business days prior to the
date on which the vote on the proposal to approve the initial
business combination is to be held. In addition, if we conduct
redemptions in connection with a stockholder vote, we intend to
require a public stockholder seeking redemption of its public
shares to also submit a written request for redemption to our
transfer agent two business days prior to the vote in which the
name of the beneficial owner of such shares is included. The proxy
materials or tender offer documents, as applicable, that we will
furnish to holders of our public shares in connection with our
initial business combination will indicate whether we are requiring
public stockholders to satisfy such delivery requirements. We
believe that this will allow our transfer agent to efficiently
process any redemptions without the need for further communication
or action from the redeeming public stockholders, which could delay
redemptions and result in additional administrative cost. If the
proposed initial business combination is not approved and we
continue to search for a target company, we will promptly return
any certificates or shares delivered by public stockholders who
elected to redeem their shares.
Our amended and restated certificate of incorporation provides that
in no event will we redeem our public shares in an amount that
would cause our net tangible assets to be less than $5,000,001. In
addition, our proposed initial business combination may impose a
minimum cash requirement for: (i) cash consideration to be
paid to the target or its owners, (ii) cash for working
capital or other general corporate purposes or (iii) the
retention of cash to satisfy other conditions. In the event the
aggregate cash consideration we would be required to pay for all
shares of Class A common stock that are validly submitted for
redemption plus any amount required to satisfy cash conditions
pursuant to the terms of the proposed initial business combination
exceed the aggregate amount of cash available to us, we will not
complete the initial business combination or redeem any shares in
connection with such initial business combination, and all shares
of Class A common stock submitted for redemption will be
returned to the holders thereof. We may, however, raise funds
through the issuance of equity-linked securities or through
loans, advances or other indebtedness in connection with our
initial business combination, including pursuant to forward
purchase agreements or backstop arrangements we may enter into
following consummation of the Public Offering, in order to, among
other reasons, satisfy such net tangible assets or minimum cash
requirements.
Limitation on Redemption Upon Completion of Our Initial
Business Combination If We Seek Stockholder Approval
If we seek stockholder approval of our initial business combination
and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our
amended and restated certificate of incorporation provides that a
public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert
or as a “group” (as defined under Section 13 of the Exchange
Act), will be restricted from seeking redemption rights with
respect to Excess Shares, without our prior consent. We believe
this restriction will discourage stockholders from accumulating
large blocks of shares, and subsequent attempts by such holders to
use their ability to exercise their redemption rights against a
proposed business combination as a means to force us or our
management to purchase their shares at a significant premium to the
then-current market price or on other undesirable terms.
Absent this provision, a public stockholder holding more than an
aggregate of 15% of the shares sold in the Public Offering could
threaten to exercise its redemption rights if such holder’s shares
are not purchased by us, our sponsor or our management at a premium
to the then-current market price or on other undesirable
terms. By limiting our stockholders’ ability to redeem no more than
15% of the shares sold in the Public Offering without our prior
consent, we believe we will limit the ability of a small group of
stockholders to unreasonably attempt to block our ability to
complete our initial business combination, particularly in
connection with a business combination with a target that requires
as a closing condition that we have a minimum net worth or a
certain amount of cash.
However, we would not be restricting our stockholders’ ability to
vote all of their shares (including Excess Shares) for or against
our initial business combination.
Delivering Stock Certificates in Connection with the Exercise
of Redemption Rights
As described above, we intend to require our public stockholders
seeking to exercise their redemption rights, whether they are
record holders or hold their shares in “street name,” to, at the
holder’s option, either deliver their stock certificates to our
transfer agent or deliver their shares to our transfer agent
electronically using The Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) system, prior to the date set
forth in the proxy materials or tender offer documents, as
applicable. In the case of proxy materials, this date may be up to
two business days prior to the date on which the vote on the
proposal to approve the initial business combination is to be held.
In addition, if we conduct redemptions in connection with a
stockholder vote, we intend to require a public stockholder seeking
redemption of its public shares to also submit a written request
for redemption to our transfer agent two business days prior to the
vote in which the name of the beneficial owner of such shares is
included. The proxy materials or tender offer documents, as
applicable, that we will furnish to holders of our public shares in
connection with our initial business combination will indicate
whether we are requiring public stockholders to satisfy such
delivery requirements. Accordingly, a public stockholder would have
up to two business days prior to the vote on the initial business
combination if we distribute proxy materials, or from the time we
send out our tender offer materials until the close of the tender
offer period, as applicable, to submit or tender its shares if it
wishes to seek to exercise its redemption rights. In the event that
a stockholder fails to comply with these or any other procedures
disclosed in the proxy or tender offer materials, as applicable,
its shares may not be redeemed. Given the relatively short exercise
period, it is advisable for stockholders to use electronic delivery
of their public shares.
There is a nominal cost associated with the
above-referenced process and the act of certificating the
shares or delivering them through the DWAC system. The transfer
agent will typically charge the broker submitting or tendering
shares a fee of approximately $80.00 and it would be up to the
broker whether or not to pass this cost on to the redeeming holder.
However, this fee would be incurred regardless of whether or not we
require holders seeking to exercise redemption rights to submit or
tender their shares. The need to deliver shares is a requirement of
exercising redemption rights regardless of the timing of when such
delivery must be effectuated.
Any request to redeem such shares, once made, may be withdrawn at
any time up to the date set forth in the proxy materials or tender
offer documents, as applicable. Furthermore, if a holder of a
public share delivered its certificate in connection with an
election of redemption rights and subsequently decides prior to the
applicable date not to elect to exercise such rights, such holder
may simply request that the transfer agent return the certificate
(physically or electronically). It is anticipated that the funds to
be distributed to holders of our public shares electing to redeem
their shares will be distributed promptly after the completion of
our initial business combination.
If our initial business combination is not approved or completed
for any reason, then our public stockholders who elected to
exercise their redemption rights would not be entitled to redeem
their shares for the applicable pro rata share of the trust
account. In such case, we will promptly return any certificates
delivered by public holders who elected to redeem their shares.
If our initial proposed initial business combination is not
completed, we may continue to try to complete an initial business
combination with a different target until 24 months from the
closing of the Public Offering.
Conduct of Redemptions Pursuant to Tender Offer
Rules
If we conduct redemptions pursuant to the tender offer rules of the
U.S. Securities and Exchange Commission (the “SEC”), we will,
pursuant to our Charter: (a) conduct the redemptions pursuant to
Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate
issuer tender offers; and (b) file tender offer documents with the
SEC prior to completing our initial business combination which
contain substantially the same financial and other information
about the initial business combination and the redemption rights as
is required under Regulation 14A of the Exchange Act, which
regulates the solicitation of proxies.
Submission of Our Initial Business Combination to a
Stockholder Vote
In the event that we seek stockholder approval of our initial
business combination, we will distribute proxy materials and, in
connection therewith, provide our public stockholders with the
redemption rights described above upon completion of the initial
business combination.
If we seek shareholder approval, we will complete our initial
business combination only if a majority of the outstanding shares
of common stock voted are voted in favor of the business
combination. A quorum for such meeting will consist of the holders
present in person or by proxy of shares of outstanding capital
stock of the company representing a majority of the voting power of
all outstanding shares of capital stock of the company entitled to
vote at such meeting. Our initial stockholders will count towards
this quorum and, pursuant to the letter agreement, our sponsor,
officers and directors have agreed to vote any founder shares they
hold and any public shares purchased during or after the Public
Offering (including in open market and
privately-negotiated transactions) in favor of our initial
business combination. For purposes of seeking approval of the
majority of our outstanding shares of common stock voted,
non-votes will have no effect on the approval of our initial
business combination once a quorum is obtained. As a result, in
addition to our initial stockholders’ founder shares, we would need
only 13,500,001, or 37.5% (assuming all issued and outstanding
shares are voted), or 2,250,001, or 6.25% (assuming only the
minimum number of shares representing a quorum are voted), of the
36,000,000 public shares sold in the Public Offering to be voted in
favor of an initial business combination in order to have our
initial business combination approved (assuming the
over-allotment option was not exercised). These quorum and
voting thresholds, and the voting agreements of our initial
stockholders, may make it more likely that we will consummate our
initial business combination. Each public stockholder may elect to
redeem its public shares irrespective of whether they vote for or
against the proposed transaction or whether they were a stockholder
on the record date for the stockholder meeting held to approve the
proposed transaction.
Redemption of Public Shares and Liquidation If No Initial
Business Combination
Our Charter provides that we will have only 24 months from the
closing of the Public Offering to complete our initial business
combination or during any Extension Period. If we are unable to
complete our initial business combination within such time period,
we will: (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten
business days thereafter, redeem the public shares, at a per share
price, payable in cash, equal to the aggregate amount then on
deposit in the trust account, including interest earned on the
funds held in the trust account and not previously released to us
to pay our taxes (less up to $100,000 of interest to pay
dissolution expenses), divided by the number of then outstanding
public shares, which redemption will completely extinguish public
stockholders’ rights as stockholders (including the right to
receive further liquidating distributions, if any), and (iii) as
promptly as reasonably possible following such redemption, subject
to the approval of our remaining stockholders and our board of
directors, liquidate and dissolve, subject, in each case, to our
obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. There will be no
redemption rights or liquidating distributions with respect to our
warrants, which will expire worthless if we fail to complete our
initial business combination within the prescribed time period.
Our initial stockholders, officers and directors have entered into
a letter agreement with us, pursuant to which they have waived
their rights to liquidating distributions from the trust account
with respect to their founder shares if we fail to complete our
initial business combination within 24 months from the closing of
the Public Offering or during any Extension Period. However, if our
initial stockholders, officers or directors acquire public shares
in or after the Public Offering, they will be entitled to
liquidating distributions from the trust account with respect to
such public shares if we fail to complete our initial business
combination within the allotted time period.
The underwriters have agreed to waive their rights to their
deferred underwriting commission held in the trust account in the
event we do not complete our initial business combination and
subsequently liquidate and, in such event, such amounts will be
included with the funds held in the trust account that will be
available to fund the redemption of our public shares.
Our initial stockholders, officers and directors have agreed,
pursuant to a letter agreement with us, that they will not propose
any amendment to our amended and restated certificate of
incorporation to modify the substance or timing of our obligation
to allow redemption in connection with our initial business
combination or to redeem 100% of our public shares if we do not
complete our initial business combination within 24 months from the
closing of the Public Offering or with respect to any other
material provisions relating to stockholders’ rights or pre-initial
business combination activity, unless we provide our public
stockholders with the opportunity to redeem their Class A common
stock upon approval of any such amendment at a per share price,
payable in cash, equal to the aggregate amount then on deposit in
the trust account, including interest earned on the funds held in
the trust account and not previously released to us to pay our
taxes, divided by the number of then outstanding public shares,
subject to the limitations described above under “Limitations on
redemptions.” For example, our board of directors may propose such
an amendment if it determines that additional time is necessary to
complete our initial business combination. In such event, we will
conduct a proxy solicitation and distribute proxy materials
pursuant to Regulation 14A of the Exchange Act seeking stockholder
approval of such proposal, and in connection therewith, provide our
public stockholders with the redemption rights described above upon
stockholder approval of such amendment.
Competition
In identifying, evaluating and selecting a target business for our
business combination, we may encounter intense competition from
other entities having a business objective similar to ours,
including private investors (which may be individuals or investment
partnerships), other blank check companies, and other entities,
domestic and international, competing for the types of businesses
we intend to acquire. Many of these individuals and entities are
well-established and have extensive experience in identifying and
effecting, directly or indirectly, acquisitions of companies
operating in or providing services to various industries. Many of
these competitors possess similar or greater technical, human and
other resources to ours or more local industry knowledge than we do
and our financial resources will be relatively limited when
contrasted with those of many of these competitors. While we
believe there are numerous target businesses we could potentially
acquire with the net proceeds of the Public Offering and the sale
of the private placement warrants, our ability to compete with
respect to the acquisition of certain target businesses that are
sizable will be limited by our available financial resources. This
inherent competitive limitation gives others an advantage in
pursuing the acquisition of certain target businesses. Furthermore,
we are obligated to offer holders of our public shares the right to
redeem their shares for cash at the time of our initial business
combination in conjunction with a stockholder vote or via a tender
offer. Target companies will be aware that this may reduce the
resources available to us for our initial business combination. Any
of these obligations may place us at a competitive disadvantage in
successfully negotiating a business combination. If we are unable
to complete our initial business combination, our public
stockholders may receive only their pro rata portion of the funds
in the trust account that are available for distribution to public
stockholders, and our warrants will expire worthless.
Employees
We currently have four executive officers: Richard T. Burke, Isaac
Applbaum, Ryan Burke and Steven Schwartz. These individuals are not
obligated to devote any specific number of hours to our matters but
they intend to devote as much of their time as they deem necessary
to our affairs until we have completed our initial business
combination. The amount of time they will devote in any time period
will vary based on whether a target business has been selected for
our initial business combination and the stage of the business
combination process we are in. We do not intend to have any full
time employees prior to the completion of our initial business
combination.
Available Information
We are required to file Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q with the SEC on a regular basis, and are
required to disclose certain material events (e.g., changes in
corporate control, acquisitions or dispositions of a significant
amount of assets other than in the ordinary course of business and
bankruptcy) in a Current Report on Form 8-K. The SEC maintains an
Internet website that contains reports, proxy and information
statements and other information regarding issuers that file
electronically with the SEC. The SEC’s Internet website is located
at http://www.sec.gov. In addition, the Company will provide copies
of these documents without charge upon request from us in writing
at 7114 East Stetson Drive, Suite 400, Scottsdale, AZ 85251or by
telephone at (480) 948-9200.
ITEM 1A. RISK
FACTORS.
RISK
FACTORS
An investment in our securities involves a high degree of risk. You
should consider carefully all of the risks described below,
together with the other information contained in this Annual Report
on Form 10-K and the prospectus associated with our Public
Offering, before making a decision to invest in our securities. If
any of the following events occur, our business, financial
condition and operating results may be materially adversely
affected. In that event, the trading price of our securities could
decline, and you could lose all or part of your investment.
RISKS RELATING TO OUR SEARCH FOR, AND CONSUMMATION OF OR
INABILITY TO
CONSUMMATE, A BUSINESS COMBINATION
Our stockholders may not be afforded an opportunity to vote on
our proposed initial business combination, and even if we hold a
vote, holders of our founder shares will participate in such vote,
which means we may complete our initial business combination even
though a majority of our public stockholders do not support such a
combination.
We may choose not to hold a stockholder vote to approve our initial
business combination if the business combination would not require
stockholder approval under applicable law or stock exchange listing
requirement. Except for as required by applicable law or stock
exchange requirement, the decision as to whether we will seek
stockholder approval of a proposed business combination or will
allow stockholders to sell their shares to us in a tender offer
will be made by us, solely in our discretion, and will be based on
a variety of factors, such as the timing of the transaction and
whether the terms of the transaction would otherwise require us to
seek stockholder approval. Even if we seek stockholder approval,
the holders of our founder shares will participate in the vote on
such approval. Accordingly, we may complete our initial business
combination even if a majority of our public stockholders do not
approve of the business combination we complete. Please see the
section entitled “Proposed Business — Stockholders May Not
Have the Ability to Approve Our Initial Business Combination” for
additional information.
If we seek stockholder approval of our initial business
combination, our initial stockholders and management team have
agreed to vote in favor of such initial business combination,
regardless of how our public stockholders vote.
Our initial stockholders will own 20% of our outstanding common
stock immediately following the completion of the Public Offering.
Our initial stockholders and management team also may from time to
time purchase Class A common stock prior to our initial
business combination. Our amended and restated certificate of
incorporation provides that, if we seek stockholder approval of an
initial business combination, such initial business combination
will be approved if we receive the affirmative vote of a majority
of the shares voted at such meeting, including the founder shares.
As a result, in addition to our initial stockholders’ founder
shares, we would need 13,500,001, or 37.5% (assuming all issued and
outstanding shares are voted), or 2,250,001, or 6.25% (assuming
only the minimum number of shares representing a quorum are voted),
of the 36,000,000 public shares sold in the Public Offering to be
voted in favor of an initial business combination in order to have
our initial business combination approved (assuming the
over-allotment option was not exercised). Accordingly, if we
seek stockholder approval of our initial business combination, the
agreement by our initial stockholders and management team to vote
in favor of our initial business combination will increase the
likelihood that we will receive the requisite stockholder approval
for such initial business combination.
Your only opportunity to affect the investment decision
regarding a potential business combination may be limited to the
exercise of your right to redeem your shares from us for
cash.
At the time of your investment in us, you will not be provided with
an opportunity to evaluate the specific merits or risks of our
initial business combination. Since our board of directors may
complete a business combination without seeking stockholder
approval, public stockholders may not have the right or opportunity
to vote on the business combination, unless we seek such
stockholder vote. Accordingly, your only opportunity to affect the
investment decision regarding our initial business combination may
be limited to exercising your redemption rights within the period
of time (which will be at least 20 business days) set forth in our
tender offer documents mailed to our public stockholders in which
we describe our initial business combination.
The ability of our public stockholders to redeem their shares
for cash may make our financial condition unattractive to potential
business combination targets, which may make it difficult for us to
enter into a business combination with a target.
We may seek to enter into a business combination transaction
agreement with minimum cash requirement for (i) cash
consideration to be paid to the target or its owners,
(ii) cash for working capital or other general corporate
purposes or (iii) the retention of cash to satisfy other
conditions. If too many public stockholders exercise their
redemption rights, we would not be able to meet such closing
condition and, as a result, would not be able to proceed with the
business combination. Furthermore, in no event will we redeem our
public shares in an amount that would cause our net tangible assets
to be less than $5,000,001. Consequently, if accepting all properly
submitted redemption requests would cause our net tangible assets
to be less than $5,000,001 or make us unable to satisfy a minimum
cash condition as described above, we would not proceed with such
redemption and the related business combination and may instead
search for an alternate business combination. Prospective targets
will be aware of these risks and, thus, may be reluctant to enter
into a business combination transaction with us.
The ability of our public stockholders to exercise redemption
rights with respect to a large number of our shares may not allow
us to complete the most desirable business combination or optimize
our capital structure.
At the time we enter into an agreement for our initial business
combination, we will not know how many stockholders may exercise
their redemption rights, and therefore will need to structure the
transaction based on our expectations as to the number of shares
that will be submitted for redemption. If our initial business
combination agreement requires us to use a portion of the cash in
the trust account to pay the purchase price, or requires us to have
a minimum amount of cash at closing, we will need to reserve a
portion of the cash in the trust account to meet such requirements,
or arrange for third party financing. In addition, if a larger
number of shares is submitted for redemption than we initially
expected, we may need to restructure the transaction to reserve a
greater portion of the cash in the trust account or arrange for
third party financing. Raising additional third party financing may
involve dilutive equity issuances or the incurrence of indebtedness
at higher than desirable levels. Furthermore, this dilution would
increase to the extent that the anti-dilution provision of the
Class B common stock results in the issues of shares of
Class A common stock on a greater than one-to-one basis
upon conversion of the shares of Class B common stock at the
time of our initial business combination. In addition, the amount
of the deferred underwriting commissions payable to the
underwriters will not be adjusted for any shares that are redeemed
in connection with an initial business combination. The per share
amount we will distribute to stockholders who properly exercise
their redemption rights will not be reduced by the deferred
underwriting commission and after such redemptions, the amount held
in trust will continue to reflect our obligation to pay the entire
deferred underwriting commissions. The above considerations may
limit our ability to complete the most desirable business
combination available to us or optimize our capital structure.
The ability of our public stockholders to exercise redemption
rights with respect to a large number of our shares could increase
the probability that our initial business combination would be
unsuccessful and that you would have to wait for liquidation in
order to redeem your shares.
If our initial business combination agreement requires us to use a
portion of the cash in the trust account to pay the purchase price,
or requires us to have a minimum amount of cash at closing, the
probability that our initial business combination would be
unsuccessful is increased. If our initial business combination is
unsuccessful, you would not receive your pro rata portion of the
trust account until we liquidate the trust account. If you are in
need of immediate liquidity, you could attempt to sell your shares
in the open market; however, at such time our shares may trade at a
discount to the pro rata amount per share in the trust account. In
either situation, you may suffer a material loss on your investment
or lose the benefit of funds expected in connection with your
exercise of redemption rights until we liquidate or you are able to
sell your shares in the open market.
Our search for a business combination, and any target business
with which we ultimately consummate a business combination, may be
materially adversely affected by the coronavirus (COVID-19)
outbreak and the status of debt and equity markets.
In December 2019, a novel strain of coronavirus was reported
to have surfaced in Wuhan, China, which has and is continuing to
spread throughout China and other parts of the world, including the
United States. On January 30, 2020, the World Health
Organization declared the outbreak of the coronavirus disease
(COVID-19) a “Public Health Emergency of International Concern.” On
January 31, 2020, U.S. Health and Human Services Secretary
Alex M. Azar II declared a public health emergency for the
United States to aid the U.S. healthcare community in
responding to COVID-19, and on March 11, 2020 the World Health
Organization characterized the outbreak as a “pandemic”. The
COVID-19 outbreak has and a significant outbreak of other
infectious diseases could result in a widespread health crisis that
could adversely affect the economies and financial markets
worldwide, and the business of any potential target business with
which we consummate a business combination could be materially and
adversely affected. Furthermore, we may be unable to complete a
business combination if continued concerns relating to
COVID-19 continues to restrict travel, limit the ability to
have meetings with potential investors or the target company’s
personnel, vendors and services providers are unavailable to
negotiate and consummate a transaction in a timely manner. The
extent to which COVID-19 impacts our search for a business
combination will depend on future developments, which are highly
uncertain and cannot be predicted, including new information which
may emerge concerning the severity of COVID-19 and the actions
to contain COVID-19 or treat its impact, among others. If the
disruptions posed by COVID-19 or other matters of global
concern continue for an extensive period of time, our ability to
consummate a business combination, or the operations of a target
business with which we ultimately consummate a business
combination, may be materially adversely affected.
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, 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.
The requirement that we complete our initial business
combination within 24 months after the closing of the Public
Offering may give potential target businesses leverage over us in
negotiating a business combination and may limit the time we have
in which to conduct due diligence on potential business combination
targets, in particular as we approach our dissolution deadline,
which could undermine our ability to complete our initial business
combination on terms that would produce value for our
stockholders.
Any potential target business with which we enter into negotiations
concerning a business combination will be aware that we must
complete our initial business combination within 24 months
from the closing of the Public Offering. Consequently, such target
business may obtain leverage over us in negotiating a business
combination, knowing that if we do not complete our initial
business combination with that particular target business, we may
be unable to complete our initial business combination with any
target business. This risk will increase as we get closer to the
timeframe described above. In addition, we may have limited time to
conduct due diligence and may enter into our initial business
combination on terms that we would have rejected upon a more
comprehensive investigation.
We may not be able to complete our initial business combination
within 24 months after the closing of the Public Offering, in which
case we would cease all operations except for the purpose of
winding up and we would redeem our public shares and
liquidate.
We may not be able to find a suitable target business and complete
our initial business combination within 24 months after the
closing of the Public Offering. Our ability to complete our initial
business combination may be negatively impacted by general market
conditions, volatility in the capital and debt markets and the
other risks described herein. For example, the outbreak of
COVID-19 continues to grow both in the U.S. and globally and,
while the extent of the impact of the outbreak on us will depend on
future developments, it could limit our ability to complete our
initial business combination, including as a result of increased
market volatility, decreased market liquidity and
third-party financing being unavailable on terms acceptable to
us or at all. Additionally, the outbreak of COVID-19 may
negatively impact businesses we may seek to acquire. If we have not
completed our initial business combination within such time period,
we will: (i) cease all operations except for the purpose of
winding up, (ii) as promptly as reasonably possible but not
more than ten business days thereafter, redeem the public shares,
at a per share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account, including interest
earned on the funds held in the trust account and not previously
released to us to pay our taxes (less up to $100,000 of interest to
pay dissolution expenses), divided by the number of then
outstanding public shares, which redemption will completely
extinguish public stockholders’ rights as stockholders (including
the right to receive further liquidating distributions, if any),
and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining stockholders
and our board of directors, liquidate and dissolve, subject in each
case, to our obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
If we seek stockholder approval of our initial business
combination, our initial stockholders, directors, executive
officers, advisors and their respective affiliates may elect to
purchase shares or public warrants from public stockholders, which
may influence a vote on a proposed business combination and reduce
the public “float” of our Class A common stock.
If we seek stockholder approval of our initial business combination
and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our
initial stockholders, directors, executive officers, advisors or
their respective affiliates may purchase shares or public warrants
in privately negotiated transactions or in the open market either
prior to or following the completion of our initial business
combination, although they are under no obligation to do so. There
is no limit on the number of shares our initial stockholders,
directors, officers, advisors or their respective affiliates may
purchase in such transactions, subject to compliance with
applicable law and Nasdaq rules. However, other than as expressly
stated herein, they have no current commitments, plans or
intentions to engage in such transactions and have not formulated
any terms or conditions for any such transactions. None of the
funds in the trust account will be used to purchase shares or
public warrants in such transactions. Such purchases may include a
contractual acknowledgment that such stockholder, although still
the record holder of our shares, is no longer the beneficial owner
thereof and therefore agrees not to exercise its redemption
rights.
In the event that our initial stockholders, directors, executive
officers, advisors or their respective affiliates purchase shares
in privately negotiated transactions from public stockholders who
have already elected to exercise their redemption rights, such
selling stockholders would be required to revoke their prior
elections to redeem their shares. The purpose of any such purchases
of shares could be to vote such shares in favor of the business
combination and thereby increase the likelihood of obtaining
stockholder approval of the business combination or to satisfy a
closing condition in an agreement with a target that requires us to
have a minimum net worth or a certain amount of cash at the closing
of our initial business combination, where it appears that such
requirement would otherwise not be met. The purpose of any such
purchases of public warrants could be to reduce the number of
public warrants outstanding or to vote such warrants on any matters
submitted to the warrant holders for approval in connection with
our initial business combination. Any such purchases of our
securities may result in the completion of our initial business
combination that may not otherwise have been possible. We expect
any such purchases will be reported pursuant to Section 13 and
Section 16 of the Exchange Act to the extent such purchasers
are subject to such reporting requirements. See “Proposed
Business — Permitted purchases of our securities” for a
description of how our sponsor, directors, officers, advisors or
any of their respective affiliates will select which stockholders
to purchase securities from in any private transaction.
In addition, if such purchases are made, the public “float” of our
Class A common stock or public warrants and the number of
beneficial holders of our securities may be reduced, possibly
making it difficult to obtain or maintain the quotation, listing or
trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem
our public shares in connection with our initial business
combination, or fails to comply with the procedures for tendering
its shares, such shares may not be redeemed.
We will comply with the proxy rules or tender offer rules, as
applicable, when conducting redemptions in connection with our
initial business combination. Despite our compliance with these
rules, if a stockholder fails to receive our proxy materials or
tender offer documents, as applicable, such stockholder may not
become aware of the opportunity to redeem its shares. In addition,
proxy materials or tender offer documents, as applicable, that we
will furnish to holders of our public shares in connection with our
initial business combination will describe the various procedures
that must be complied with in order to validly tender or submit
public shares for redemption. For example, we intend to require our
public stockholders seeking to exercise their redemption rights,
whether they are record holders or hold their shares in “street
name,” to, at the holder’s option, either deliver their stock
certificates to our transfer agent, or to deliver their shares to
our transfer agent electronically prior to the date set forth in
the proxy materials or tender offer documents, as applicable. In
the case of proxy materials, this date may be up to two business
days prior to the date on which the vote on the proposal to approve
the initial business combination is to be held. In addition, if we
conduct redemptions in connection with a stockholder vote, we
intend to require a public stockholder seeking redemption of its
public shares to also submit a written request for redemption to
our transfer agent two business days prior to the vote in which the
name of the beneficial owner of such shares is included.
In the event that a stockholder fails to comply with these or any
other procedures disclosed in the proxy or tender offer materials,
as applicable, its shares may not be redeemed. See the section of
this prospectus entitled “Proposed Business — Submitting Stock
Certificates in Connection with Redemption Rights.”
You will not be entitled to protections normally afforded to
investors of many other blank check companies.
Since the net proceeds of the Public Offering and the sale of the
private placement warrants are intended to be used to complete an
initial business combination with a target business that has not
been selected, we may be deemed to be a “blank check” company under
the United States securities laws. However, because we will
have net tangible assets in excess of $5,000,000 upon the
completion of the Public Offering and the sale of the private
placement warrants and will file a Current Report on Form 8-K,
including an audited balance sheet demonstrating this fact, we are
exempt from rules promulgated by the SEC to protect investors in
blank check companies, such as Rule 419. Accordingly,
investors will not be afforded the benefits or protections of those
rules. Among other things, this means our units will be immediately
tradable and we will have a longer period of time to complete our
initial business combination than do companies subject to
Rule 419. Moreover, if the Public Offering were subject to
Rule 419, that rule would prohibit the release of any interest
earned on funds held in the trust account to us unless and until
the funds in the trust account were released to us in connection
with our completion of an initial business combination. For a more
detailed comparison of our offering to offerings that comply with
Rule 419, please see “Proposed Business — Comparison of
The Public Offering to Those of Blank Check Companies Subject to
Rule 419.”
If we seek stockholder approval of our initial business
combination and we do not conduct redemptions pursuant to the
tender offer rules, and if you or a “group” of stockholders are
deemed to hold in excess of 15% of our Class A common stock,
you will lose the ability to redeem all such shares in excess of
15% of our Class A common stock.
If we seek stockholder approval of our initial business combination
and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our
amended and restated certificate of incorporation provides that a
public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert
or as a “group” (as defined under Section 13 of the Exchange
Act), will be restricted from seeking redemption rights with
respect to more than an aggregate of 15% without our prior consent,
which we refer to as the “Excess Shares.” However, we would not be
restricting our stockholders’ ability to vote all of their shares
(including Excess Shares) for or against our initial business
combination. Your inability to redeem the Excess Shares will reduce
your influence over our ability to complete our initial business
combination and you could suffer a material loss on your investment
in us if you sell Excess Shares in open market transactions.
Additionally, you will not receive redemption distributions with
respect to the Excess Shares if we complete our initial business
combination. And as a result, you will continue to hold that number
of shares exceeding 15% and, in order to dispose of such shares,
would be required to sell your shares in open market transactions,
potentially at a loss.
Because of our limited resources and the significant competition
for business combination opportunities, it may be more difficult
for us to complete our initial business combination. If we are
unable to complete our initial business combination, our public
stockholders may receive only their pro rata portion of the funds
in the trust account that are available for distribution to public
stockholders, and our warrants will expire worthless.
We expect to encounter competition from other entities having a
business objective similar to ours, including private investors
(which may be individuals or investment partnerships), other blank
check companies and other entities, domestic and international,
competing for the types of businesses we intend to acquire. Many of
these individuals and entities are well-established and have
extensive experience in identifying and effecting, directly or
indirectly, acquisitions of companies operating in or providing
services to various industries. Many of these competitors possess
similar or greater technical, human and other resources to ours or
more local industry knowledge than we do and our financial
resources will be relatively limited when contrasted with those of
many of these competitors. While we believe there are numerous
target businesses we could potentially acquire with the net
proceeds of the Public Offering and the sale of the private
placement warrants, our ability to compete with respect to the
acquisition of certain target businesses that are sizable will be
limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing the
acquisition of certain target businesses. Furthermore, we are
obligated to offer holders of our public shares the right to redeem
their shares for cash at the time of our initial business
combination in conjunction with a stockholder vote or via a tender
offer. Target companies will be aware that this may reduce the
resources available to us for our initial business combination. Any
of these obligations may place us at a competitive disadvantage in
successfully negotiating a business combination. If we are unable
to complete our initial business combination, our public
stockholders may receive only their pro rata portion of the funds
in the trust account that are available for distribution to public
stockholders, and our warrants will expire worthless.
If the net proceeds of the Public Offering not being held in the
trust account are insufficient to allow us to operate for at least
the 24 months following the closing of the offering, it could limit
the amount available to fund our search for a target business or
businesses and complete our initial business combination, and we
will depend on loans from our sponsor or management team to fund
our search and to complete our initial business
combination.
Of the net proceeds of the Public Offering, only $1,000,000 will be
available to us initially outside the trust account to fund our
working capital requirements. We believe that, upon closing of the
Public Offering, the funds available to us outside of the trust
account will be sufficient to allow us to operate for at least the
24 months following such closing; however, we cannot assure
you that our estimate is accurate. Of the funds available to us, we
could use a portion of the funds available to us to pay fees to
consultants to assist us with our search for a target business. We
could also use a portion of the funds as a down payment or to fund
a “no-shop” provision (a provision in letters of intent or merger
agreements designed to keep target businesses from “shopping”
around for transactions with other companies or investors on terms
more favorable to such target businesses) with respect to a
particular proposed business combination, although we do not have
any current intention to do so. If we entered into a letter of
intent or merger agreement where we paid for the right to receive
exclusivity from a target business and were subsequently required
to forfeit such funds (whether as a result of our breach or
otherwise), we might not have sufficient funds to continue
searching for, or conduct due diligence with respect to, a target
business.
In the event that our offering expenses exceed our estimate of
$1,000,000, we may fund such excess with funds not to be held in
the trust account. In such case, the amount of funds we intend to
be held outside the trust account would decrease by a corresponding
amount. Conversely, in the event that the offering expenses are
less than our estimate of $1,000,000, the amount of funds we intend
to be held outside the trust account would increase by a
corresponding amount. The amount held in the trust account will not
be impacted as a result of such increase or decrease. If we are
required to seek additional capital, we would need to borrow funds
from our sponsor, management team or other third parties to operate
or may be forced to liquidate. Neither our sponsor, members of our
management team nor any of their respective affiliates is under any
obligation to advance funds to us in such circumstances. Any such
advances would be repaid only from funds held outside the trust
account or from funds released to us upon completion of our initial
business combination. Up to $1,500,000 of such loans may be
convertible into warrants of the post-business combination
entity at a price of $1.00 per warrant at the option of the lender.
The warrants would be identical to the private placement warrants.
Prior to the completion of our initial business combination, we do
not expect to seek loans from parties other than our sponsor or an
affiliate of our sponsor as we do not believe third parties will be
willing to loan such funds and provide a waiver against any and all
rights to seek access to funds in our trust account. If we are
unable to complete our initial business combination because we do
not have sufficient funds available to us, we will be forced to
cease operations and liquidate the trust account. Consequently, our
public stockholders may only receive an estimated $10.00 per share,
or possibly less, on our redemption of our public shares, and our
warrants will expire worthless.
If third parties bring claims against us, the proceeds held in
the trust account could be reduced and the per share redemption
amount received by stockholders may be less than $10.00 per
share.
Our placing of funds in the trust account may not protect those
funds from third party claims against us. Although we will seek to
have all vendors, service providers (except for our independent
registered public accounting firm), prospective target businesses
and other entities with which we do business 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, such parties may not execute such agreements,
or even if they execute such agreements they may not be prevented
from bringing claims against the trust account, including, but not
limited to, fraudulent inducement, breach of fiduciary
responsibility or other similar claims, as well as claims
challenging the enforceability of the waiver, in each case in order
to gain advantage with respect to a claim against our assets,
including the funds held in the trust account. If any third party
refuses to execute an agreement waiving such claims to the monies
held in the trust account, our management will consider whether
competitive alternatives are reasonably available to us and will
only enter into an agreement with such third party if management
believes that such third party’s engagement would be in the best
interests of the company under the circumstances. The underwriters
of the Public Offering as well as our registered independent public
accounting firm will not execute agreements with us waiving such
claims to the monies held in the trust account.
Examples of possible instances where we may engage a third party
that refuses to execute a waiver include the engagement of a third
party consultant whose particular expertise or skills are believed
by management to be significantly superior to those of other
consultants that would agree to execute a waiver or in cases where
management is unable to find a service provider willing to execute
a waiver. In addition, there is no guarantee that such entities
will agree to waive any claims they may have in the future as a
result of, or arising out of, any negotiations, contracts or
agreements with us and will not seek recourse against the trust
account for any reason. Upon redemption of our public shares, if we
are unable to complete our initial business combination within the
prescribed timeframe, or upon the exercise of a redemption right in
connection with our initial business combination, we will be
required to provide for payment of claims of creditors that were
not waived that may be brought against us within the 10 years
following redemption. Accordingly, the per share redemption
amount received by public stockholders could be less than the
$10.00 per public share initially held in the trust account, due to
claims of such creditors. Pursuant to the letter agreement the form
of which is filed as an exhibit to the registration statement of
which this prospectus forms a part, our sponsor has agreed that it
will be liable to us if and to the extent any claims by a third
party for services rendered or products sold to us, or a
prospective target business with which we have entered into a
written letter of intent, confidentiality or other similar
agreement or business combination agreement, reduce the amount of
funds in the trust account to below the lesser of (i) $10.00 per
public share and (ii) the actual amount per public share held
in the trust account as of the date of the liquidation of the trust
account, if less than $10.00 per public share due to reductions in
the value of the trust assets, less taxes payable, provided that
such liability will not apply to any claims by a third party or
prospective target business who executed a waiver of any and all
rights to the monies held in the trust account (whether or not such
waiver is enforceable) nor will it apply to any claims under our
indemnity of the underwriters of the Public Offering against
certain liabilities, including liabilities under the Securities
Act. 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 we believe that our sponsor’s only assets are
securities of our company. Therefore, we cannot assure you that our
sponsor would be able to satisfy those obligations. As a result, if
any such claims were successfully made against the trust account,
the funds available for our initial business combination and
redemptions could be reduced to less than $10.00 per public share.
In such event, we may not be able to complete our initial business
combination, and you would receive such lesser amount per share in
connection with any redemption of your public shares. None of our
officers or directors will indemnify us for claims by third parties
including, without limitation, claims by vendors and prospective
target businesses.
Our directors may decide not to enforce the indemnification
obligations of our sponsor, 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 the lesser of (i) $10.00 per share and (ii) the actual
amount per public share held in the trust account as of the date of
the liquidation of the trust account if less than $10.00 per public
share due to reductions in the value of the trust assets, in each
case less taxes payable, and our sponsor asserts that it is unable
to satisfy its 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 its indemnification obligations. While we
currently expect that our independent directors would take legal
action on our behalf against our sponsor to enforce its
indemnification obligations to us, it is possible that our
independent directors in exercising their business judgment and
subject to their fiduciary duties may choose not to do so in any
particular instance. If our independent directors choose not to
enforce these indemnification obligations, the amount of funds in
the trust account available for distribution to our public
stockholders may be reduced below $10.00 per share.
If, after we distribute the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, a bankruptcy court may seek to recover such proceeds,
and the members of our board of directors may be viewed as having
breached their fiduciary duties to our creditors, thereby exposing
the members of our board of directors and us to claims of punitive
damages.
If, after we distribute the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, any distributions received by stockholders could be
viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a
result, a bankruptcy court could seek to recover some or all
amounts received by our stockholders. In addition, our board of
directors may be viewed as having breached its fiduciary duty to
our creditors and/or having acted in bad faith, by paying public
stockholders from the trust account prior to addressing the claims
of creditors, thereby exposing itself and us to claims of punitive
damages.
If, before distributing the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, the claims of creditors in such proceeding may have
priority over the claims of our stockholders and the per share
amount that would otherwise be received by our stockholders in
connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, the proceeds held in the trust account could be subject
to applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to the claims of third parties with priority
over the claims of our stockholders. To the extent any bankruptcy
claims deplete the trust account, the per share amount that
would otherwise be received by our stockholders in connection with
our liquidation may be reduced.
Our warrants are accounted for as liabilities and the changes in
value of our warrants could have a material effect on our financial
results.
On April 12, 2021, the Acting Director of the Division of
Corporation Finance and Acting Chief Accountant of the SEC together
issued a statement regarding the accounting and reporting
considerations for warrants issued by special purpose acquisition
companies entitled “Staff Statement on Accounting and Reporting
Considerations for Warrants Issued by Special Purpose Acquisition
Companies (“SPACs”)” (the “SEC Staff Statement”). Specifically, the
SEC Staff Statement focused on certain settlement terms and
provisions related to certain tender offers following a business
combination, which terms are deemed to be similar to those
contained in the warrant agreement governing our warrants and those
of other SPAC entities. As a result of the SEC Staff Statement, we
reevaluated the accounting treatment of our public warrants and our
private placement warrants, and determined to reclassify the
warrants as derivative liabilities measured at fair value, with
changes in fair value each period reported in earnings.
As a result, now included on our balance sheet as of December 31,
2020 contained elsewhere in this Annual Report are derivative
liabilities related to our warrants. Accounting Standards
Codification 815, Derivatives and Hedging (“ASC 815”), provides for
the remeasurement of the fair value of such derivatives at each
balance sheet date, with a resulting non-cash gain or loss related
to the change in the fair value being recognized in earnings in the
statement of operations in the period of change. As a result of
this recurring fair value measurement, our financial statements and
results of operations may fluctuate quarterly, based on factors
which are outside of our control. Due to the recurring fair value
measurement, we expect that we will recognize going forward
non-cash gains or losses on our warrants each reporting period
until exercised and that the amount of such gains or losses could
be material.
We have identified a material weakness in our internal control
over financial reporting as of December 31, 2020 solely related to
the accounting for our warrants in accordance with the guidance set
forth in the SEC Staff Statement. If we are unable to develop and
maintain an effective system of internal control over financial
reporting going forward, we may not be able to accurately report
our financial results in a timely manner, which may adversely
effect investor confidence in us and materially and adversely
affect our business and operating results.
Following the issuance of the SEC Staff Statement on April 12,
2021, after consultation with our independent registered public
accounting firm, our management and our audit committee concluded
that, in light of the SEC Staff Statement, it was appropriate for
us to restate our previously issued audited financial statements as
of and for the period ended December 31, 2020. See “—Our warrants
are accounted for as liabilities and the changes in value of our
warrants could have a material effect on our financial results.” A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be
prevented, or detected and corrected on a timely basis. We have
determined to classify this circumstance as a material
weakness.
Effective internal controls are necessary for us to provide
reliable financial reports and prevent fraud. We have taken certain
actions and continue to evaluate steps to prevent as possible the
necessity for restatements going forward. These remediation
measures may be time consuming and costly, and there is no
assurance that these initiatives will ultimately have the intended
effects. If we identify any new material weaknesses in the future,
any such newly identified material weakness could limit our ability
to prevent or detect a misstatement of our accounts or disclosures
that could result in a material misstatement of our annual or
interim financial statements. In such case, we may be unable to
maintain compliance with securities law requirements regarding
timely filing of periodic reports. In addition to applicable stock
exchange listing requirements, investors may in such event lose
confidence in our financial reporting and our stock price may
decline as a result. We cannot assure that the measures we have
taken to date, or any measures we may take in the future, will be
sufficient to avoid potential future material weaknesses.
We, and following our initial business combination, the
post-business combination company, may face litigation and other
risks as a result of material weaknesses in our internal control
over financial reporting.
The restatement described in Item 7, Management’s Discussion and
Analysis of Financial Condition and Results of Operations, the
change in accounting for our warrants, and other matters raised or
that may in the future be raised by the SEC, we face potential for
litigation or other disputes which may include, among others,
claims under federal and state securities laws, contractual claims
or other claims arising from the restatement and material
weaknesses in our internal control over financial reporting and the
preparation of our financial statements. As of the date of this
Amendment No. 2, we have no knowledge of any such litigation or
dispute. However, we can provide no assurance that such litigation
or dispute will not arise in the future. Any such litigation or
dispute, whether successful or not, could have a material adverse
effect on our business, results of operations and financial
condition or our ability to complete a business combination.
If we are deemed to be an investment company under the
Investment Company Act, we may be required to institute burdensome
compliance requirements and our activities may be restricted, which
may make it difficult for us to complete our initial business
combination.
If we are deemed to be an investment company under the Investment
Company Act, our activities may be restricted, including:
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restrictions
on the nature of our investments; and |
| |
● |
restrictions
on the issuance of securities, |
each of which may make it difficult for us to complete our initial
business combination. In addition, we may have imposed upon us
burdensome requirements, including:
| |
● |
registration
as an investment company with the SEC; |
| |
● |
adoption
of a specific form of corporate structure; and |
| |
● |
reporting,
record keeping, voting, proxy and disclosure requirements and other
rules and regulations that we are not subject to. |
In order not to be regulated as an investment company under the
Investment Company Act, unless we can qualify for an exclusion, we
must ensure that we are engaged primarily in a business other than
investing, reinvesting or trading of securities and that our
activities do not include investing, reinvesting, owning, holding
or trading “investment securities” constituting more than 40% of
our assets (exclusive of U.S. government securities and cash items)
on an unconsolidated basis. Our business will be to identify and
complete a business combination and thereafter to operate the
post-transaction business or assets for the long term. We do
not plan to buy businesses or assets with a view to resale or
profit from their resale. We do not plan to buy unrelated
businesses or assets or to be a passive investor.
We do not believe that our anticipated principal activities will
subject us to the Investment Company Act. To this end, the proceeds
held in the trust account may only be invested in
United States “government securities” within the meaning of
Section 2(a)(16) of the Investment Company Act having a
maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the
Investment Company Act which invest only in direct U.S. government
treasury obligations. Pursuant to the trust agreement, the trustee
is not permitted to invest in other securities or assets. By
restricting the investment of the proceeds to these instruments,
and by having a business plan targeted at acquiring and growing
businesses for the long term (rather than on buying and selling
businesses in the manner of a merchant bank or private equity
fund), we intend to avoid being deemed an “investment company”
within the meaning of the Investment Company Act. The Public
Offering is not intended for persons who are seeking a return on
investments in government securities or investment securities. The
trust account is intended as a holding place for funds pending the
earliest to occur of either: (i) the completion of our initial
business combination; (ii) the redemption of any public shares
properly tendered in connection with a stockholder vote to amend
our amended and restated certificate of incorporation to modify the
substance or timing of our obligation to allow redemption in
connection with our initial business combination or to redeem 100%
of our public shares if we do not complete our initial business
combination within 24 months from the closing of the Public
Offering; and (iii) absent an initial business combination
within 24 months from the closing of the Public Offering or
with respect to any other material provisions relating to
stockholders’ rights or pre-initial business combination
activity, our return of the funds held in the trust account to our
public stockholders as part of our redemption of the public shares.
If we do not invest the proceeds as discussed above, we may be
deemed to be subject to the Investment Company Act. If we were
deemed to be subject to the Investment Company Act, compliance with
these additional regulatory burdens would require additional
expenses for which we have not allotted funds and may hinder our
ability to complete a business combination. If we are unable to
complete our initial business combination, our public stockholders
may only receive their pro rata portion of the funds in the trust
account that are available for distribution to public stockholders,
and our warrants will expire worthless.
Changes in laws or regulations, or a failure to comply with any
laws and regulations, may adversely affect our business, including
our ability to negotiate and complete our initial business
combination, and results of operations.
We are subject to laws and regulations enacted by national,
regional and local governments. In particular, we will be required
to comply with certain SEC and other legal requirements. Compliance
with, and monitoring of, applicable laws and regulations may be
difficult, time consuming and costly. Those laws and regulations
and their interpretation and application may also change from time
to time and those changes could have a material adverse effect on
our business, investments and results of operations. In addition, a
failure to comply with applicable laws or regulations, as
interpreted and applied, could have a material adverse effect on
our business, including our ability to negotiate and complete our
initial business combination, and results of operations.
If we have not completed an initial business combination within
24 months from the closing of the Public Offering, our public
stockholders may be forced to wait beyond such 24 months before
redemption from our trust account.
If we have not completed an initial business combination within
24 months from the closing of the Public Offering, the
proceeds then on deposit in the trust account, including interest
earned on the funds held in the trust account and not previously
released to us to pay our taxes, if any (less up to $100,000 of the
interest to pay dissolution expenses), will be used to fund the
redemption of our public shares, as further described herein. Any
redemption of public stockholders from the trust account will be
effected automatically by function of our amended and restated
certificate of incorporation prior to any voluntary winding up. If
we are required to wind-up, liquidate the trust account and
distribute such amount therein, pro rata, to our public
stockholders, as part of any liquidation process, such winding up,
liquidation and distribution must comply with the applicable
provisions of the DGCL. In that case, investors may be forced to
wait beyond 24 months from the closing of the Public Offering
before the redemption proceeds of our trust account become
available to them, and they receive the return of their pro rata
portion of the proceeds from our trust account. We have no
obligation to return funds to investors prior to the date of our
liquidation unless we complete our initial business combination or
amend certain material provisions of our amended and restated
certificate of incorporation prior thereto and only then in cases
where investors have sought to redeem their Class A common
stock. Only upon our redemption or any liquidation will public
stockholders be entitled to distributions if we do not complete our
initial business combination.
Our stockholders may be held liable for claims by third parties
against us to the extent of distributions received by them upon
redemption of their shares.
Under the DGCL, stockholders may be held liable for claims by third
parties against a corporation to the extent of distributions
received by them in a dissolution. The pro rata portion of our
trust account distributed to our public stockholders upon the
redemption of our public shares in the event we do not complete our
initial business combination within 24 months from the closing
of the Public Offering may be considered a liquidating distribution
under Delaware law. If a corporation complies with certain
procedures set forth in Section 280 of the DGCL intended to
ensure that it makes reasonable provision for all claims against
it, including a 60-day notice period during which any
third-party claims can be brought against the corporation, a
90-day period during which the corporation may reject any
claims brought, and an additional 150-day waiting period
before any liquidating distributions are made to stockholders, any
liability of stockholders with respect to a liquidating
distribution is limited to the lesser of such stockholder’s pro
rata share of the claim or the amount distributed to the
stockholder, and any liability of the stockholder would be barred
after the third anniversary of the dissolution. However, it is our
intention to redeem our public shares as soon as reasonably
possible following the 24th month from the closing
of the Public Offering in the event we do not complete our initial
business combination and, therefore, we do not intend to comply
with the foregoing procedures.
Because we will not be complying with Section 280,
Section 281(b) of the DGCL requires us to adopt a plan, based
on facts known to us at such time that will provide for our payment
of all existing and pending claims or claims that may be
potentially brought against us within the 10 years following
our dissolution. However, because we are a blank check company,
rather than an operating company, and our operations will be
limited to searching for prospective target businesses to acquire,
the only likely claims to arise would be from our vendors (such as
lawyers, investment bankers, etc.) or prospective target
businesses. If our plan of distribution complies with
Section 281(b) of the DGCL, any liability of stockholders with
respect to a liquidating distribution is limited to the lesser of
such stockholder’s pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would likely be barred after the third anniversary of
the dissolution. We cannot assure you that we will properly assess
all claims that may be potentially brought against us. As such, our
stockholders could potentially be liable for any claims to the
extent of distributions received by them (but no more) and any
liability of our stockholders may extend beyond the third
anniversary of such date. Furthermore, if the pro rata portion of
our trust account distributed to our public stockholders upon the
redemption of our public shares in the event we do not complete our
initial business combination within 24 months from the closing
of the Public Offering is not considered a liquidating distribution
under Delaware law and such redemption distribution is deemed to be
unlawful (potentially due to the imposition of legal proceedings
that a party may bring or due to other circumstances that are
currently unknown), then pursuant to Section 174 of the DGCL,
the statute of limitations for claims of creditors could then be
six years after the unlawful redemption distribution, instead of
three years, as in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after
the consummation of our initial business combination, which could
delay the opportunity for our stockholders to elect
directors.
In accordance with Nasdaq’s corporate governance requirements, we
are not required to hold an annual meeting until no later than one
year after our first fiscal year end following our listing on
Nasdaq. Under Section 211(b) of the DGCL, we are, however,
required to hold an annual meeting of stockholders for the purposes
of electing directors in accordance with our bylaws unless such
election is made by written consent in lieu of such a meeting. We
may not hold an annual meeting of stockholders to elect new
directors prior to the consummation of our initial business
combination, and thus we may not be in compliance with
Section 211(b) of the DGCL, which requires an annual meeting.
Therefore, if our stockholders want us to hold an annual meeting
prior to the consummation of our initial business combination, they
may attempt to force us to hold one by submitting an application to
the Delaware Court of Chancery in accordance with
Section 211(c) of the DGCL.
Because we are neither limited to evaluating a target business
in a particular industry sector nor have we selected any specific
target businesses with which to pursue our initial business
combination, you will be unable to ascertain the merits or risks of
any particular target business’s operations.
Our efforts to identify a prospective initial business combination
target will not be limited to a particular industry, sector or
geographic region. While we may pursue an initial business
combination opportunity in any industry or sector, we intend to
capitalize on the ability of our management team to identify,
acquire and operate a business or businesses that can benefit from
our management team’s established global relationships and
operating experience. Our management team has extensive experience
in identifying and executing strategic investments globally and has
done so successfully in a number of sectors. Our amended and
restated certificate of incorporation prohibits us from
effectuating a business combination with another blank check
company or similar company with nominal operations. Because we have
not yet selected any specific target business with respect to a
business combination, there is no basis to evaluate the possible
merits or risks of any particular target business’s operations,
results of operations, cash flows, liquidity, financial condition
or prospects. To the extent we complete our initial business
combination, we may be affected by numerous risks inherent in the
business operations with which we combine. For example, if we
combine with a financially unstable business or an entity lacking
an established record of sales or earnings, we may be affected by
the risks inherent in the business and operations of a financially
unstable or a development stage entity. Although our officers and
directors will endeavor to evaluate the risks inherent in a
particular target business, we cannot assure you that we will
properly ascertain or assess all of the significant risk factors or
that we will have adequate time to complete due diligence.
Furthermore, some of these risks may be outside of our control and
leave us with no ability to control or reduce the chances that
those risks will adversely impact a target business. We also cannot
assure you that an investment in our units will ultimately prove to
be more favorable to investors than a direct investment, if such
opportunity were available, in a business combination target.
Accordingly, any stockholders or warrant holders who choose to
remain stockholders or warrant holders following our initial
business combination could suffer a reduction in the value of their
securities. Such stockholders or warrant holders are unlikely to
have a remedy for such reduction in value unless they are able to
successfully claim that the reduction was due to the breach by our
officers or directors of a duty of care or other fiduciary duty
owed to them, or if they are able to successfully bring a private
claim under securities laws that the proxy materials or tender
offer documents, as applicable, relating to the business
combination contained an actionable material misstatement or
material omission.
We may seek business combination opportunities in industries or
sectors that may be outside of our management’s areas of
expertise.
We will consider a business combination outside of our management’s
areas of expertise if a business combination candidate is presented
to us and we determine that such candidate offers an attractive
business combination opportunity for our company. Although our
management will endeavor to evaluate the risks inherent in any
particular business combination candidate, we cannot assure you
that we will adequately ascertain or assess all of the significant
risk factors. We also cannot assure you that an investment in our
units will not ultimately prove to be less favorable to investors
in the Public Offering than a direct investment, if an opportunity
were available, in a business combination candidate. In the event
we elect to pursue a business combination outside of the areas of
our management’s expertise, our management’s expertise may not be
directly applicable to its evaluation or operation, and the
information contained in this prospectus regarding the areas of our
management’s expertise would not be relevant to an understanding of
the business that we elect to acquire. As a result, our management
may not be able to ascertain or assess adequately all of the
relevant risk factors. Accordingly, any stockholders who choose to
remain stockholders following our initial business combination
could suffer a reduction in the value of their shares. Such
stockholders are unlikely to have a remedy for such reduction in
value.
Although we have identified general criteria and guidelines that
we believe are important in evaluating prospective target
businesses, we may enter into our initial business combination with
a target that does not meet such criteria and guidelines, and as a
result, the target business with which we enter into our initial
business combination may not have attributes entirely consistent
with our general criteria and guidelines.
Although we have identified general criteria and guidelines for
evaluating prospective target businesses, it is possible that a
target business with which we enter into our initial business
combination will not have attributes consistent with our general
criteria and guidelines. If we complete our initial business
combination with a target that does not meet some or all of these
guidelines, such combination may not be as successful as a
combination with a business that does meet all of our general
criteria and guidelines. In addition, if we announce a prospective
business combination with a target that does not meet our general
criteria and guidelines, a greater number of stockholders may
exercise their redemption rights, which may make it difficult for
us to meet any closing condition with a target business that
requires us to have a minimum net worth or a certain amount of
cash. In addition, if stockholder approval of the transaction is
required by law, or we decide to obtain stockholder approval for
business or other reasons, it may be more difficult for us to
attain stockholder approval of our initial business combination if
the target business does not meet our general criteria and
guidelines. If we are unable to complete our initial business
combination, our public stockholders may only receive their pro
rata portion of the funds in the trust account that are available
for distribution to public stockholders, and our warrants will
expire worthless.
We are not required to obtain an opinion from an independent
investment banking firm or from a valuation or appraisal firm, and
consequently, you may have no assurance from an independent source
that the price we are paying for the business is fair to our
stockholders from a financial point of view.
Unless we complete our initial business combination with an
affiliated entity or our board of directors cannot independently
determine the fair market value of the target business or
businesses (including with the assistance of financial advisors),
we are not required to obtain an opinion from an independent
investment banking firm which is a member of FINRA or from a
valuation or appraisal firm that the price we are paying is fair to
our stockholders from a financial point of view. If no opinion is
obtained, our stockholders will be relying on the judgment of our
board of directors, who will determine fair market value based on
standards generally accepted by the financial community. Such
standards used will be disclosed in our proxy materials or tender
offer documents, as applicable, related to our initial business
combination.
We may issue additional shares of Class A common stock or
shares of preferred stock to complete our initial business
combination or under an employee incentive plan after completion of
our initial business combination. We may also issue shares of
Class A common stock upon the conversion of the founder shares
at a ratio greater than one-to-one at the time of our initial
business combination as a result of the anti-dilution provisions
contained in our amended and restated certificate of incorporation.
Any such issuances would dilute the interest of our stockholders
and likely present other risks.
Our amended and restated certificate of incorporation authorizes
the issuance of up to 380,000,000 shares of Class A
common stock, par value $0.0001 per share, 20,000,000 shares
of Class B common stock, par value $0.0001 per share, and
1,000,000 shares of preferred stock, par value $0.0001 per
share. Immediately after the Public Offering, there will be
338,600,000 and 9,650,000 authorized but unissued shares of
Class A common stock and Class B common stock,
respectively, available for issuance which amount does not take
into account shares reserved for issuance upon exercise of
outstanding warrants or shares issuable upon conversion of the
Class B common stock. The Class B common stock is
automatically convertible into Class A common stock
concurrently with or immediately following the consummation of our
initial business combination, initially at a one-for-one ratio
but subject to adjustment as set forth herein and in our amended
and restated certificate of incorporation. Immediately after the
Public Offering, there will be no shares of preferred stock issued
and outstanding.
We may issue a substantial number of additional shares of
Class A common stock or shares of preferred stock to complete
our initial business combination or under an employee incentive
plan after completion of our initial business combination. We may
also issue shares of Class A common stock to redeem the
warrants as described in “Description of Securities —
Warrants — Public Stockholders’ Warrants — Redemption of
warrants when the price per share of Class A common stock
equals or exceeds $10.00” or upon conversion of the Class B
common stock at a ratio greater than one-to-one at the time of
our initial business combination as a result of the
anti-dilution provisions as set forth therein. However, our
amended and restated certificate of incorporation provides, among
other things, that prior to our initial business combination, we
may not issue additional shares that would entitle the holders
thereof to (i) receive funds from the trust account or
(ii) vote as a class with our public shares (a) on any
initial business combination or (b) to approve an amendment to
our amended and restated certificate of incorporation to
(x) extend the time we have to consummate a business
combination beyond 24 months from the closing of the Public
Offering or (y) amend the foregoing provisions. These
provisions of our amended and restated certificate of
incorporation, like all provisions of our amended and restated
certificate of incorporation, may be amended with a stockholder
vote. The issuance of additional shares of common stock or shares
of preferred stock:
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may significantly dilute
the equity interest of investors in the Public
Offering; |
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may subordinate the
rights of holders of Class A common stock if shares of
preferred stock are issued with rights senior to those afforded our
Class A common stock; |
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could
cause a change in control if a substantial number of shares of
Class A common stock is 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 units,
Class A common stock and/or warrants. |
Unlike some other similarly structured special purpose
acquisition companies, our initial stockholders will receive
additional shares of Class A common stock if we issue certain
shares to consummate an initial business combination.
The founder shares will automatically convert into shares of
Class A common stock concurrently with or immediately
following the consummation of our initial business combination on a
one-for-one basis, subject to adjustment for stock splits,
stock dividends, reorganizations, recapitalizations and the like,
and subject to further adjustment as provided herein. In the case
that additional shares of Class A common stock or
equity-linked securities are issued or deemed issued in connection
with our initial business combination, the number of shares of
Class A common stock issuable upon conversion of all founder shares
will equal, in the aggregate, on an as-converted basis, 20% of
the total number of shares of Class A common stock outstanding
after such conversion (after giving effect to any redemptions of
shares of Class A common stock by public stockholders),
including the total number of shares of Class A common stock
issued, or deemed issued or issuable upon conversion or exercise of
any equity-linked securities or rights issued or deemed
issued, by the company in connection with or in relation to the
consummation of the initial business combination, excluding any
shares of Class A common stock or
equity-linked securities or rights exercisable for or
convertible into shares of Class A common stock issued, or to
be issued, to any seller in the initial business combination and
any private placement warrants issued to our sponsor, officers or
directors upon conversion of working capital loans, provided that
such conversion of founder shares will never occur on a less than
one-for-one basis. This is different than some other similarly
structured special purpose acquisition companies in which the
initial stockholders will only be issued an aggregate of 20% of the
total number of shares to be outstanding prior to our initial
business combination.
Resources could be wasted in researching business combinations
that are not completed, which could materially adversely affect
subsequent attempts to locate and acquire or merge with another
business. If we are unable to complete our initial business
combination, our public stockholders may only receive their pro
rata portion of the funds in the trust account that are available
for distribution to public stockholders, and our warrants will
expire worthless.
We anticipate that the investigation of each specific target
business and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If we decide not to complete a
specific initial business combination, the costs incurred up to
that point for the proposed transaction likely would not be
recoverable. Furthermore, if we reach an agreement relating to a
specific target business, we may fail to complete our initial
business combination for any number of reasons including those
beyond our control. Any such event will result in a loss to us of
the related costs incurred which could materially adversely affect
subsequent attempts to locate and acquire or merge with another
business. If we are unable to complete our initial business
combination, our public stockholders may only receive their pro
rata portion of the funds in the trust account that are available
for distribution to public stockholders, and our warrants will
expire worthless.
We may engage in a business combination with one or more target
businesses that have relationships with entities that may be
affiliated with our sponsor, executive officers, directors or
existing holders which may raise potential conflicts of
interest.
In light of the involvement of our sponsor, executive officers and
directors with other entities, we may decide to acquire one or more
businesses affiliated with our sponsor, executive officers,
directors or existing holders. Our directors also serve as officers
and board members for other entities, including, without
limitation, those described under “Management — Conflicts of
Interest.” Such entities may compete with us for business
combination opportunities. Our sponsor, officers and directors are
not currently aware of any specific opportunities for us to
complete our initial business combination with any entities with
which they are affiliated, and there have been no substantive
discussions concerning a business combination with any such entity
or entities. Although we will not be specifically focusing on, or
targeting, any transaction with any affiliated entities, we would
pursue such a transaction if we determined that such affiliated
entity met our criteria for a business combination as set forth in
“Proposed Business — Effecting our initial business
combination — Selection of a target business and structuring
of our initial business combination” and such transaction was
approved by a majority of our independent and disinterested
directors. Despite our agreement to obtain an opinion from an
independent investment banking firm which is a member of FINRA or a
valuation or appraisal firm regarding the fairness to our company
from a financial point of view of a business combination with one
or more domestic or international businesses affiliated with our
sponsor, executive officers, directors or existing holders,
potential conflicts of interest still may exist and, as a result,
the terms of the business combination may not be as advantageous to
our public stockholders as they would be absent any conflicts of
interest.
Since our sponsor, executive officers and directors will lose
their entire investment in us if our initial business combination
is not completed (other than with respect to public shares they may
acquire during or after the Public Offering), a conflict of
interest may arise in determining whether a particular business
combination target is appropriate for our initial business
combination.
On August 27, 2020 our sponsor subscribed for an aggregate
10,062,500 founder shares for a total subscription price of
$25,000, or approximately $0.002 per share. On November 23,
2020, our sponsor surrendered 1,437,500 founder shares to us for
cancellation for no consideration resulting in our sponsor holding
8,625,000 founder shares. Such shares are fully paid, and the cash
amount of the subscription price therefor was received on
September 22, 2020. On December 10, 2020, we effected a
1:1.2 stock split of our Class B common stock, resulting in an
aggregate of 10,350,000 founder shares outstanding, all of which
are held by our sponsor. Prior to the initial investment in the
company of $25,000 by the sponsor, the company had no assets,
tangible or intangible. The purchase price of the founder shares
was determined by dividing the amount of cash contributed to the
company by the number of founder shares issued. The number of
founder shares outstanding was determined based on the expectation
that the total size of the Public Offering would be a maximum of
41,400,000 units if the underwriters’ over-allotment option
was exercised in full, and therefore that such founder shares would
represent 20% of the outstanding shares after the Public Offering.
The founder shares will be worthless if we do not complete an
initial business combination. In addition, our sponsor has
committed to purchase an aggregate of 10,280,000 warrants, each
exercisable for one share of Class A common stock at $11.50
per share, for an aggregate purchase price of $10,280,000, or $1.00
per warrant, that will also be worthless if we do not complete our
initial business combination. The personal and financial interests
of our executive officers and directors may influence their
motivation in identifying and selecting a target business
combination, completing an initial business combination and
influencing the operation of the business following the initial
business combination. This risk may become more acute as the
24-month anniversary of the closing of the Public Offering
nears, which is the deadline for our completion of an initial
business combination.
We may issue notes or other debt securities, or otherwise incur
substantial debt, to complete a business combination, which may
adversely affect our leverage and financial condition and thus
negatively impact the value of our stockholders’ investment in
us.
Although we have no commitments as of the date of this prospectus
to issue any notes or other debt securities, or to otherwise incur
outstanding debt following the Public Offering, we may choose to
incur substantial debt to complete our initial business
combination. We and our officers have agreed that we will not incur
any indebtedness unless we have obtained from the lender a waiver
of any right, title, interest or claim of any kind in or to the
monies held in the trust account. As such, no issuance of debt will
affect the per share amount available for redemption from the trust
account. Nevertheless, the incurrence of debt could have a variety
of negative effects, including:
| |
● |
default
and foreclosure on our assets if our operating revenues after an
initial business combination are insufficient to repay our debt
obligations; |
| |
● |
acceleration
of our obligations to repay the indebtedness even if we make all
principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios
or reserves without a waiver or renegotiation of that
covenant; |
| |
● |
our
immediate payment of all principal and accrued interest, if any, if
the debt is payable on demand; |
| |
● |
our
inability to obtain necessary additional financing if the debt
contains covenants restricting our ability to obtain such financing
while the debt is outstanding; |
| |
● |
our
inability to pay dividends on our Class A common
stock; |
| |
● |
using
a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available for
dividends on our Class A common stock if declared, expenses,
capital expenditures, acquisitions and other general corporate
purposes; |
| |
● |
limitations
on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate; |
| |
● |
increased
vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government
regulation; and |
| |
● |
limitations
on our ability to borrow additional amounts for expenses, capital
expenditures, acquisitions, debt service requirements, execution of
our strategy and other purposes and other disadvantages compared to
our competitors who have less debt. |
We may only be able to complete one business combination with
the proceeds of the Public Offering and the sale of the private
placement warrants, which will cause us to be solely dependent on a
single business which may have a limited number of products or
services. This lack of diversification may negatively impact our
operations and profitability.
The net proceeds from the Public Offering and the private placement
of warrants provided us with $399,510,000 that we may use to
complete our initial business combination and pay related fees and
expenses (after taking into account the $14,490,000 of deferred
underwriting commissions being held in the trust account and the
estimated offering expenses).
We may effectuate our initial business combination with a single
target business or multiple target businesses simultaneously or
within a short period of time. However, we may not be able to
effectuate our initial business combination with more than one
target business because of various factors, including the existence
of complex accounting issues and the requirement that we prepare
and file pro forma financial statements with the SEC that present
operating results and the financial condition of several target
businesses as if they had been operated on a combined basis. By
completing our initial business combination with only a single
entity, our lack of diversification may subject us to numerous
economic, competitive and regulatory developments. Further, we
would not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other
entities which may have the resources to complete several business
combinations in different industries or different areas of a single
industry. Accordingly, the prospects for our success may be:
| |
● |
solely
dependent upon the performance of a single business, property or
asset, or |
| |
● |
dependent
upon the development or market acceptance of a single or limited
number of products, processes or services. |
This lack of diversification may subject us to numerous economic,
competitive and regulatory risks, any or all of which may have a
substantial adverse impact upon the particular industry in which we
may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations
with multiple prospective targets, which may hinder our ability to
complete our initial business combination and give rise to
increased costs and risks that could negatively impact our
operations and profitability.
If we determine to simultaneously acquire several businesses that
are owned by different sellers, we will need for each of such
sellers to agree that our purchase of its business is contingent on
the simultaneous closings of the other business combinations, which
may make it more difficult for us, and delay our ability, to
complete our initial business combination. With multiple business
combinations, we could also face additional risks, including
additional burdens and costs with respect to possible multiple
negotiations and due diligence 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.
We may attempt to complete our initial business combination with
a private company about which little information is available,
which may result in a business combination with a company that is
not as profitable as we suspected, if at all.
In pursuing our business combination strategy, we may seek to
effectuate our initial business combination with a privately held
company. Very little public information generally exists about
private companies, and we could be required to make our decision on
whether to pursue a potential initial business combination on the
basis of limited information, which may result in a business
combination with a company that is not as profitable as we
suspected, if at all.
We do not have a specified maximum redemption threshold. The
absence of such a redemption threshold may make it possible for us
to complete our initial business combination with which a
substantial majority of our stockholders or warrant holders do not
agree.
Our amended and restated certificate of incorporation does not
provide a specified maximum redemption threshold, except that in no
event will we redeem our public shares in an amount that would
cause our net tangible assets to be less than $5,000,001. In
addition, our proposed initial business combination may impose a
minimum cash requirement for: (i) cash consideration to be
paid to the target or its owners, (ii) cash for working
capital or other general corporate purposes or (iii) the
retention of cash to satisfy other conditions. As a result, we may
be able to complete our initial business combination even though a
substantial majority of our public stockholders do not agree with
the transaction and have redeemed their shares or, if we seek
stockholder approval of our initial business combination and do not
conduct redemptions in connection with our initial business
combination pursuant to the tender offer rules, have entered into
privately negotiated agreements to sell their shares to our
sponsor, officers, directors, advisors or any of their respective
affiliates. In the event the aggregate cash consideration we would
be required to pay for all shares of Class A common stock that
are validly submitted for redemption plus any amount required to
satisfy cash conditions pursuant to the terms of the proposed
business combination exceed the aggregate amount of cash available
to us, we will not complete the business combination or redeem any
shares in connection with such initial business combination, all
shares of Class A common stock submitted for redemption will
be returned to the holders thereof, and we instead may search for
an alternate business combination.
In order to effectuate an initial business combination, special
purpose acquisition companies have, in the recent past, amended
various provisions of their charters and other governing
instruments, including their warrant agreements. We cannot assure
you that we will not seek to amend our amended and restated
certificate of incorporation or governing instruments in a manner
that will make it easier for us to complete our initial business
combination that our stockholders may not support.
In order to effectuate a business combination, special purpose
acquisition companies have, in the recent past, amended various
provisions of their charters and governing instruments, including
their warrant agreements. For example, special purpose acquisition
companies have amended the definition of business combination,
increased redemption thresholds and extended the time to consummate
an initial business combination and, with respect to their
warrants, amended their warrant agreements to require the warrants
to be exchanged for cash and/or other securities. Amending our
amended and restated certificate of incorporation requires the
approval of holders of 65% of our common stock, and amending our
warrant agreement will require a vote of holders of at least 50% of
the public warrants and, solely with respect to any amendment to
the terms of the private placement warrants or any provision of the
warrant agreement with respect to the private placement warrants,
50% of the number of the then outstanding private placement
warrants. In addition, our amended and restated certificate of
incorporation requires us to provide our public stockholders with
the opportunity to redeem their public shares for cash if we
propose an amendment to our amended and restated certificate of
incorporation to modify the substance or timing of our obligation
to allow redemption in connection with our initial business
combination or to redeem 100% of our public shares if we do not
complete an initial business combination within 24 months of
the closing of the Public Offering or with respect to any other
material provisions relating to stockholders’ rights or
pre-initial business combination activity. To the extent any
of such amendments would be deemed to fundamentally change the
nature of the securities offered through this registration
statement, we would register, or seek an exemption from
registration for, the affected securities. We cannot assure you
that we will not seek to amend our charter or governing instruments
or extend the time to consummate an initial business combination in
order to effectuate our initial business combination.
The provisions of our amended and restated certificate of
incorporation that relate to our pre-business combination activity
(and corresponding provisions of the agreement governing the
release of funds from our trust account) may be amended with the
approval of holders of 65% of our common stock, which is a lower
amendment threshold than that of some other special purpose
acquisition companies. It may be easier for us, therefore, to amend
our amended and restated certificate of incorporation to facilitate
the completion of an initial business combination that some of our
stockholders may not support.
Our amended and restated certificate of incorporation provides that
any of its provisions related to pre-business combination
activity (including the requirement to deposit proceeds of the
Public Offering and the private placement of warrants into the
trust account and not release such amounts except in specified
circumstances, and to provide redemption rights to public
stockholders as described herein) may be amended if approved by
holders of 65% of our common stock entitled to vote thereon and
corresponding provisions of the trust agreement governing the
release of funds from our trust account may be amended if approved
by holders of 65% of our common stock entitled to vote thereon. In
all other instances, our amended and restated certificate of
incorporation may be amended by holders of a majority of our
outstanding common stock entitled to vote thereon, subject to
applicable provisions of the DGCL or applicable stock exchange
rules. Our initial stockholders, who will collectively beneficially
own 20% of our common stock upon the closing of the Public Offering
(assuming they do not purchase any units in the Public Offering),
may participate in any vote to amend our amended and restated
certificate of incorporation and/or trust agreement and will have
the discretion to vote in any manner they choose. As a result, we
may be able to amend the provisions of our amended and restated
certificate of incorporation which govern our
pre-business combination behavior more easily than some other
special purpose acquisition companies, and this may increase our
ability to complete a business combination with which you do not
agree. Our stockholders may pursue remedies against us for any
breach of our amended and restated certificate of
incorporation.
Our sponsor, executive officers and directors have agreed, pursuant
to written agreements with us, that they will not propose any
amendment to our amended and restated certificate of incorporation
to modify the substance or timing of our obligation to allow
redemption in connection with our initial business combination or
to redeem 100% of our public shares if we do not complete our
initial business combination within 24 months from the closing
of the Public Offering or with respect to any other material
provisions relating to stockholders’ rights or
pre-initial business combination activity, unless we provide
our public stockholders with the opportunity to redeem their
Class A common stock upon approval of any such amendment at a
per share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account, including interest
earned on the funds held in the trust account and not previously
released to us to pay our taxes, divided by the number of then
outstanding public shares. Our stockholders are not parties to, or
third-party beneficiaries of, these agreements and, as a
result, will not have the ability to pursue remedies against our
sponsor, executive officers or directors for any breach of these
agreements. As a result, in the event of a breach, our stockholders
would need to pursue a stockholder derivative action, subject to
applicable law.
We may be unable to obtain additional financing to complete our
initial business combination or to fund the operations and growth
of a target business, which could compel us to restructure or
abandon a particular business combination.
We have not selected any specific business combination target but
intend to target businesses with enterprise values that are greater
than we could acquire with the net proceeds of the Public Offering
and the sale of the private placement warrants. As a result, if the
cash portion of the purchase price exceeds the amount available
from the trust account, net of amounts needed to satisfy any
redemption by public stockholders, we may be required to seek
additional financing to complete such proposed initial business
combination. We cannot assure you that such financing will be
available on acceptable terms, if at all. To the extent that
additional financing proves to be unavailable when needed to
complete our initial business combination, we would be compelled to
either restructure the transaction or abandon that particular
business combination and seek an alternative target business
candidate. Further, we may be required to obtain additional
financing in connection with the closing of our initial business
combination for general corporate purposes, including for
maintenance or expansion of operations of the
post-transaction businesses, the payment of principal or
interest due on indebtedness incurred in completing our initial
business combination, or to fund the purchase of other companies.
If we are unable to complete our initial business combination, our
public stockholders may only receive their pro rata portion of the
funds in the trust account that are available for distribution to
public stockholders, and our warrants will expire worthless. In
addition, even if we do not need additional financing to complete
our initial business combination, we may require such financing to
fund the operations or growth of the target business. The failure
to secure additional financing could have a material adverse effect
on the continued development or growth of the target business. None
of our officers, directors or stockholders is required to provide
any financing to us in connection with or after our initial
business combination.
Our initial stockholders control a substantial interest in us
and thus may exert a substantial influence on actions requiring a
stockholder vote, potentially in a manner that you do not
support.
Upon closing of the Public Offering, our initial stockholders will
own 20% of our issued and outstanding common stock (assuming they
do not purchase any units in the Public Offering). Accordingly,
they may exert a substantial influence on actions requiring a
stockholder vote, potentially in a manner that you do not support,
including amendments to our amended and restated certificate of
incorporation. If our initial stockholders purchase any units in
the Public Offering or if our initial stockholders purchase any
additional Class A common stock in the aftermarket or in
privately negotiated transactions, this would increase their
control. Neither our initial stockholders nor, to our knowledge,
any of our officers or directors, have any current intention to
purchase additional securities, other than as disclosed in this
prospectus. Factors that would be considered in making such
additional purchases would include consideration of the current
trading price of our Class A common stock. In addition, our
board of directors, whose members were elected by our sponsor, is
and will be divided into three classes, each of which will
generally serve for a terms for three years with only one class of
directors being elected in each year. We may not hold an annual
meeting of stockholders to elect new directors prior to the
completion of our initial business combination, in which case all
of the current directors will continue in office until at least the
completion of the business combination. If there is an annual
meeting, as a consequence of our “staggered” board of directors,
only a minority of the board of directors will be considered for
election and our initial stockholders, because of their ownership
position, will have considerable influence regarding the outcome.
Accordingly, our initial stockholders will continue to exert
control at least until the completion of our initial business
combination.
Because we must furnish our stockholders with target business
financial statements, we may lose the ability to complete an
otherwise advantageous initial business combination with some
prospective target businesses.
The federal proxy rules require that the proxy statement with
respect to the vote on an initial business combination include
historical and pro forma financial statement disclosure. We will
include the same financial statement disclosure in connection with
our tender offer documents, whether or not they are required under
the tender offer rules. These financial statements may be required
to be prepared in accordance with, or be reconciled to, accounting
principles generally accepted in the United States of America
(“GAAP”), or international financial reporting standards as issued
by the International Accounting Standards Board (“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)
(“PCAOB”). These financial statement requirements may limit the
pool of potential target businesses we may acquire because some
targets may be unable to provide such financial statements in time
for us to disclose such statements in accordance with federal proxy
rules and complete our initial business combination within the
prescribed time frame.
Compliance obligations under the Sarbanes-Oxley Act may make it
more difficult for us to effectuate our initial business
combination, require substantial financial and management
resources, and increase the time and costs of completing an initial
business combination.
Section 404 of the Sarbanes-Oxley Act requires that we
evaluate and report on our system of internal controls beginning
with our Annual Report on Form 10-K for the year ending
December 31, 2021. Only in the event we are deemed to be a
large accelerated filer or an accelerated filer, and no longer
qualify as an emerging growth company, will we be required to
comply with the independent registered public accounting firm
attestation requirement on our internal control over financial
reporting. Further, for as long as we remain an emerging growth
company, we will not be required to comply with the independent
registered public accounting firm attestation requirement on our
internal control over financial reporting. The fact that we are a
blank check company makes compliance with the requirements of the
Sarbanes-Oxley Act particularly burdensome on us as compared
to other public companies because a target business with which we
seek to complete our initial business combination may not be in
compliance with the provisions of the Sarbanes-Oxley Act
regarding adequacy of its internal controls. The development of the
internal control of any such entity to achieve compliance with the
Sarbanes-Oxley Act may increase the time and costs necessary
to complete any such business combination.
We may seek business combination opportunities with a high
degree of complexity that require significant operational
improvements, which could delay or prevent us from achieving our
desired results.
We may seek business combination opportunities with large, highly
complex companies that we believe would benefit from operational
improvements. While we intend to implement such improvements, to
the extent that our efforts are delayed or we are unable to achieve
the desired improvements, the initial business combination may not
be as successful as we anticipate.
To the extent we complete our initial business combination with a
large complex business or entity with a complex operating
structure, we may also be affected by numerous risks inherent in
the operations of the business with which we combine, which could
delay or prevent us from implementing our strategy. Although our
management team will endeavor to evaluate the risks inherent in a
particular target business and its operations, we may not be able
to properly ascertain or assess all of the significant risk factors
until we complete our initial business combination. If we are not
able to achieve our desired operational improvements, or the
improvements take longer to implement than anticipated, we may not
achieve the gains that we anticipate. Furthermore, some of these
risks and complexities may be outside of our control and leave us
with no ability to control or reduce the chances that those risks
and complexities will adversely impact a target business. Such
combination may not be as successful as a combination with a
smaller, less complex organization.
RISKS RELATING TO THE POST-BUSINESS COMBINATION COMPANY
Subsequent to our completion of our initial business
combination, we may be required to take write-downs or write-offs,
restructuring and impairment or other charges that could have a
significant negative effect on our financial condition, results of
operations and the price of our securities, which could cause you
to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business
with which we combine, we cannot assure you that this diligence
will identify all material issues that may be present with a
particular target business, that it would be possible to uncover
all material issues through a customary amount of due diligence, or
that factors outside of the target business and outside of our
control will not later arise. As a result of these factors, we may
be forced to later write-down or write-off assets,
restructure our operations, or incur impairment or other charges
that could result in our reporting losses. Even if our due
diligence successfully identifies certain risks, unexpected risks
may arise and previously known risks may materialize in a manner
not consistent with our preliminary risk analysis. Even though
these charges may be non-cash items and not have an immediate
impact on our liquidity, the fact that we report charges of this
nature could contribute to negative market perceptions about us or
our securities. In addition, charges of this nature may cause us to
violate net worth or other covenants to which we may be subject as
a result of assuming pre-existing debt held by a target
business or by virtue of our obtaining debt financing to partially
finance the initial business combination or thereafter.
Accordingly, any stockholders or warrant holders who choose to
remain stockholders or warrant holders following the business
combination could suffer a reduction in the value of their
securities. Such stockholders or warrant holders are unlikely to
have a remedy for such reduction in value unless they are able to
successfully claim that the reduction was due to the breach by our
officers or directors of a duty of care or other fiduciary duty
owed to them, or if they are able to successfully bring a private
claim under securities laws that the proxy materials or tender
offer documents, as applicable, relating to the business
combination contained an actionable material misstatement or
material omission.
The officers and directors of an acquisition candidate may
resign upon completion of our initial business combination. The
loss of a business combination target’s key personnel could
negatively impact the operations and profitability of our
post-combination business.
The role of an acquisition candidate’s key personnel upon the
completion of our initial business combination cannot be
ascertained at this time. Although we contemplate that certain
members of an acquisition candidate’s management team will remain
associated with the acquisition candidate following our initial
business combination, it is possible that members of the management
of an acquisition candidate will not wish to remain in place.
Our management may not maintain control of a target business
after our initial business combination. We cannot provide assurance
that, upon loss of control of a target business, new management
will possess the skills, qualifications or abilities necessary to
profitably operate such business.
We may structure our initial business combination so that the
post-transaction company in which our public stockholders own
shares will own less than 100% of the equity interests or assets of
a target business, but we will only complete such business
combination if the post-transaction company owns or acquires
50% or more of the outstanding voting securities of the target or
otherwise acquires a controlling interest in the target sufficient
for us not to be required to register as an investment company
under the Investment Company Act. We will not consider any
transaction that does not meet such criteria. Even if the
post-transaction company owns 50% or more of the voting
securities of the target, our stockholders prior to our initial
business combination may collectively own a minority interest in
the post business combination company, depending on valuations
ascribed to the target and us in the business combination. For
example, we could pursue a transaction in which we issue a
substantial number of new shares of Class A common stock in
exchange for all of the outstanding capital stock of a target. In
this case, we would acquire a 100% interest in the target. However,
as a result of the issuance of a substantial number of new shares
of Class A common stock, our stockholders immediately prior to
such transaction could own less than a majority of our outstanding
Class A common stock subsequent to such transaction. In
addition, other minority stockholders may subsequently combine
their holdings resulting in a single person or group obtaining a
larger share of the company’s shares than we initially acquired.
Accordingly, this may make it more likely that our management will
not maintain control of the target business.
We may have a limited ability to assess the management of a
prospective target business and, as a result, may effect our
initial business combination with a target business whose
management may not have the skills, qualifications or abilities to
manage a public company.
When evaluating the desirability of effecting our initial business
combination with a prospective target business, our ability to
assess the target business’s management may be limited due to a
lack of time, resources or information. Our assessment of the
capabilities of the target business’s management, therefore, may
prove to be incorrect and such management may lack the skills,
qualifications or abilities we suspected. Should the target
business’s management not possess the skills, qualifications or
abilities necessary to manage a public company, the operations and
profitability of the post-combination business may be
negatively impacted. Accordingly, any stockholders or warrant
holders who choose to remain stockholders or warrant holders
following the business combination could suffer a reduction in the
value of their securities. Such stockholders or warrant holders are
unlikely to have a remedy for such reduction in value unless they
are able to successfully claim that the reduction was due to the
breach by our officers or directors of a duty of care or other
fiduciary duty owed to them, or if they are able to successfully
bring a private claim under securities laws that the proxy
solicitation or tender offer materials, as applicable, relating to
the business combination contained an actionable material
misstatement or material omission.
There are risks related to the healthcare industry to which we
may be subject.
Business combinations with companies with operations in the
healthcare industry entail special considerations and risks. If we
are successful in completing a business combination with a target
business with operations in the healthcare industry, we will be
subject to, and possibly adversely affected by, the following
risks, including but not limited to:
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Competition
could reduce profit margins. |
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Our
inability to comply with governmental regulations affecting the
healthcare industry could negatively affect our
operations. |
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An
inability to license or enforce intellectual property rights on
which our business may depend. |
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The
success of our planned business following consummation of our
initial business combination may depend on maintaining a
well-secured business and technology
infrastructure. |
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If we
are required to obtain governmental approval of our products, the
production of our products could be delayed and we could be
required to engage in a lengthy and expensive approval process that
may not ultimately be successful. |
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Continuing
government and private efforts to contain healthcare costs,
including through the implementation of legal and regulatory
changes, may reduce our future revenue and our profitability
following such business combination. |
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Changes
in the healthcare related wellness industry and markets for such
products affecting our customers or retailing practices could
negatively impact customer relationships and our results of
operations. |
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The
healthcare industry is susceptible to significant liability
exposure. If liability claims are brought against us following a
business combination, it could materially adversely affect our
operations. |
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Dependence
of our operations upon third-party suppliers, manufacturers or
contractors whose failure to perform adequately could disrupt our
business. |
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● |
The
Affordable Care Act, possible changes to it or its repeal, and how
it is implemented could negatively impact our business. |
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A
disruption in supply could adversely impact our
business. |
Any of the foregoing could have an adverse impact on our operations
following a business combination. However, our efforts in
identifying prospective target businesses will not be limited to
the healthcare industry. Accordingly, if we acquire a target
business in another industry, these risks will likely not affect us
and we will be subject to other risks attendant with the specific
industry in which we operate or target business which we acquire,
none of which can be presently ascertained.
RISKS RELATING TO ACQUIRING AND OPERATING A BUSINESS IN FOREIGN
COUNTRIES
If we effect our initial business combination with a company
located outside of the United States, we would be subject to a
variety of additional risks that may adversely affect us.
If we pursue a target company with operations or opportunities
outside of the United States for our initial business
combination, we may face additional burdens in connection with
investigating, agreeing to and completing such initial business
combination, and if we effect such initial business combination, we
would be subject to a variety of additional risks that may
negatively impact our operations.
If we pursue a target a company with operations or opportunities
outside of the United States for our initial business
combination, we would be subject to risks associated with
cross-border business combinations, including in connection
with investigating, agreeing to and completing our initial business
combination, conducting due diligence in a foreign jurisdiction,
having such transaction approved by any local governments,
regulators or agencies and changes in the purchase price based on
fluctuations in foreign exchange rates.
If we effect our initial business combination with such a company,
we would be subject to any special considerations or risks
associated with companies operating in an international setting,
including any of the following:
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costs
and difficulties inherent in managing cross-border business
operations; |
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● |
rules
and regulations regarding currency redemption; |
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● |
complex
corporate withholding taxes on individuals; |
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● |
laws
governing the manner in which future business combinations may be
effected; |
| |
● |
exchange
listing and/or delisting requirements; |
| |
● |
tariffs
and trade barriers; |
| |
● |
regulations
related to customs and import/export matters; |
| |
● |
local
or regional economic policies and market conditions; |
| |
● |
unexpected
changes in regulatory requirements; |
| |
● |
challenges
in managing and staffing international operations; |
| |
● |
tax
issues, such as tax law changes and variations in tax laws as
compared to the United States; |
| |
● |
currency
fluctuations and exchange controls; |
| |
● |
challenges
in collecting accounts receivable; |
| |
● |
cultural
and language differences; |
| |
● |
employment
regulations; |
| |
● |
underdeveloped
or unpredictable legal or regulatory systems; |
| |
● |
protection
of intellectual property; |
| |
● |
social
unrest, crime, strikes, riots and civil disturbances; |
| |
● |
regime
changes and political upheaval; |
| |
● |
terrorist
attacks and wars; and |
| |
● |
deterioration
of political relations with the United States. |
We may not be able to adequately address these additional risks. If
we were unable to do so, we may be unable to complete such initial
business combination, or, if we complete such initial business
combination, our operations might suffer, either of which may
adversely impact our business, financial condition and results of
operations.
RISKS RELATING TO OUR MANAGEMENT TEAM
We are dependent upon our executive officers and directors and
their loss could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of
individuals and, in particular, our executive officers and
directors. We believe that our success depends on the continued
service of our officers and directors, at least until we have
completed our initial business combination. In addition, our
executive officers and directors are not required to commit any
specified amount of time to our affairs and, accordingly, will have
conflicts of interest in allocating their time among various
business activities, including identifying potential business
combinations and monitoring the related due diligence. We do not
have an employment agreement with, or key-man insurance on the
life of, any of our directors or executive officers. The unexpected
loss of the services of one or more of our directors or executive
officers could have a detrimental effect on us.
Involvement of members of our management and companies with
which they are affiliated in civil disputes and litigation or
governmental investigations unrelated to our business affairs could
materially impact our ability to complete an initial business
combination.
Members of our management team and companies with which they are
affiliated have been, and in the future will continue to be,
involved in a wide variety of business affairs, including
transactions, such as sales and purchases of businesses, and
ongoing operations. As a result of such involvement, members of our
management and companies with which they are affiliated in past
have been, and may in the future be, involved in civil disputes and
litigation and governmental investigations relating to their
business affairs unrelated to our company. Any claims or
investigations involving members of our management and companies
with which they are affiliated may be detrimental to our reputation
and could negatively affect our ability to identify and complete an
initial business combination in a material manner and may have an
adverse effect on the price of our securities.
Our ability to successfully effect our initial business
combination and to be successful thereafter will be dependent upon
the efforts of our key personnel, some of whom may join us
following our initial business combination. The loss of key
personnel could negatively impact the operations and profitability
of our post-combination business.
Our ability to successfully effect our initial business combination
is dependent upon the efforts of our key personnel. The role of our
key personnel in the target business, however, cannot presently be
ascertained. Although some of our key personnel may remain with the
target business in senior management or advisory positions
following our initial business combination, it is likely that some
or all of the management of the target business will remain in
place. While we intend to closely scrutinize any individuals we
engage after our initial business combination, we cannot assure you
that our assessment of these individuals will prove to be correct.
These individuals may be unfamiliar with the requirements of
operating a company regulated by the SEC, which could cause us to
have to expend time and resources helping them become familiar with
such requirements.
Our key personnel may negotiate employment or consulting
agreements with a target business in connection with a particular
business combination, and a particular business combination may be
conditioned on the retention or resignation of such key personnel.
These agreements may provide for them to receive compensation
following our initial business combination and as a result, may
cause them to have conflicts of interest in determining whether a
particular business combination is the most advantageous.
Our key personnel may be able to remain with our company after the
completion of our initial business combination only if they are
able to negotiate employment or consulting agreements in connection
with the business combination. Such negotiations would take place
simultaneously with the negotiation of the business combination and
could provide for such individuals to receive compensation in the
form of cash payments and/or our securities for services they would
render to us after the completion of the business combination. Such
negotiations also could make such key personnel’s retention or
resignation a condition to any such agreement. The personal and
financial interests of such individuals may influence their
motivation in identifying and selecting a target business, subject
to their fiduciary duties under Delaware law.
Our executive officers and directors will allocate their time to
other businesses thereby causing conflicts of interest in their
determination as to how much time to devote to our affairs. This
conflict of interest could have a negative impact on our ability to
complete our initial business combination.
Our executive officers and directors are not required to, and will
not, commit their full time to our affairs, which may result in a
conflict of interest in allocating their time between our
operations and our search for a business combination and their
other businesses. We do not intend to have any
full-time employees prior to the completion of our initial
business combination. Each of our executive officers is engaged in
several other business endeavors for which he may be entitled to
substantial compensation, and our executive officers and
non-independent directors are not obligated to contribute any
specific number of hours per week to our affairs. Our independent
directors also serve as officers and board members for other
entities. If our executive officers’ and directors’ other business
affairs require them to devote substantial amounts of time to such
affairs in excess of their current commitment levels, it could
limit their ability to devote time to our affairs which may have a
negative impact on our ability to complete our initial business
combination. For a complete discussion of our executive officers’
and directors’ other business affairs, please see
“Management — Officers and Directors.”
Our officers and directors presently have, and any of them in
the future may have additional, fiduciary or contractual
obligations to other entities and, accordingly, may have conflicts
of interest in determining to which entity a particular business
opportunity should be presented.
Following the completion of the Public Offering and until we
consummate our initial business combination, we intend to engage in
the business of identifying and combining with one or more
businesses. Each of our officers and directors presently has, and
any of them in the future may have, additional fiduciary or
contractual obligations to other entities pursuant to which such
officer or director is or will be required to present a business
combination opportunity to such entity. Accordingly, they may have
conflicts of interest in determining to which entity a particular
business opportunity should be presented. These conflicts may not
be resolved in our favor and a potential target business may be
presented to another entity prior to its presentation to us. Our
amended and restated certificate of incorporation provides that we
renounce our interest in any corporate opportunity offered to any
director or officer unless such opportunity is expressly offered to
such person solely in his or her capacity as a director or officer
of the company and such opportunity is one we are legally and
contractually permitted to undertake and would otherwise be
reasonable for us to pursue, and to the extent the director or
officer is permitted to refer that opportunity to us without
violating another legal obligation. In addition, our sponsor and
our officers and directors may sponsor or form other special
purpose acquisition companies similar to ours or may pursue other
business or investment ventures during the period in which we are
seeking an initial business combination. Any such companies,
businesses or ventures may present additional conflicts of interest
in pursuing an initial business combination. However, we do not
believe that any such potential conflicts would materially affect
our ability to complete our initial business combination.
For a complete discussion of our executive officers’ and directors’
business affiliations and the potential conflicts of interest that
you should be aware of, please see “Management — Officers and
Directors,” “Management — Conflicts of Interest” and “Certain
Relationships and Related Party Transactions.”
Our executive officers, directors, security holders and their
respective affiliates may have competitive pecuniary interests that
conflict with our interests.
We have not adopted a policy that expressly prohibits our
directors, executive officers, security holders or affiliates from
having a direct or indirect pecuniary or financial interest in any
investment to be acquired or disposed of by us or in any
transaction to which we are a party or have an interest. In fact,
we may enter into a business combination with a target business
that is affiliated with our sponsor, our directors or executive
officers, although we do not intend to do so. Nor do we have a
policy that expressly prohibits any such persons from engaging for
their own account in business activities of the types conducted by
us. Accordingly, such persons or entities may have a conflict
between their interests and ours.
The personal and financial interests of our directors and officers
may influence their motivation in timely identifying and selecting
a target business and completing a business combination.
Consequently, our directors’ and officers’ discretion in
identifying and selecting a suitable target business may result in
a conflict of interest when determining whether the terms,
conditions and timing of a particular business combination are
appropriate and in our stockholders’ best interest. If this were
the case, it would be a breach of their fiduciary duties to us as a
matter of Delaware law and we or our stockholders might have a
claim against such individuals for infringing on our stockholders’
rights. However, we might not ultimately be successful in any claim
we may make against them for such reason.
We may not have sufficient funds to satisfy indemnification
claims of our directors and executive officers.
We have agreed to indemnify our officers and directors to the
fullest extent permitted by law. However, our officers and
directors have agreed to waive any right, title, interest or claim
of any kind in or to any monies in the trust account and to not
seek recourse against the trust account for any reason whatsoever.
Accordingly, any indemnification provided will be able to be
satisfied by us only if (i) we have sufficient funds outside
of the trust account or (ii) we consummate an initial business
combination. Our obligation to indemnify our officers and directors
may discourage stockholders from bringing a lawsuit against our
officers or directors for breach of their fiduciary duty. These
provisions also may have the effect of reducing the likelihood of
derivative litigation against our officers and directors, even
though such an action, if successful, might otherwise benefit us
and our stockholders. Furthermore, a stockholder’s investment may
be adversely affected to the extent we pay the costs of settlement
and damage awards against our officers and directors pursuant to
these indemnification provisions.
Certain agreements related to the Public Offering may be amended
without stockholder approval.
Each of the agreements related to the Public Offering to which we
are a party, other than the warrant agreement and the investment
management trust agreement, may be amended without stockholder
approval. Such agreements are: the underwriting agreement; the
letter agreement among us and our initial stockholders, officers
and directors; the registration rights agreement among us and our
initial stockholders; the private placement warrants purchase
agreement between us and our sponsor; and the administrative
services agreement among us, our sponsor and an affiliate of our
sponsor. These agreements contain various provisions that our
public stockholders might deem to be material. For example, our
letter agreement and the underwriting agreement contain certain
lock-up provisions with respect to the founder shares, private
placement warrants and other securities held by our initial
stockholders, officers and directors. Amendments to such agreements
would require the consent of the applicable parties thereto and
would need to be approved by our board of directors, which may do
so for a variety of reasons, including to facilitate our initial
business combination. While we do not expect our board of directors
to approve any amendment to any of these agreements prior to our
initial business combination, it may be possible that our board of
directors, in exercising its business judgment and subject to its
fiduciary duties, chooses to approve one or more amendments to any
such agreement. Any amendment entered into in connection with the
consummation of our initial business combination will be disclosed
in our proxy materials or tender offer documents, as applicable,
related to such initial business combination, and any other
material amendment to any of our material agreements will be
disclosed in a filing with the SEC. Any such amendments would not
require approval from our stockholders, may result in the
completion of our initial business combination that may not
otherwise have been possible, and may have an adverse effect on the
value of an investment in our securities. For example, amendments
to the lock-up provision discussed above may result in our
initial stockholders selling their securities earlier than they
would otherwise be permitted, which may have an adverse effect on
the price of our securities.
RISKS RELATING TO OUR SECURITIES
You will not have any rights or interests in funds from the
trust account, except under certain limited circumstances.
Therefore, to liquidate your investment, you may be forced to sell
your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the
trust account only upon the earlier to occur of: (i) our
completion of an initial business combination, and then only in
connection with those shares of Class A common stock that such
stockholder properly elected to redeem, subject to the limitations
described herein, (ii) the redemption of any public shares
properly tendered in connection with a stockholder vote to amend
our amended and restated certificate of incorporation to modify the
substance or timing of our obligation to allow redemption in
connection with our initial business combination or to redeem 100%
of our public shares if we do not complete our initial business
combination within 24 months from the closing of the Public
Offering or with respect to any other material provisions relating
to stockholders’ rights or pre-initial business combination
activity, and (iii) the redemption of our public shares if we
are unable to complete an initial business combination within
24 months from the closing of the Public Offering, subject to
applicable law and as further described herein. In addition, if our
plan to redeem our public shares if we are unable to complete an
initial business combination within 24 months from the closing
of the Public Offering is not completed for any reason, compliance
with Delaware law may require that we submit a plan of dissolution
to our then-existing stockholders for approval prior to the
distribution of the proceeds held in our trust account. In that
case, public stockholders may be forced to wait beyond
24 months from the closing of the Public Offering before they
receive funds from our trust account. In no other circumstances
will a public stockholder have any right or interest of any kind in
the trust account. Holders of warrants will not have any right to
the proceeds held in the trust account with respect to the
warrants. Accordingly, to liquidate your investment, you may be
forced to sell your public shares or warrants, potentially at a
loss.
Nasdaq may delist our securities from trading on its exchange,
which could limit investors’ ability to make transactions in our
securities and subject us to additional trading
restrictions.
We have been approved to have our units listed on Nasdaq. We expect
that our Class A common stock and warrants will be listed on
Nasdaq on or promptly after their date of separation. Although
after giving effect to the Public Offering we expect to meet, on a
pro forma basis, the minimum initial listing standards set forth in
Nasdaq listing standards, we cannot assure you that our securities
will continue to be listed on Nasdaq in the future or prior to our
initial business combination. In order to continue listing our
securities on Nasdaq prior to our initial business combination, we
must maintain certain financial, distribution and share price
levels. Generally, we must maintain a minimum average global market
capitalization and a minimum number of holders of our
securities.
Additionally, in connection with our initial business combination,
we will be required to demonstrate compliance with Nasdaq’s initial
listing requirements, which are more rigorous than Nasdaq’s
continued listing requirements, in order to continue to maintain
the listing of our securities on Nasdaq. For instance, our share
price would generally be required to be at least $4.00 per share
and our stockholder’s equity would generally be required to be at
least $5.0 million. We cannot assure you that we will be able
to meet those initial listing requirements at that time.
If Nasdaq delists our securities from trading on its exchange and
we are not able to list our securities on another national
securities exchange, we expect our securities could be quoted on an
over-the-counter market. If this were to occur, we could face
significant material adverse consequences, including:
| |
● |
a
limited availability of market quotations for our
securities; |
| |
● |
reduced
liquidity for our securities; |
| |
● |
a
determination that our Class A common stock is a “penny stock”
which will require brokers trading in our Class A common stock
to adhere to more stringent rules and possibly result in a reduced
level of trading activity in the secondary trading market for our
securities; |
| |
● |
a
limited amount of news and analyst coverage; and |
| |
● |
a
decreased ability to issue additional securities or obtain
additional financing in the future. |
The National Securities Markets Improvement Act of 1996, which is a
federal statute, prevents or preempts the states from regulating
the sale of certain securities, which are referred to as “covered
securities.” Because we expect that our units and eventually our
Class A common stock and warrants will be listed on Nasdaq,
our units, Class A common stock and warrants will qualify as
covered securities under the statute. Although the states are
preempted from regulating the sale of our securities, the federal
statute does allow the states to investigate companies if there is
a suspicion of fraud, and, if there is a finding of fraudulent
activity, then the states can regulate or bar the sale of covered
securities in a particular case. 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, other than the State of
Idaho, 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 qualify as covered securities
under the statute and we would be subject to regulation in each
state in which we offer our securities.
Our initial stockholders paid an aggregate of $25,000 to cover
certain of our offering costs in exchange
for 10,350,000 founder shares, or approximately
$0.002 per founder share and, accordingly, you will experience
immediate and substantial dilution from the purchase of our shares
of Class A common stock.
The difference between the public offering price per share
(allocating all of the unit purchase price to the share of
Class A common stock and none to the warrant included in the
unit) and the pro forma net tangible book value per share of our
Class A common stock after the Public Offering constitutes the
dilution to you and the other investors in the Public Offering. Our
initial stockholders acquired the founder shares at a nominal
price, significantly contributing to this dilution. This dilution
would increase to the extent that the anti-dilution provisions
of the founder shares result in the issuance of shares of
Class A common stock on a greater than one-to-one basis
upon conversion of the founder shares at the time of our initial
business combination and would become exacerbated to the extent
that public stockholders seek redemptions from the trust for their
public shares. In addition, because of the
anti-dilution protection in the founder shares, any equity or
equity-linked securities issued in connection with our initial
business combination would be disproportionately dilutive to our
Class A common stock.
The determination of the offering price of our units, the size
of the Public Offering and terms of the units is more arbitrary
than the pricing of securities and size of an offering of an
operating company in a particular industry. You may have less
assurance, therefore, that the offering price of our units properly
reflects the value of such units than you would have in a typical
offering of an operating company.
Prior to the Public Offering there has been no public market for
any of our securities. The public offering price of the units and
the terms of the warrants were negotiated between us and the
underwriters. In determining the size of the Public Offering,
management held customary organizational meetings with the
representative of the underwriters, both prior to our inception and
thereafter, with respect to the state of capital markets,
generally, and the amount the underwriters believed they reasonably
could raise on our behalf. Factors considered in determining the
size of the Public Offering, prices and terms of the units,
including the Class A common stock and warrants underlying the
units, include:
| |
● |
the
history and prospects of companies whose principal business is the
acquisition of other companies; |
| |
● |
prior
offerings of those companies; |
| |
● |
our
prospects for acquiring an operating business at attractive
values; |
| |
● |
a
review of debt to equity ratios in leveraged
transactions; |
| |
● |
an
assessment of our management and their experience in identifying
operating companies; |
| |
● |
general
conditions of the securities markets at the time of the Public
Offering; and |
| |
● |
other
factors as were deemed relevant. |
Although these factors were considered, the determination of our
offering size, price and terms of the units is more arbitrary than
the pricing of securities of an operating company in a particular
industry since we have no historical operations or financial
results.
There is currently no market for our securities and a market for
our securities may not develop, which would adversely affect the
liquidity and price of our securities.
There is currently no market for our securities. Stockholders
therefore have no access to information about prior market history
on which to base their investment decision. Following the Public
Offering, the price of our securities may vary significantly due to
one or more potential business combinations and general market or
economic conditions, including as a result of the
COVID-19 pandemic. Furthermore, an active trading market for
our securities may never develop or, if developed, it may not be
sustained. You may be unable to sell your securities unless a
market can be established and sustained.
Provisions in our amended and restated certificate of
incorporation 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 shares of Class A common stock and could
entrench management.
Our amended and restated certificate of incorporation contains
provisions that may discourage unsolicited takeover proposals that
stockholders may consider to be in their best interests. These
provisions include a staggered board of directors and the ability
of the board of directors to designate the terms of and issue new
series of preferred stock, which 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.
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 the removal of management more difficult
and may discourage transactions that otherwise could involve
payment of a premium over prevailing market prices for our
securities.
Our initial business combination and our structure thereafter
may not be tax-efficient to our stockholders and warrant holders.
As a result of our business combination, our tax obligations may be
more complex, burdensome and uncertain.
Although we will attempt to structure our initial business
combination in a tax-efficient manner, tax structuring
considerations are complex, the relevant facts and law are
uncertain and may change, and we may prioritize commercial and
other considerations over tax considerations. For example, in
connection with our initial business combination and subject to any
requisite stockholder approval, we may structure our business
combination in a manner that requires stockholders and/or warrant
holders to recognize gain or income for tax purposes, effect a
business combination with a target company in another jurisdiction,
or reincorporate in a different jurisdiction (including, but not
limited to, the jurisdiction in which the target company or
business is located). We do not intend to make any cash
distributions to stockholders or warrant holders to pay taxes in
connection with our business combination or thereafter.
Accordingly, a stockholder or a warrant holder may need to satisfy
any liability resulting from our initial business combination with
cash from its own funds or by selling all or a portion of the
shares received. In addition, stockholders and warrant holders may
also be subject to additional income, withholding or other taxes
with respect to their ownership of us after our initial business
combination.
In addition, we may effect a business combination with a target
company that has business operations outside of the United States,
and possibly, business operations in multiple jurisdictions. If we
effect such a business combination, we could be subject to
significant income, withholding and other tax obligations in a
number of jurisdictions with respect to income, operations and
subsidiaries related to those jurisdictions. Due to the complexity
of tax obligations and filings in other jurisdictions, we may have
a heightened risk related to audits or examinations by U.S.
federal, state, local and non-U.S. taxing authorities. This
additional complexity and risk could have an adverse effect on our
after-tax profitability and financial condition.
We may amend the terms of the warrants in a manner that may be
adverse to holders of public warrants with the approval by the
holders of at least 50% of the then outstanding public warrants. As
a result, the exercise price of your warrants could be increased,
the exercise period could be shortened and the number of shares of
Class A common stock purchasable upon exercise of a warrant
could be decreased, all without your approval.
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 for the purpose of (i) curing any ambiguity or
to correct any defective provision or mistake, including to conform
the provisions of the warrant agreement to the description of the
terms of the warrants and the warrant agreement set forth in this
prospectus, (ii) adjusting the provisions relating to cash
dividends on shares of common stock as contemplated by and in
accordance with the warrant agreement or (iii) adding or
changing any provisions with respect to matters or questions
arising under the warrant agreement as the parties to the warrant
agreement may deem necessary or desirable and that the parties deem
to not adversely affect the rights of the registered holders of the
warrants, provided that the approval by the holders of at least 50%
of the then outstanding public warrants is required to make any
change that adversely affects the interests of the registered
holders of the public warrants. Accordingly, we may amend the terms
of the public warrants in a manner adverse to a holder if holders
of at least 50% of the then outstanding public warrants approve of
such amendment. Although our ability to amend the terms of the
public warrants with the consent of at least 50% of the then
outstanding public warrants is unlimited, examples of such
amendments could be amendments to, among other things, increase the
exercise price of the warrants, convert the warrants into cash or
stock (at a ratio different than initially provided), shorten the
exercise period or decrease the number of shares of Class A
common stock purchasable upon exercise of a warrant.
Our warrant agreement will designate the courts of the State of
New York or the United States District Court for the
Southern District of New York as the sole and exclusive forum
for certain types of actions and proceedings that may be initiated
by holders of our warrants, which could limit the ability of
warrant holders to obtain a favorable judicial forum for disputes
with our company.
Our warrant agreement provides that, subject to applicable law,
(i) any action, proceeding or claim against us arising out of
or relating in any way to the warrant agreement, including under
the Securities Act, will be brought and enforced in the courts of
the State of New York or the United States District Court
for the Southern District of New York, and (ii) that we
irrevocably submit to such jurisdiction, which jurisdiction shall
be the exclusive forum for any such action, proceeding or claim. We
will waive any objection to such exclusive jurisdiction and that
such courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant
agreement will not apply to suits brought to enforce any liability
or duty created by the Exchange Act or any other claim for which
the federal district courts of the United States of America
are the sole and exclusive forum. Any person or entity purchasing
or otherwise acquiring any interest in any of our warrants shall be
deemed to have notice of and to have consented to the forum
provisions in our warrant agreement. If any action, the subject
matter of which is within the scope the forum provisions of the
warrant agreement, is filed in a court other than a court of the
State of New York or the United States District Court for
the Southern District of New York (a “foreign action”) in the
name of any holder of our warrants, such holder shall be deemed to
have consented to: (x) the personal jurisdiction of the state
and federal courts located in the State of New York in
connection with any action brought in any such court to enforce the
forum provisions (an “enforcement action”), and (y) having
service of process made upon such warrant holder in any such
enforcement action by service upon such warrant holder’s counsel in
the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s
ability to bring a claim in a judicial forum that it finds
favorable for disputes with our company, which may discourage such
lawsuits. Alternatively, if a court were to find this provision of
our warrant agreement inapplicable or unenforceable with respect to
one or more of the specified types of actions or proceedings, we
may incur additional costs associated with resolving such matters
in other jurisdictions, which could materially and adversely affect
our business, financial condition and results of operations and
result in a diversion of the time and resources of our management
and board of directors.
A provision of our warrant agreement may make it more difficult
for us to complete an initial business combination.
If (i) we issue additional common stock or
equity-linked securities for capital raising purposes in
connection with the closing of our initial business combination at
a Newly Issued Price of less than $9.20 per common stock,
(ii) 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 completion of our initial business
combination (net of redemptions), and (iii) the Market Value
is below $9.20 per share, then the exercise price of the warrants
will be adjusted to be equal to 115% of the higher of the Market
Value and the Newly Issued Price, and the $10.00 and $18.00 per
share redemption trigger prices will be adjusted (to the nearest
cent) to be equal to 100% and 180% of the higher of the Market
Value and the Newly Issued Price, respectively. This may make it
more difficult for us to complete an initial business combination
with a target business.
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 the outstanding public warrants at
any time after they become exercisable and prior to their
expiration, at a price of $0.01 per warrant, provided that the
closing price of our Class A common stock equals or exceeds
$18.00 per share (as adjusted for adjustments to the number of
shares issuable upon exercise or the exercise price of a warrant as
described under the heading “Description of Securities —
Warrants — Public Stockholders’ Warrants —
Anti-Dilution Adjustments”) for any 20 trading days within a
30 trading-day period ending on the third trading day prior to
proper notice of such redemption and provided that certain other
conditions are met. 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. As a result, we may redeem the
warrants as set forth above even if the holders are otherwise
unable to exercise the warrants. Redemption of the outstanding
warrants could force you to (i) exercise your warrants and pay
the exercise price therefor at a time when it may be
disadvantageous for you to do so, (ii) sell your warrants at
the then-current market price when you might otherwise wish to
hold your warrants or (iii) accept the nominal redemption
price which, at the time the outstanding warrants are called for
redemption, we expect would be substantially less than the market
value of your warrants. None of the private placement warrants will
be redeemable by us so long as they are held by our sponsor or its
permitted transferees.
In addition, we have the ability to redeem the outstanding public
warrants at any time after they become exercisable and prior to
their expiration, at a price of $0.10 per warrant upon a minimum of
30 days’ prior written notice of
redemption provided that the closing price of our
Class A common stock equals or exceeds $10.00 per share (as
adjusted for adjustments to the number of shares issuable upon
exercise or the exercise price of a warrant as described under the
heading “Description of Securities — Warrants — Public
Stockholders’ Warrants — Anti-Dilution Adjustments”) for
any 20 trading days within a 30 trading-day period ending on
the third trading day prior to proper notice of such redemption
and provided that certain other conditions are
met, including that holders will be able to exercise their warrants
prior to redemption for a number of shares of Class A common
stock determined based on the redemption date and the fair market
value of our Class A common stock. Please see “Description of
Securities — Warrants — Public Stockholders’
Warrants — Redemption of warrants when the price per share of
Class A common stock equals or exceeds $10.00.” The value
received upon exercise of the warrants (i) may be less than
the value the holders would have received if they had exercised
their warrants at a later time where the underlying share price is
higher and (ii) may not compensate the holders for the value
of the warrants, including because the number of shares of
Class A common stock received is capped at 0.361 shares
of Class A common stock per warrant (subject to adjustment)
irrespective of the remaining life of the warrants.
Our warrants may have an adverse effect on the market price of
our shares of Class A common stock and make it more difficult
to effectuate our initial business combination.
We issued warrants to purchase 20,700,000 shares of
Class A common stock as part of the units offered by this
prospectus and, simultaneously with the closing of the Public
Offering, we issued in a private placement an aggregate of
10,280,000 warrants, each exercisable to purchase one share of
Class A common stock at $11.50 per share. In addition, if our
sponsor or an affiliate of our sponsor or certain of our officers
and directors makes any working capital loans, such lender may
convert those loans into up to an additional 1,500,000 private
placement warrants, at the price of $1.00 per warrant. To the
extent we issue common stock to effectuate our initial business
combination, the potential for the issuance of a substantial number
of additional shares of Class A common stock upon exercise of
these warrants could make us a less attractive acquisition vehicle
to a target business. Such warrants, when exercised, will increase
the number of issued and outstanding shares of Class A common
stock and reduce the value of the Class A common stock issued
to complete our initial business combination. Therefore, our
warrants may make it more difficult to effectuate our initial
business combination or increase the cost of acquiring the target
business.
Because each unit contains one-half of one warrant and only a
whole warrant may be exercised, the units may be worth less than
units of other special purpose acquisition companies.
Each unit contains one-half of one warrant. Pursuant to the
warrant agreement, no fractional warrants will be issued upon
separation of the units, and only whole units will trade. If, upon
exercise of the warrants, a holder would be entitled to receive a
fractional interest in a share, we will, upon exercise, round down
to the nearest whole number the number of shares of Class A
common stock to be issued to the warrant holder. This is different
from other offerings similar to ours whose units include one common
share and one warrant to purchase one whole share. We have
established the components of the units in this way in order to
reduce the dilutive effect of the warrants upon completion of a
business combination since the warrants will be exercisable in the
aggregate for one-half of the number of shares compared to
units that each contain a whole warrant to purchase one share, thus
making us, we believe, a more attractive merger partner for target
businesses. Nevertheless, this unit structure may cause our units
to be worth less than if it included a warrant to purchase one
whole share.
The grant of registration rights to our initial stockholders and
holders of our private placement warrants may make it more
difficult to complete our initial business combination, and the
future exercise of such rights may adversely affect the market
price of our shares of Class A common stock.
Pursuant to an agreement entered into concurrently with the
issuance and sale of the securities in the Public Offering, our
initial stockholders, the holders of our private placement
warrants, the holders of warrants that may be issued upon
conversion of working capital loans and their permitted transferees
can demand that we register the shares of Class A common stock
into which founder shares are convertible, the private placement
warrants and the Class A common stock issuable upon exercise
of the private placement warrants or the Class A common stock
issuable upon conversion of warrants that may be issued upon
conversion of working capital loans and any other securities of the
company acquired by them prior to the consummation of our initial
business combination. We will bear the cost of registering these
securities. The registration and availability of such a significant
number of securities for trading in the public market may have an
adverse effect on the market price of our Class A common
stock. In addition, the existence of the registration rights may
make our initial business combination more costly or difficult to
conclude. This is because the stockholders of the target business
may increase the equity stake they seek in the combined entity or
ask for more cash consideration to offset the negative impact on
the market price of our Class A common stock that is expected
when the shares of common stock owned by our initial stockholders,
holders of our private placement warrants or holders of our working
capital loans or their respective permitted transferees are
registered.
You will not be permitted to exercise your warrants unless we
register and qualify the underlying Class A common stock or
certain exemptions are available.
If the issuance of the Class A common stock upon exercise of
the warrants is not registered, qualified or exempt from
registration or qualification under the Securities Act and
applicable state securities laws, holders of warrants will not be
entitled to exercise such warrants and such warrants may have no
value and expire worthless. In such event, holders who acquired
their warrants as part of a purchase of units will have paid the
full unit purchase price solely for the Class A common stock
included in the units.
We are not registering the Class A common stock issuable upon
exercise of the warrants under the Securities Act or any state
securities laws at this time. However, under the terms of the
warrant agreement, we have agreed that, as soon as practicable, but
in no event later than 15 business days, after the closing of our
initial business combination, we will use our best efforts to file
with the SEC a registration statement covering the registration
under the Securities Act of the Class A common stock issuable
upon exercise of the warrants and thereafter will use our best
efforts to cause the same to become effective within 60 business
days following our initial business combination and to maintain a
current prospectus relating to the Class A common stock
issuable upon exercise of the warrants until the expiration of the
warrants in accordance with the provisions of the warrant
agreement. We cannot assure you that we will be able to do so if,
for example, any facts or events arise which represent a
fundamental change in the information set forth in the registration
statement or prospectus, the financial statements contained or
incorporated by reference therein are not current or correct or the
SEC issues a stop order.
If the shares of Class A common stock issuable upon exercise
of the warrants are not registered under the Securities Act, under
the terms of the warrant agreement, holders of warrants who seek to
exercise their warrants will not be permitted to do so for cash
and, instead, will be required to do so on a cashless basis in
accordance with Section 3(a)(9) of the Securities Act or
another exemption.
In no event will warrants be exercisable for cash or on a cashless
basis, and we will not be obligated to issue any shares to holders
seeking to exercise their warrants, unless the issuance of the
shares upon such exercise is registered or qualified under the
securities laws of the state of the exercising holder, or an
exemption from registration or qualification is available.
If our shares of Class A common stock are at the time of any
exercise of a warrant not listed on a national securities exchange
such that they satisfy the definition of “covered securities” under
Section 18(b)(1) of the Securities Act, we may, at our option,
not permit holders of warrants who seek to exercise their warrants
to do so for cash and, instead, require them to do so on a cashless
basis in accordance with Section 3(a)(9) of the Securities
Act; in the event we so elect, we will not be required to file or
maintain in effect a registration statement or register or qualify
the shares underlying the warrants under applicable state
securities laws, and in the event we do not so elect, we will use
our best efforts to register or qualify the shares underlying the
warrants under applicable state securities laws to the extent an
exemption is not available.
In no event will we be required to net cash settle any warrant, or
issue securities (other than upon a cashless exercise as described
above) or other compensation in exchange for the warrants in the
event that we are unable to register or qualify the shares
underlying the warrants under the Securities Act or applicable
state securities laws.
You may only be able to exercise your public warrants on a
“cashless basis” under certain circumstances, and if you do so, you
will receive fewer shares of Class A common stock from such
exercise than if you were to exercise such warrants for
cash.
The warrant agreement provides that in the following circumstances
holders of warrants who seek to exercise their warrants will not be
permitted to do for cash and will, instead, be required to do so on
a cashless basis in accordance with Section 3(a)(9) of the
Securities Act: (i) if the shares of Class A common stock
issuable upon exercise of the warrants are not registered under the
Securities Act in accordance with the terms of the warrant
agreement; and (ii) if we have so elected and the shares of
Class A common stock is at the time of any exercise of a
warrant not listed on a national securities exchange such that they
satisfy the definition of “covered securities” under
Section 18(b)(1) of the Securities Act. If you exercise your
public warrants on a cashless basis under the circumstances
described in clauses (i) and (ii) in the preceding
sentence, you would pay the warrant exercise price by surrendering
the warrants for that number of shares of Class A common stock
equal to the quotient obtained by dividing (x) the product of
the number of shares of Class A common stock underlying the
warrants, multiplied by the excess of the “fair market value” of
our shares of Class A common stock (as defined in the next
sentence) over the exercise price of the warrants by (y) the
fair market value. The “fair market value” is the average reported
closing price of the shares of Class A common stock for the 10
trading days ending on the third trading day prior to the date on
which the notice of exercise is received by the warrant agent or on
which the notice of redemption is sent to the holders of warrants,
as applicable. As a result, you would receive fewer shares of
Class A common stock from such exercise than if you were to
exercise such warrants for cash.
The securities in which we invest the proceeds held in the trust
account could bear a negative rate of interest, which could reduce
the interest income available for payment of taxes or reduce the
value of the assets held in trust such that the per share
redemption amount received by stockholders may be less than $10.00
per share.
The net proceeds of the Public Offering and certain proceeds from
the sale of the private placement warrants, in the amount of
$360,000,000, will be held in an interest-bearing trust
account. The proceeds held in the trust account may only be
invested in direct U.S. government treasury obligations with a
maturity of 185 days or less or in certain money market funds
which invest only in direct U.S. government treasury obligations.
While short-term U.S. Treasury obligations currently yield a
positive rate of interest, they have briefly yielded negative
interest rates in recent years. Central banks in Europe and Japan
pursued interest rates below zero in recent years, and the Open
Market Committee of the Federal Reserve has not ruled out the
possibility that it may in the future adopt similar policies in the
United States. In the event of very low or negative yields,
the amount of interest income (which we are permitted to use to pay
our taxes and up to $100,000 of dissolution expenses) would be
reduced. In the event that we are unable to complete our initial
business combination, our public stockholders are entitled to
receive their pro-rata share of the proceeds held in the trust
account, plus any interest income (less up to $100,000 of interest
to pay dissolution expenses). If the balance of the trust account
is reduced below $360,000,000 as a result of negative interest
rates, the amount of funds in the trust account available for
distribution to our public stockholders may be reduced below $10.00
per share.
GENERAL RISK FACTORS
We are a blank check company with no operating history and no
revenues, and you have no basis on which to evaluate our ability to
achieve our business objective.
We are a blank check company incorporated under the laws of the
State of Delaware with no operating results, and we will not
commence operations until obtaining funding through the Public
Offering. Because we lack an operating history, you have no basis
upon which to evaluate our ability to achieve our business
objective of completing our initial business combination. We have
no plans, arrangements or understandings with any prospective
target business concerning a business combination and may be unable
to complete our initial business combination. If we fail to
complete our initial business combination, we will never generate
any operating revenues.
Past performance by our management team and their respective
affiliates may not be indicative of future performance of an
investment in us or in the future performance of any business that
we may acquire.
Information regarding performance by, or businesses associated
with, our management team or businesses associated with them is
presented for informational purposes only. Past performance by our
management team or the other companies referred to in this
prospectus 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 locate a suitable candidate for
our initial business combination. You should not rely on the
historical record of the performance of our management team’s or
businesses associated with them as indicative of our future
performance of an investment in us or the returns we will, or is
likely to, generate going forward. An investment in us is not an
investment in any of the companies associated with our management
team.
Cyber incidents or attacks directed at us could result in
information theft, data corruption, operational disruption and/or
financial loss.
We depend on digital technologies, including information systems,
infrastructure and cloud applications and services, including those
of third parties with which we may deal. Sophisticated and
deliberate attacks on, or security breaches in, our systems or
infrastructure, or the systems or infrastructure of third parties
or the cloud, could lead to corruption or misappropriation of our
assets, proprietary information and sensitive or confidential data.
As an early stage company without significant investments in data
security protection, we may not be sufficiently protected against
such occurrences. We may not have sufficient resources to
adequately protect against, or to investigate and remediate any
vulnerability to, cyber incidents. It is possible that any of these
occurrences, or a combination of them, could have adverse
consequences on our business and lead to financial loss.
We are an emerging growth company and a smaller reporting
company within the meaning of the Securities Act, and if we take
advantage of certain exemptions from disclosure requirements
available to emerging growth companies or smaller reporting
companies, this could make our securities less attractive to
investors and may make it more difficult to compare our performance
with other public companies.
We are an “emerging growth company” within the meaning of the
Securities Act, as modified by the JOBS Act, and we may take
advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging
growth companies including, but not limited to, not being required
to comply with the auditor internal controls attestation
requirements of Section 404 of the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements, and exemptions from the
requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute
payments not previously approved. As a result, our stockholders may
not have access to certain information they may deem important. We
could be an emerging growth company for up to five years, although
circumstances could cause us to lose that status earlier, including
if the market value of our Class A common stock held by
non-affiliates equals or exceeds $700 million as of any
June 30 before that time, in which case we would no longer be an
emerging growth company as of the following December 31. We cannot
predict whether investors will find our securities less attractive
because we will rely on these exemptions. If some investors find
our securities less attractive as a result of our reliance on these
exemptions, the trading prices of our securities may be lower than
they otherwise would be, there may be a less active trading market
for our securities and the trading prices of our securities may be
more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging
growth companies from being required to comply with new or revised
financial accounting standards until private companies (that is,
those that have not had a Securities Act registration statement
declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or
revised financial accounting standards. The JOBS Act provides that
a company can elect to opt out of the extended transition period
and comply with the requirements that apply to
non-emerging growth companies but any such an election to opt
out is irrevocable. We have elected not to opt out of such extended
transition period which means that when a standard is issued or
revised and it has different application dates for public or
private companies, we, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new
or revised standard. This may make comparison of our financial
statements with another public company which is neither an emerging
growth company nor an emerging growth company which has opted out
of using the extended transition period difficult or impossible
because of the potential differences in accounting standards
used.
Additionally, we are a “smaller reporting company” as defined in
Item 10(f)(1) of Regulation S-K. Smaller reporting companies
may take advantage of certain reduced disclosure obligations,
including, among other things, providing only two years of audited
financial statements. We will remain a smaller reporting company
until the last day of the fiscal year in which (1) the market
value of our common stock held by non-affiliates equals or
exceeds $250 million as of the prior June 30th, or
(2) our annual revenues exceeded $100 million during such
completed fiscal year and the market value of our common stock held
by non-affiliates equals or exceeds $700 million as of
the prior June 30th. To the extent we take advantage of
such reduced disclosure obligations, it may also make comparison of
our financial statements with other public companies difficult or
impossible.
Provisions in our amended and restated certificate of
incorporation and Delaware law may have the effect of discouraging
lawsuits against our directors and officers.
Our amended and restated certificate of incorporation requires,
unless we consent in writing to the selection of an alternative
forum, that (i) any derivative action or proceeding brought on
our behalf, (ii) any action asserting a claim of breach of a
fiduciary duty owed by any director, officer or other employee to
us or our stockholders, (iii) any action asserting a claim
against us, our directors, officers or employees arising pursuant
to any provision of the DGCL or our amended and restated
certificate of incorporation or bylaws, or (iv) any action
asserting a claim against us, our directors, officers or employees
governed by the internal affairs doctrine may be brought only in
the Court of Chancery in the State of Delaware, except any claim
(A) as to which the Court of Chancery of the State of Delaware
determines that there is an indispensable party not subject to the
jurisdiction of the Court of Chancery (and the indispensable party
does not consent to the personal jurisdiction of the Court of
Chancery within ten days following such determination),
(B) which is vested in the exclusive jurisdiction of a court
or forum other than the Court of Chancery, or (C) for which
the Court of Chancery does not have subject matter jurisdiction. If
an action is brought outside of Delaware, the stockholder bringing
the suit will be deemed to have consented to service of process on
such stockholder’s counsel. Although we believe this provision
benefits us by providing increased consistency in the application
of Delaware law in the types of lawsuits to which it applies, a
court may determine that this provision is unenforceable, and to
the extent it is enforceable, the provision may have the effect of
discouraging lawsuits against our directors and officers, although
our stockholders will not be deemed to have waived our compliance
with federal securities laws and the rules and regulations
thereunder.
Notwithstanding the foregoing, our amended and restated certificate
of incorporation provides that the exclusive forum provision will
not apply to suits brought to enforce a duty or liability created
by the Exchange Act or any other claim for which the federal courts
have exclusive jurisdiction. 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. Additionally, unless we consent
in writing to the selection of an alternative forum, the federal
courts shall be the exclusive forum for the resolution of any
complaint asserting a cause of action arising under the Securities
Act against us or any of our directors, officers, other employees
or agents. Any person or entity purchasing or otherwise acquiring
any interest in our securities shall be deemed to have notice of
and consented to these provisions. Although we believe this
provision benefits us by providing increased consistency in the
application of Delaware law in the types of lawsuits to which it
applies, the provision limit our stockholders’ ability to obtain a
favorable judicial forum for disputed with us and may have the
effect of discouraging lawsuits against our directors and
officers.
Additionally, unless we consent in writing to the selection of an
alternative forum, the federal courts shall be the exclusive forum
for the resolution of any complaint asserting a cause of action
arising under the Securities Act against us or any of our
directors, officers, other employees or agents. Section 22 of
the Securities Act, however, created concurrent jurisdiction for
federal and state courts over all suits brought to enforce any duty
or liability created by the Securities Act or the rules and
regulations thereunder. Accordingly, there is uncertainty as to
whether a court would enforce such provisions, and the
enforceability of similar choice of forum provisions in other
companies’ charter documents has been challenged in legal
proceedings. While the Delaware courts have determined that such
exclusive forum provisions are facially valid, a stockholder may
nevertheless seek to bring a claim in a venue other than those
designated in the exclusive forum provisions, and there can be no
assurance that such provisions will be enforced by a court in those
other jurisdictions. Any person or entity purchasing or otherwise
acquiring any interest in our securities shall be deemed to have
notice of an consented to these provisions; however, we note that
investors cannot waive compliance with the federal securities laws
and the rules and regulations thereunder.
Although we believe this provision benefits us by providing
increased consistency in the application of Delaware law in the
types of lawsuits to which it applies, the provision may limit our
stockholders’ ability to obtain a favorable judicial forum for
disputed with us and may have the effect of discouraging lawsuits
against our directors and officers.
ITEM IB. UNRESOLVED
STAFF COMMENTS.
None.
ITEM 2.
PROPERTIES.
We currently sub-lease executive offices at 7114 East Stetson
Drive, Suite 400, Scottsdale, AZ 85251 from our Sponsor and the
members of our management team. We consider our current office
space adequate for our current operations.
ITEM 3. LEGAL
PROCEEDINGS.
As of December 31, 2020, to the knowledge of our management, there
was no material litigation, arbitration or governmental proceeding
pending against us or any members of our management team in their
capacity as such, and we and the members of our management team
have not been subject to any such proceeding.
ITEM 4. MINE SAFETY
DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Market Information
Our units, Class A common stock and warrants are listed on Nasdaq
under the symbols “SNRHU,” “SNRH” and “SNRHW”, respectively.
Holders
As of December 31, 2020, there was one holder of record of our
units, no holders of record of our Class A common stock, one holder
of record of our Class B common stock and one holder of record of
our warrants. The number of holders of record does not include a
substantially greater number of “street name” holders or beneficial
holders whose units, Class A common stock and warrants are held of
record by banks, brokers and other financial institutions.
Recent Sales of Unregistered Securities; Use of Proceeds from
Registered Offerings
Unregistered Sales
The sales of the Founder Shares and Private Placement Warrants to
our Sponsor and our initial stockholders as described herein were
deemed to be exempt from registration under the Securities Act, in
reliance on Section 4(a)(2) of the Securities Act as transactions
by an issuer not involving a public offering.
Use of Proceeds
On December 15, 2020, we consummated the Public Offering of
41,400,000 units (the “Units” and, with respect to the Class A
common stock included in the Units being offered, the “Public
Shares”), including the issuance of 5,400,000 Units as a result of
the underwriters’ exercise of their over-allotment option in full,
at $10.00 per Unit, generating gross proceeds of $414.0 million,
and incurring offering costs of approximately $23.3 million,
inclusive of approximately $14.5 million in deferred underwriting
commissions.
In connection with the Public Offering, we incurred offering costs
of approximately $23.3 million, inclusive of approximately $14.5
million in deferred underwriting commissions. Other incurred
offering costs consisted principally of preparation fees related to
the Public Offering. After deducting the underwriting discounts and
commissions (excluding the deferred portion, which amount will be
payable upon consummation of the initial Business Combination, if
consummated) and the Public Offering expenses, $414.0 million of
the net proceeds from our Public Offering and certain of the
proceeds from the private placement of the Private Placement
Warrants (or $10.00 per Unit sold in the Public Offering) was
placed in the Trust Account. The net proceeds of the Public
Offering and certain proceeds from the sale of the Private
Placement Warrants are held in the Trust Account and invested as
described elsewhere in this Annual Report on Form 10-K.
There has been no material change in the planned use of the
proceeds from the Public Offering and Private Placement as is
described in the Company’s final prospectus related to the Public
Offering.
ITEM 6. SELECTED
FINANCIAL DATA.
As a “smaller reporting company,” we are not required to provide
the information called for by this Item.
ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
References to “we”, “us”, “our” or the “Company” are to Senior
Connect Acquisition Corp. I, except where the context requires
otherwise. The following discussion should be read in conjunction
with our financial statements and related notes thereto included
elsewhere in this Annual Report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
This Annual
Report on Form 10-K includes forward-looking statements
within the meaning of Section 27A of the Securities Act, and
Section 21E of the Exchange Act. We have based these
forward-looking statements on our current expectations and
projections about future events. These forward-looking statements
are subject to known and unknown risks, uncertainties and
assumptions about us that may cause our actual results, levels of
activity, performance or achievements to be materially different
from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking
statements. In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “could,”
“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“continue,” or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a
discrepancy include, but are not limited to, those described in our
other U.S. Securities and Exchange Commission (“SEC”)
filings.
Restatement
In this Amendment No. 2 to our annual report filed on Form 10-K, we
are restating our audited financial statements as of and for the
period from August 27, 2020 (inception) through December 31,
2020.
The restatement results from our prior accounting for our warrants
issued in connection with initial public offering and private
placement in December 2020 which had been classified as a component
of equity on the premise that the instruments were indexed to our
own stock and were eligible to be accounted for as equity
instruments instead of classifying them as derivative
liabilities.
In preparation of our unaudited condensed financial statements as
of and for quarterly period ended September 30, 2021, we concluded
it should restate its financial statements to classify all Class A
common stock subject to possible redemption in temporary equity. In
accordance with the SEC and its staff’s guidance on redeemable
equity instruments in ASC 480-10-S99, redemption provisions not
solely within the control of us require common stock subject to
redemption to be classified outside of permanent equity. We had
previously classified a portion of its Class A common stock in
permanent equity, or total stockholders’ equity. Although we did
not specify a maximum redemption threshold, its Amended and
Restated Certificate of Incorporation currently provides that we
will not redeem our public shares in an amount that would cause its
net tangible assets to be less than $5,000,001. Previously, we did
not consider redeemable shares classified as temporary equity as
part of net tangible assets. We revised this interpretation to
include temporary equity in net tangible assets.
Additionally, on April 12, 2021, the SEC Staff issued the SEC Staff
Statement, in which the SEC Staff expressed its view that certain
terms and conditions common to SPAC warrants may require the
warrants to be classified as liabilities on the SPAC’s balance
sheet as opposed to equity. Since issuance on December 15, 2020,
our warrants were accounted for as equity within our balance
sheets, and after discussion and evaluation, including with our
independent auditors, we have concluded that our warrants should be
presented as liabilities with subsequent fair value
remeasurement.
Therefore, we, in consultation with our Audit Committee, concluded
that our previously issued financial statements for the Affected
Periods should be restated because of a misapplication in the
guidance around accounting for our Class A common stock subject to
possible redemption and our warrants and should no longer be relied
upon.
The identified errors had no effect on our previously reported
revenue, operating expenses, operating income, total cash flows or
cash.
In connection with the restatement, our management reassessed the
effectiveness of its disclosure controls and procedures for the
periods affected by the restatement. As a result of that
reassessment, management determined that our disclosure controls
and procedures for such periods were not effective with respect to
the classification of our warrants as components of equity instead
of as derivative liabilities. For more information, see Item
9A included in this Amendment No. 2.
The financial information that has been previously filed or
otherwise reported for these periods is superseded by the
information in this Amendment No. 2, and the financial statements
and related financial information contained in such previously
filed reports should no longer be relied upon.
The restatement is more fully described in Note 2 of the notes to
the financial statements included herein.
Overview
We are a blank check company incorporated in Delaware on
August 27, 2020. We were formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more
businesses or entities (the “Business Combination”).
Our sponsor is Health Connect Acquisitions Holdings LLC, a Delaware
limited liability company (the “Sponsor”). The registration
statement for the initial public offering (the “Public Offering”)
was declared effective on December 10, 2020. On December 15, 2020,
we consummated the Public Offering of 41,400,000
units (the “Units” and, with respect to the Class A common
stock included in the Units being offered, the “Public
Shares”), including the issuance of 5,400,000 Units as a
result of the underwriters’ exercise of their over-allotment option
in full, at $10.00 per Unit, generating gross proceeds
of $414.0 million, and incurring offering costs of
approximately $23.3 million, inclusive of approximately
$14.5 million in deferred underwriting commissions.
Simultaneously with the closing of the Public Offering, we
consummated the private placement (“Private Placement”)
of 10,280,000 warrants (each, a “Private Placement Warrant”
and collectively, the “Private Placement Warrants”), at a price of
$1.00 per Private Placement Warrant to our Sponsor, generating
gross proceeds to us of $10.3 million.
Upon the closing of the Public Offering and the Private Placement,
$414.0 million ($10.00 per Unit) of the net proceeds of the
Public Offering and certain of the proceeds of the Private
Placement was placed in a trust account (“Trust Account”),
located in the United States with Continental Stock
Transfer & Trust Company acting as trustee, and invested
only in U.S. “government securities” within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940, as
amended (the “Investment Company Act”) having a maturity of 185
days or less or in money market funds meeting certain conditions
under Rule 2a-7 promulgated under the
Investment Company Act which invest only in direct U.S. government
treasury obligations, until the the earlier of (i) the completion
of the Business Combination and (ii) the distribution of the Trust
Account as described below.
If we are unable to complete a Business Combination within 24
months from the closing of the Public Offering, or December 15,
2022 (as such period may be extended pursuant to the Certificate of
Incorporation, the “Combination Period”), we will (i) cease all
operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest earned on the funds held in the Trust
Account and not previously released to us to pay its taxes (less up
to $100,000 of interest to pay dissolution expenses), divided by
the number of then outstanding Public Shares, which redemption will
completely extinguish Public Stockholders’ rights as stockholders
(including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining
stockholders and the board of directors, liquidate and dissolve,
subject, in each case, to our obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law.
Results of Operations
Our entire activity since inception through December 31, 2020
related to our formation, the preparation for the Public Offering,
and since the closing of the Public Offering, the search for a
prospective initial Business Combination. We have neither engaged
in any operations nor generated any revenues to date. We will not
generate any operating revenues until after completion of our
initial Business Combination. We
generate non-operating income in the form of interest
income on cash and cash equivalents. We expect to incur
increased expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses.
For the period from August 27, 2020 (inception) through December
31, 2020 we had net loss of approximately $7.0 million, which
consisted of approximately $41,000 in general and administrative
expenses, $5,000 of administrative fees – related party,
approximately $69,000 of franchise tax expenses, change in fair
value of warrant liabilities of approximately $6.2 million,
offering costs associated with issuance of public and private
warrants of approximately $661,000, offset by approximately $2,000
in interest income on the Trust Account.
As a result of the restatement described in Note 2 of the notes to
the financial statements included herein, we classify the warrants
issued in connection with our Initial Public Offering, Private
Placement as liabilities at their fair value and adjust the warrant
instruments to fair value at each reporting period. These
liabilities are subject to re-measurement at each balance sheet
date until exercised, and any change in fair value is recognized in
our statement of operations.
Liquidity and Capital Resources
As of December 31, 2020, we had approximately $0.9 million in cash
and working capital of approximately $1.4 million, (not taking into
account tax obligations of approximately $69,000 that may be paid
using investment income earned from the Trust Account).
Prior to the consummation of the Public Offering on December 15,
2020, our liquidity needs were satisfied through the receipt of
$25,000 from our Sponsor in exchange for the issuance of the
founder shares, and the proceeds of the Note from our Sponsor.
Subsequent to the consummation of the Public Offering and Private
Placement, our liquidity needs have been satisfied with the
proceeds from the consummation of the Private Placement not held in
the Trust Account. In addition, in order to finance transaction
costs in connection with a Business Combination, our Sponsor may,
but is not obligated to, provide us working capital
loans.
Based on the foregoing, our management believes that we will have
sufficient working capital and borrowing capacity to meet our needs
through the earlier of the consummation of a Business Combination
or one year from this filing. Over this time period, we will be
using these funds for paying existing accounts payable, identifying
and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge
with or acquire, and structuring, negotiating and consummating the
Business Combination.
Management continues to evaluate the impact of the COVID-19
pandemic and has concluded that the specific impact is not readily
determinable as of the date of the balance sheet. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Related Party Transactions
Founder Shares
On August 27, 2020, the Sponsor subscribed to purchase
10,062,500 shares of our Class B common stock, par value
$0.0001 per share (the “Founder Shares”), and fully paid for those
shares on September 22, 2020. On November 23, 2020, the
Sponsor surrendered 1,437,500 shares of Class B common stock
to us for cancellation for no consideration. On December 10,
2020, we effected a 1:1.2 stock split of Class B common stock,
resulting in an aggregate of 10,350,000 shares of Class B
common stock outstanding. All shares and associated amounts have
been retroactively restated to reflect the share surrender and the
stock split. The initial stockholders agreed to forfeit up to
1,350,000 Founder Shares to the extent that the
over-allotment option was not exercised in full by the
underwriters, so that the Founder Shares would represent 20.0% of
the Company’s issued and outstanding shares of common stock after
the Public Offering. The underwriter exercised its
over-allotment option in full on December 15, 2020; thus,
these 1,350,000 Founder Shares were no longer subject to
forfeiture.
The initial stockholders agreed, subject to limited exceptions, not
to transfer, assign or sell any of the Founder Shares until the
earlier to occur of: (i) one year after the completion of the
initial Business Combination or earlier if, subsequent to the
initial Business Combination, the closing price of the Class A
common stock equals or exceeds $12.00 per share (as adjusted for
stock splits, stock capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any
30-trading day period commencing at least 150 days after
the initial Business Combination, and (ii) the date following
the completion of the initial Business Combination on which we
complete a liquidation, merger, capital stock exchange or other
similar transaction that results in all of the stockholders having
the right to exchange their Class A common stock for cash,
securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Public Offering, we
consummated the Private Placement of 10,280,000 Private
Placement Warrants at a price of $1.00 per Private Placement
Warrant to the Sponsor, generating proceeds of approximately
$10.3 million.
Each whole Private Placement Warrant is exercisable for one whole
share of Class A common stock at a price of $11.50 per share,
subject to adjustment. A portion of the proceeds from the sale of
the Private Placement Warrants to the Sponsor was added to the
proceeds from the Public Offering held in the Trust Account. If we
do not complete a Business Combination within the Combination
Period, the Private Placement Warrants will expire worthless. The
Private Placement Warrants will be non-redeemable for cash
(except as described below) and exercisable on a cashless basis so
long as they are held by the Sponsor or its permitted
transferees.
The Sponsor agreed, subject to limited exceptions, not to transfer,
assign or sell the Private Placement Warrants until 30 days
after the completion of the initial Business Combination.
Related Party Loans
On August 27, 2020, the Sponsor, a related party, agreed to
loan us an aggregate of up to $300,000 to cover expenses related to
the Public Offering pursuant to a promissory note (the “Note”).
This loan is non-interest bearing and payable upon the
completion of the Public Offering. As of December 15, 2020, we
borrowed approximately $139,000 from the related party under the
Note. We repaid the Note in full on December 16, 2020.
In addition, in order to fund working capital deficiencies or
finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain
of our officers and directors may, but are not obligated to, loan
us funds as may be required (“Working Capital Loans”). If we
complete a Business Combination, we may repay the Working Capital
Loans out of the proceeds of the Trust Account released to us.
Otherwise, the Working Capital Loans could be repaid only out of
funds held outside the Trust Account. In the event that a Business
Combination does not close, we may use a portion of proceeds held
outside the Trust Account to repay the Working Capital Loans but no
proceeds held in the Trust Account would be used to repay the
Working Capital Loans. The Working Capital Loans would either be
repaid upon consummation of a Business Combination or, at the
lenders’ discretion, up to $1,500,000 of such Working Capital Loans
may be convertible into warrants of the post Business Combination
entity at a price of $1.00 per warrant. The warrants would be
identical to the Private Placement Warrants. Except for the
foregoing, the terms of such Working Capital Loans, if any, have
not been determined and no written agreements exist with respect to
such loans. As of December 31, 2020, we had no borrowings under the
Working Capital Loans.
Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Warrants and
warrants that may be issued upon conversion of Working Capital
Loans, if any, are entitled to registration rights pursuant to a
registration rights agreement. These holders will be entitled to
certain demand and “piggyback” registration rights. However, the
registration rights agreement provides that we will not permit any
registration statement filed under the Securities Act to become
effective until the termination of the applicable
lock-up period for the securities to be registered. We will
bear the expenses incurred in connection with the filing of any
such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20
per unit, approximately $8.3 million in the aggregate, paid
upon the closing of the Public Offering. In addition, $0.35 per
unit, or approximately $14.5 million in the aggregate, will be
payable to the underwriters for deferred underwriting commissions.
The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that we
complete a Business Combination, subject to the terms of the
underwriting agreement.
Administrative Support Agreement
We entered into an agreement to pay our Sponsor a total of up to
$10,000 per month for overhead and administration support. Upon
completion of the Initial Business Combination or our liquidation,
we will cease paying these monthly fees. We incurred $5,000 of such
fees for the period from August 27, 2020 (inception) through
December 31, 2020.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of income and
expenses during the periods reported. Actual results could
materially differ from those estimates. We have identified the
following as our critical accounting policies:
Class A Common Stock Subject to Possible
Redemption
We account for Class A common stock subject to possible redemption
in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory
redemption (if any) is classified as a liability instrument and
measured at fair value. Conditionally redeemable common stock
(including common stock that features redemption rights that are
either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times,
common stock is classified as stockholders’ equity. Our outstanding
common stock features certain redemption rights that are considered
to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, at December 31, 2020,
37,230,600 shares of common stock subject to possible redemption is
presented as temporary equity, outside of the stockholders’ equity
section of the balance sheet.
Net Loss Per Share of Common Stock
Net loss per share is computed by dividing net loss by the
weighted-average number of common stock outstanding during the
periods. We have not considered the effect of the warrants sold in
the Initial Public Offering and Private Placement in the
calculation of diluted loss per common stock, since the exercise of
the warrants are contingent upon the occurrence of future events.
As a result, diluted net loss per common stock is the same as basic
net loss per common stock for the periods presented.
Our statement of operations include a presentation of loss per
share for Class A common stock subject to possible redemption in a
manner similar to the two-class method of loss per share. Net loss
per common stock, basic and diluted, for Class A common stock
subject to possible redemption is calculated by dividing the
proportionate share of loss on marketable securities held by the
Trust Account, net of applicable franchise taxes, by the weighted
average number of Class A Common stock subject to possible
redemption outstanding since original issuance.
Net loss per share, basic and diluted, for non-redeemable common
stock is calculated by dividing the net loss, adjusted for loss on
marketable securities attributable to Class A common stock subject
to possible redemption, by the weighted average number of
non-redeemable common stock outstanding for the period.
Non-redeemable common stock includes Class B common stock and
non-redeemable shares of Class A common stock. Non-redeemable
common stock participates in the loss on marketable securities
based on non-redeemable shares’ proportionate interest.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash
flow, market, or foreign currency risks. We evaluate all of our
financial instruments, including issued stock purchase warrants, to
determine if such instruments are derivatives or contain features
that qualify as embedded derivatives, pursuant to ASC 480 and ASC
815-15. The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as
equity, is re-assessed at the end of each reporting period.
We issued 30,980,000 common shares warrants in connection with our
Initial Public Offering (20,700,000) and Private Placement
(10,280,000) which are recognized as derivative liabilities in
accordance with ASC 815-40. Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjust the instruments
to fair value at each reporting period. The liabilities are subject
to re-measurement at each balance sheet date until exercised, and
any change in fair value is recognized in our statement of
operations. The fair value of warrants issued in connection with
the Initial Public Offering and Private Placement have been
estimated using Monte-Carlo simulations at each balance sheet
date.
Recent Adopted Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”)
No. 2020-06, Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s
Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06”), which simplifies accounting for convertible instruments
by removing major separation models required under current GAAP.
The ASU also removes certain settlement conditions that are
required for equity-linked contracts to qualify for the derivative
scope exception, and it simplifies the diluted earnings per share
calculation in certain areas. We adopted ASU 2020-06 on January 1,
2021. Adoption of the ASU did not impact our financial position,
results of operations or cash flows.
Recent Issued Accounting Standards
Our management does not believe that any recently issued, but not
yet effective, accounting standards updates, if currently adopted,
would have a material effect on the accompanying financial
statement.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2020, we did not
have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii)
of Regulation S-K and did not have any
commitments or contractual obligations.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”) contains provisions that, among other things, relax
certain reporting requirements for qualifying public companies. We
qualify as an “emerging growth company” and under the JOBS Act are
allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised
accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which
adoption of such standards is
required for non-emerging growth companies. As
a result, our financial statements may not be comparable to
companies that comply with new or revised accounting pronouncements
as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of
relying on the other reduced reporting requirements provided by the
JOBS Act. Subject to certain conditions set forth in the JOBS Act,
if, as an “emerging growth company,” we choose to rely on such
exemptions we may not be required to, among other things,
(i) provide an auditor’s attestation report on our system of
internal controls over financial reporting pursuant to
Section 404 of the Sarbanes-Oxley Act, (ii) provide
all of the compensation disclosure that may be
required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (iii) comply with any requirement that may be
adopted by the PCAOB regarding mandatory audit firm rotation or a
supplement to the auditor’s report providing additional information
about the audit and the financial statements (auditor discussion
and analysis) and (iv) disclose certain executive compensation
related items such as the correlation between executive
compensation and performance and comparisons of the CEO’s
compensation to median employee compensation. These exemptions will
apply for a period of five years following the completion of our
Public Offering or until we are no longer an “emerging growth
company,” whichever is earlier.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and are not required to provide the information
otherwise required under this item.
ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Pages F-1 through F-23 comprising a portion of
this Annual Report on Form 10-K.
SENIOR CONNECT ACQUISITION CORP. I
INDEX TO FINANCIAL STATEMENTS
Report of Independent
Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Senior Connect Acquisition Corp. I
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Senior Connect
Acquisition Corp. I (the “Company”) as of December 31, 2020, the
related statements of operations, changes in stockholders’ equity
and cash flows for the period from August 27, 2020 (inception)
through December 31, 2020, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2020, and the
results of its operations and its cash flows for the period from
August 27, 2020 (inception) through December 31, 2020, in
conformity with accounting principles generally accepted in the
United States of America.
Restatement of the 2020 Financial Statements
As disclosed in Note 2 to the financial statements, the
accompanying financial statements as of December 31, 2020 and for
the period from August 27, 2020 (inception) through December 31,
2020, have been restated.
Basis for Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
Company's financial statements based on our audit. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audit, we are required to obtain
an understanding of internal control over financial reporting but
not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis
for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor since 2020.
New York, NY
March 31, 2021 except for the effects of the restatements discussed
in Note 2 – Amendment 1, as to which the date is July 15, 2021, and
in Note 2–Amendment 2, as to which the date is December 23,
2021
SENIOR CONNECT
ACQUISITION CORP. I
BALANCE SHEET
December 31, 2020 (Restated, See Note 2)
| Assets: |
|
|
|
| Current assets: |
|
|
|
|
Cash |
|
$ |
891,720 |
|
|
Prepaid expenses |
|
|
607,850 |
|
|
Total current assets |
|
|
1,499,570 |
|
|
Investments held in Trust Account |
|
|
414,001,702 |
|
|
Total Assets |
|
$ |
415,501,272 |
|
| |
|
|
|
|
|
Liabilities, Class A Common Stock Subject to Possible Redemption
and Stockholders’ Equity: |
|
|
|
|
| Current
liabilities: |
|
|
|
|
| Accounts
payable |
|
$ |
16,015 |
|
| Accrued
expenses |
|
|
70,000 |
|
| Accrued
expenses - related party |
|
|
5,000 |
|
|
Franchise tax payable |
|
|
69,449 |
|
|
Total current liabilities |
|
|
160,464 |
|
|
Derivative warrant liabilities |
|
|
23,544,800 |
|
|
Deferred underwriting commissions |
|
|
14,490,000 |
|
|
Total Liabilities |
|
|
38,195,264 |
|
| |
|
|
|
|
|
Commitments & Contingencies |
|
|
|
|
| |
|
|
|
|
|
Class A common stock subject to possible redemption, $0.0001 par
value; 41,400,000 shares at $10.00 per share redemption value |
|
|
414,000,000 |
|
| |
|
|
|
|
|
Stockholders’ Deficit: |
|
|
|
|
|
Preferred stock, 0.0001 par value; 1,000,000 shares authorized;
none issued and outstanding |
|
|
- |
|
|
Class A common stock, 0.0001 par value; 380,000,000 shares
authorized |
|
|
- |
|
|
Class B common stock, 0.0001 par value; 20,000,000 shares
authorized; 10,350,000 shares issued and outstanding |
|
|
1,035 |
|
|
Additional paid-in capital |
|
|
- |
|
|
Accumulated deficit |
|
|
(36,695,027 |
) |
|
Total stockholders’ deficit |
|
|
(36,693,992 |
) |
|
Total Liabilities, Class A Common Stock Subject to Possible
Redemption and Stockholders’ Deficit |
|
$ |
415,501,272 |
|
See accompanying notes to the financial statements
SENIOR CONNECT ACQUISITION CORP. I
STATEMENT OF
OPERATIONS
For the period from August 27, 2020 (inception) through December
31, 2020
(Restated, See Note 2)
|
General and administrative expenses |
|
$ |
40,752 |
|
|
Administrative fees - related party |
|
|
5,000 |
|
|
Franchise tax expenses |
|
|
69,449 |
|
| Total operating
expenses |
|
|
(115,201 |
) |
|
Change in fair value of warrant liabilities |
|
|
(6,196,000 |
) |
|
Offering costs associated with issuance of public and private
warrants |
|
|
(661,147 |
) |
|
Net gain from investments held in Trust Account |
|
|
1,702 |
|
|
Net loss |
|
$ |
(6,970,646 |
) |
| |
|
|
|
|
|
Weighted average shares outstanding of Class A common stock, basic
and diluted |
|
|
6,968,317 |
|
| |
|
|
|
|
|
Basic and Diluted net loss per share of Class A common stock |
|
$ |
(0.43 |
) |
| |
|
|
|
|
|
Weighted average shares outstanding of Class B common stock, basic
and diluted |
|
|
9,227,228 |
|
| |
|
|
|
|
|
Basic and diluted net loss per share of Class B common stock |
|
$ |
(0.43 |
) |
See accompanying notes to the financial statements
SENIOR CONNECT
ACQUISITION CORP. I
STATEMENT OF STOCKHOLDERS’ DEFICIT
For the period from August 27, 2020 (inception) through December
31, 2020
(Restated, See Note 2)
| |
|
Common Stock |
|
|
Additional |
|
|
|
|
|
Total |
|
| |
|
Class A |
|
|
Class B |
|
|
Paid-In |
|
|
Accumulated |
|
|
Stockholders’ |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
|
| Balance -
August 27, 2020 (inception) |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
Issuance of Class B common stock to Sponsor |
|
|
- |
|
|
|
- |
|
|
|
10,350,000 |
|
|
|
1,035 |
|
|
|
23,965 |
|
|
|
- |
|
|
|
25,000 |
|
|
Excess cash received over the fair value of the private
warrants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,523,200 |
|
|
|
- |
|
|
|
4,523,200 |
|
|
Accretion on Class A common stock subject to possible redemption
amount – restated, See Note 2 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,547,165 |
) |
|
|
(29,724,381 |
) |
|
|
(34,271,546 |
) |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,970,646 |
) |
|
|
(6,970,646 |
) |
|
Balance - December 31, 2020 (restated) |
|
|
- |
|
|
$ |
- |
|
|
|
10,350,000 |
|
|
$ |
1,035 |
|
|
$ |
- |
|
|
$ |
(36,695,027 |
) |
|
$ |
(36,693,992 |
) |
See accompanying notes to the financial statements
SENIOR CONNECT
ACQUISITION CORP. I
STATEMENT OF CASH FLOWS
For the period from August 27, 2020 (inception) through December
31, 2020
(Restated, See Note 2)
| Cash Flows from Operating
Activities: |
|
|
|
|
Net loss |
|
$ |
(6,970,646 |
) |
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
| Change
in fair value of warrant liabilities |
|
|
6,196,000 |
|
|
Offering costs associated with issuance of public and private
warrants |
|
|
661,147 |
|
| Net
gain from investments held in Trust Account |
|
|
(1,702 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
| Prepaid
expenses |
|
|
(607,850 |
) |
|
Accounts payable |
|
|
16,015 |
|
| Accrued
expenses - related party |
|
|
5,000 |
|
|
Franchise tax payable |
|
|
69,449 |
|
|
Net cash used in operating activities |
|
|
(632,587 |
) |
| |
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
Investment held in Trust Account |
|
|
(414,000,000 |
) |
|
Net cash used in investing activities |
|
|
(414,000,000 |
) |
| |
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
Proceeds from issuance of Class B common stock to Sponsor |
|
|
25,000 |
|
|
Proceeds from note payable to related party |
|
|
138,788 |
|
|
Proceeds received from initial public offering, gross |
|
|
414,000,000 |
|
|
Proceeds received from private placement |
|
|
10,280,000 |
|
|
Offering costs paid |
|
|
(8,780,693 |
) |
|
Repayment of note payable to related party |
|
|
(138,788 |
) |
|
Net cash provided by financing activities |
|
|
415,524,307 |
|
| |
|
|
|
|
|
Net change in cash |
|
|
891,720 |
|
| |
|
|
|
|
|
Cash - beginning of the period |
|
|
- |
|
|
Cash - end of the period |
|
$ |
891,720 |
|
| |
|
|
|
|
|
Supplemental disclosure of noncash activities: |
|
|
|
|
|
Offering costs included in accrued expenses |
|
$ |
70,000 |
|
|
Deferred underwriting commissions in connection with the initial
public offering |
|
$ |
14,490,000 |
|
|
Accretion of Class A common stock subject to possible redemption
amount |
|
$ |
34,271,546 |
|
See accompanying notes to the financial statements
SENIOR CONNECT ACQUISITION CORP. I
RESTATED NOTES TO
FINANCIAL STATEMENTS
Note 1—Description of Organization and Business
Operations
Organization and General
Senior Connect Acquisition Corp. I (f/k/a Health Connect
Acquisitions Corp. I) (the “Company”) is a blank check company
incorporated in Delaware on August 27, 2020. The Company was
formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or
similar business combination with one or more businesses (the
“Business Combination”). The Company is an emerging growth company
and, as such, the Company is subject to all of the risks associated
with emerging growth companies.
As of December 31, 2020, the Company had not commenced any
operations. All activity for the period from August 27, 2020
(inception) through December 31, 2020 relates to the Company’s
formation and the initial public offering (the “Public Offering”)
described below. The Company will not generate any operating
revenues until after the completion of its initial Business
Combination, at the earliest. The Company generates
non-operating income in the form of interest income on cash
and cash equivalents from the proceeds derived from the Public
Offering. The Company has selected December 31 as its fiscal year
end.
Sponsor and Financing
The Company’s sponsor is Health Connect Acquisitions Holdings LLC,
a Delaware limited liability company (the “Sponsor”). The
registration statement for the Company’s Public Offering was
declared effective on December 10, 2020. On December 15, 2020,
the Company consummated its Public Offering of 41,400,000
units (the “Units” and, with respect to the Class A common
stock included in the Units being offered, the “Public Shares”),
including 5,400,000 additional Units to cover over-allotments
(the “Over-Allotment Units”), at $10.00 per Unit, generating gross
proceeds of $414.0 million, and incurring offering costs
of approximately $23.3 million, inclusive of approximately
$14.5 million in deferred underwriting commissions
(Note 6).
Simultaneously with the closing of the Public Offering, the Company
consummated the Private Placement of 10,280,000 Private
Placement Warrants at a price of $1.00 per Private Placement
Warrant to the Sponsor, generating proceeds of approximately
$10.3 million (Note 5).
Trust Account
Upon the closing of the Public Offering and the Private
Placement, $414.0 million ($10.00 per Unit) of the net
proceeds of the Public Offering and certain of the proceeds of the
Private Placement was held in a trust account (“Trust
Account”) located in the United States with Continental Stock
Transfer & Trust Company acting as trustee, and invested
only in U.S. government treasury obligations with a maturity of
185 days or less or in money market funds meeting certain
conditions under Rule 2a-7 under the Investment Company
Act 1940, as amended (the “Investment Company Act”), which will be
invested only in direct U.S. government treasury obligations, as
determined by the Company, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution
of the Trust Account as described below.
Initial Business Combination
The Company’s management has broad discretion with respect to the
specific application of the net proceeds of the Public Offering and
the sale of the Private Placement Warrants, although substantially
all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the
Company will be able to complete a Business Combination
successfully. The Company must complete an initial Business
Combination with one or more operating businesses or assets with a
fair market value equal to at least 80% of the net assets held in
the Trust Account (excluding the deferred underwriting commissions
and taxes payable on the interest earned on the trust account).
However, the Company will only complete a Business Combination if
the post-transaction company owns or acquires 50% or more of
the outstanding voting securities of the target or otherwise
acquires a controlling interest in the target business sufficient
for it not to be required to register as an investment company
under the Investment Company Act.
The Company will provide holders (the “Public Stockholders”) of the
Public Shares with the opportunity to redeem all or a portion of
their Public Shares upon the completion of a Business Combination
either (i) in connection with a stockholder meeting called to
approve the Business Combination or (ii) by means of a tender
offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will
be made by the Company, solely in its discretion. The Public
Stockholders will be entitled to redeem their Public Shares for a
pro rata portion of the amount then held in the Trust Account
(initially anticipated to be $10.00 per Public Share), calculated
as of two business days prior to the initial Business Combination,
including interest earned on the funds held in the trust account
and not previously released to the Company to pay the Company’s
taxes, net of taxes payable. The per share amount to be
distributed to Public Stockholders who redeem their Public Shares
will not be reduced by the deferred underwriting commissions the
Company will pay to the underwriters (as discussed in Note 6).
These Public Shares have been recorded at a redemption value and
classified as temporary equity upon the completion of the Public
Offering in accordance with the Financial Accounting Standards
Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic
480 “Distinguishing Liabilities from Equity.” The Company will
proceed with a Business Combination if a majority of the shares
voted are voted in favor of the Business Combination. The Company
will not redeem the Public Shares in an amount that would cause its
net tangible assets to be less than $5,000,001. If a stockholder
vote is not required by applicable law or stock exchange rule and
the Company does not decide to hold a stockholder vote for business
or other reasons, the Company will, pursuant to its amended and
restated certificate of incorporation (the “Certificate of
Incorporation”), conduct the redemptions pursuant to the tender
offer rules of the U.S. Securities and Exchange Commission (“SEC”)
and file tender offer documents with the SEC prior to completing a
Business Combination. If, however, stockholder approval of the
transaction is required by applicable law or stock exchange rule,
or the Company decides to obtain stockholder approval for business
or reasons, the Company will offer to redeem shares in conjunction
with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. Additionally, each Public
Stockholder may elect to redeem their Public Shares without voting,
and if they do vote, irrespective of whether they vote for or
against the proposed transaction. If the Company seeks stockholder
approval in connection with a Business Combination, the initial
stockholders (as defined below) agreed to vote any Founder Shares
(as defined below in Note 5) and any Public Shares held by them in
favor of a Business Combination. In addition, the initial
stockholders agreed to waive their redemption rights with respect
to any Founder Shares and any Public Shares held by them in
connection with the completion of a Business Combination.
The Certificate of Incorporation provides that a Public
Stockholder, together with any affiliate of such stockholder or any
other person with whom such stockholder is acting in concert or as
a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be
restricted from redeeming its shares with respect to more than an
aggregate of 15% or more of the Public Shares, without the prior
consent of the Company.
The Sponsor and the Company’s officers and directors (the “initial
stockholders”) agreed, pursuant to a letter agreement with the
Company, that they will not propose any amendment to the
Certificate of Incorporation (A) to modify the substance or
timing of the Company’s obligation to allow redemption in
connection with the initial Business Combination or to redeem 100%
of the Public Shares if the Company does not complete a Business
Combination within the Combination Period (as defined below) or
(B) with respect to any other provision relating to
stockholders’ rights or pre-initial Business Combination
activity, unless the Company provides the Public Stockholders with
the opportunity to redeem their Public Shares upon approval of any
such amendment at a per share price, payable in cash, equal to
the aggregate amount then on deposit in the Trust Account,
including interest (which interest shall be net of taxes payable)
divided by the number of then outstanding Public Shares.
If the Company is unable to complete a Business Combination within
24 months from the closing of the Public Offering, or December
15, 2022 (as such period may be extended pursuant to the
Certificate of Incorporation, the “Combination Period”), the
Company will (i) cease all operations except for the purpose
of winding up, (ii) as promptly as reasonably possible but not
more than ten business days thereafter, redeem the Public Shares,
at a per share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest
earned on the funds held in the Trust Account and not previously
released to the Company to pay its taxes (less up to $100,000 of
interest to pay dissolution expenses), divided by the number of
then outstanding Public Shares, which redemption will completely
extinguish Public Stockholders’ rights as stockholders (including
the right to receive further liquidating distributions, if any),
and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining stockholders
and the board of directors, liquidate and dissolve, subject, in
each case, to the Company’s obligations under Delaware law to
provide for claims of creditors and the requirements of other
applicable law.
The initial stockholders agreed to waive their rights to
liquidating distributions from the Trust Account with respect to
any Founder Shares held by them if the Company fails to complete a
Business Combination within the Combination Period. However, if the
initial stockholders acquire Public Shares in or after the Public
Offering, they will be entitled to liquidating distributions from
the Trust Account with respect to such Public Shares if the Company
fails to complete a Business Combination within the Combination
Period. The underwriters agreed to waive their rights to the
deferred underwriting commission (see Note 6) held in the Trust
Account in the event the Company does not complete a Business
Combination within in the Combination Period and, in such event,
such amounts will be included with the other funds held in the
Trust Account that will be available to fund the redemption of the
Public Shares. In the event of such distribution, it is possible
that the per share value of the residual assets remaining available
for distribution (including Trust Account assets) will be only, or
less than, $10.00. In order to protect the amounts held in the
Trust Account, the Sponsor has agreed to be liable to the Company
if and to the extent any claims by a third party (except for the
Company’s independent registered public accounting firm) for
services rendered or products sold to the Company, or a prospective
target business with which the Company has discussed entering into
a transaction agreement (a “Target”), reduce the amount of funds in
the Trust Account to below the lesser of (i) $10.00 per Public
Share and (ii) the actual amount per Public Share held in the
Trust Account as of the date of the liquidation of the Trust
Account, if less than $10.00 per Public Share due to reductions in
the value of the trust assets, less taxes payable, provided that
such liability will not apply to any claims by a third party or
Target that executed a waiver of any and all rights to the monies
held in the Trust Account nor will it apply to any claims under the
Company’s indemnity of the underwriters of the Public Offering
against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the “Securities Act”).
Moreover, in the event that an executed waiver is deemed to be
unenforceable against a third party, then the Sponsor will not be
responsible to the extent of any liability for such
third-party claims. The Company will seek to reduce the
possibility that the Sponsor will have to indemnify the Trust
Account due to claims of creditors by endeavoring to have all
vendors, service providers, prospective target businesses and other
entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any
kind in or to monies held in the Trust Account.
Liquidity and Capital Resources
As of December 31, 2020, the Company had approximately $0.9 million
in its operating bank accounts and working capital of approximately
$1.4 million (not taking into account tax obligations of
approximately $69,000 that may be paid using investment income
earned from the Trust Account).
The Company’s liquidity needs prior to the consummation of the
Public Offering were satisfied through the proceeds of $25,000 from
the Sponsor to purchase Founders Shares (as defined in Note 5), and
loan proceeds from related party of approximately $139,000 under
the Note (as defined in Note 5). The Company repaid the Note
in full on December 16, 2020. Subsequent from the consummation of
the Public Offering, the Company’s liquidity has been satisfied
through the net proceeds from the consummation of the Public
Offering and the Private Placement held outside of the Trust
Account.
Based on the foregoing, management believes that the Company will
have sufficient working capital and borrowing capacity to meet its
needs through the earlier of the consummation of a Business
Combination or one year from this filing. Over this time period,
the Company will be using the funds held outside of the Trust
Account for paying existing accounts payable, identifying and
evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge
with or acquire, and structuring, negotiating and consummating the
Business Combination.
Note 2—Restatement of Previously Issued Financial
Statements
Amendment No.1
On June 22, 2021, the Company’s management and the Audit Committee
of the Company’s Board of Directors concluded that, because of a
misapplication of the accounting guidance related to its warrants
issued in Initial Public Offering and Private Placement in December
2020 (collectively, the “Warrants”), the Company’s previously
issued financial statements for the year ended December 31, 2020
(collectively, the “Affected Periods”) should no longer be relied
upon. As such, the Company is restating its financial
statements for the Affected Periods included in this Amendment No.
1 to the Annual Report on Form 10-K (“Annual Report”).
On April 12, 2021, the staff of the Securities and Exchange
Commission (the “SEC Staff”) issued a public statement entitled
“Staff Statement on Accounting and Reporting Considerations for
Warrants issued by Special Purpose Acquisition Companies (“SPACs”)”
(the “SEC Staff Statement”). In the SEC Staff Statement, the SEC
Staff expressed its view that certain terms and conditions common
to SPAC warrants may require the warrants to be classified as
liabilities on the SPAC’s balance sheet as opposed to equity. Since
issuance on December 15, 2020, the Company’s Warrants were
accounted for as equity within the Company’s previously reported
balance sheets, and after discussion and evaluation, including with
the Company’s independent auditors, management concluded that the
outstanding Warrants should be presented as liabilities with
subsequent fair value remeasurement.
Historically, the Warrants were reflected as a component of equity
as opposed to liabilities on the balance sheets and the statements
of operations did not include the subsequent non-cash changes in
estimated fair value of the Warrants, based on our application of
FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in
Entity’s Own Equity (“ASC 815-40”). The views expressed in the SEC
Staff Statement were not consistent with the Company’s historical
interpretation of the specific provisions within its warrant
agreement and the Company’s application of ASC 815-40 to the
warrant agreement. The Company reassessed its accounting for
Warrants issued on December 15, 2020 in light of the SEC Staff’s
published views. Based on this reassessment, management determined
that the Warrants should be classified as liabilities measured at
fair value upon issuance, with subsequent changes in fair value
reported in the Company Statement of Operations each reporting
period.
Therefore, the Company, in consultation with its Audit Committee,
concluded that its previously issued Financial Statements for the
Affected Periods should be restated because of a misapplication in
the guidance around accounting for the Warrants should no longer be
relied upon.
The impact of the restatement on the balance sheet, statement of
operations and statements of cash flows for the Affected Periods is
presented below:
| |
|
As
of December 31, 2020 |
|
| |
|
As
Previously
Reported |
|
|
Restatement
Adjustment |
|
|
As
Restated |
|
| Balance
Sheet |
|
|
|
|
|
|
|
|
|
|
Total
assets |
|
$ |
415,501,272 |
|
|
$ |
- |
|
|
$ |
415,501,272 |
|
| Liabilities
and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
| Total
current liabilities |
|
$ |
160,464 |
|
|
$ |
- |
|
|
$ |
160,464 |
|
| Deferred
underwriting commissions |
|
|
14,490,000 |
|
|
|
- |
|
|
|
14,490,000 |
|
| Warrant
liabilities |
|
|
- |
|
|
|
23,544,800 |
|
|
|
23,544,800 |
|
| Total
liabilities |
|
|
14,650,464 |
|
|
|
23,544,800 |
|
|
|
38,195,264 |
|
| Class
A ordinary shares, $0.0001 par value; shares subject to possible
redemption |
|
|
395,850,800 |
|
|
|
(23,544,800 |
) |
|
|
372,306,000 |
|
| Shareholders’
equity |
|
|
|
|
|
|
|
|
|
|
|
|
| Preferred
shares - $0.0001 par value |
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Class
A ordinary shares - $0.0001 par value |
|
|
181 |
|
|
|
236 |
|
|
|
417 |
|
| Class
B ordinary shares - $0.0001 par value |
|
|
1,035 |
|
|
|
- |
|
|
|
1,035 |
|
| Additional
paid-in-capital |
|
|
5,112,291 |
|
|
|
6,856,911 |
|
|
|
11,969,202 |
|
| Accumulated
deficit |
|
|
(113,499 |
) |
|
|
(6,857,147 |
) |
|
|
(6,970,646 |
) |
| Total
shareholders’ equity |
|
|
5,000,008 |
|
|
|
- |
|
|
|
5,000,008 |
|
| Total
liabilities and shareholders’ equity |
|
$ |
415,501,272 |
|
|
$ |
- |
|
|
$ |
415,501,272 |
|
|
|
|
For
the Period from August 27, 2020
(Inception) through December 31, 2020 |
|
|
|
|
As
Previously
Reported |
|
|
Restatement
Adjustment |
|
|
As
Restated |
|
| Statement
of Operations |
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses |
|
$ |
40,752 |
|
|
$ |
- |
|
|
$ |
40,752 |
|
| Administrative
fees - related party |
|
|
5,000 |
|
|
|
- |
|
|
|
5,000 |
|
| Franchise
tax expenses |
|
|
69,449 |
|
|
|
- |
|
|
|
69,449 |
|
| Loss
from operations |
|
|
(115,201 |
) |
|
|
- |
|
|
|
(115,201 |
) |
| Change
in fair value of warrant liabilities |
|
|
- |
|
|
|
(6,196,000 |
) |
|
|
(6,196,000 |
) |
| Offering
costs associated with issuance of private placement
warrants |
|
|
- |
|
|
|
(661,147 |
) |
|
|
(661,147 |
) |
| Net
gain from investments held in Trust Account |
|
|
1,702 |
|
|
|
- |
|
|
|
1,702 |
|
| Net
loss |
|
$ |
(113,499 |
) |
|
$ |
(6,857,147 |
) |
|
$ |
(6,970,646 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted
average shares outstanding of Class A ordinary shares subject to
possible redemption, basic and diluted |
|
|
39,589,592 |
|
|
|
(1,771,327 |
) |
|
|
37,818,265 |
|
| Basic
and diluted net income per share, Class A ordinary shares subject
to possible redemption |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| Weighted
average shares outstanding of non-redeemable ordinary shares, basic
and diluted |
|
|
9,531,950 |
|
|
|
298,144 |
|
|
|
9,830,094 |
|
| Basic
and diluted net loss per share, non-redeemable ordinary
shares |
|
$ |
(0.01 |
) |
|
$ |
(0.70 |
) |
|
$ |
(0.71 |
) |
| |
|
For the Period from August 27, 2020
(Inception) through December 31, 2020 |
|
| |
|
As
Previously
Reported |
|
|
Restatement
Adjustment |
|
|
As
Restated |
|
| Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(113,499 |
) |
|
$ |
(6,857,147 |
) |
|
$ |
(6,970,646 |
) |
| Change in fair value of warrant
liabilities |
|
|
- |
|
|
|
6,196,000 |
|
|
|
6,196,000 |
|
| Offering costs associated with
issuance of public and private warrants |
|
|
- |
|
|
|
661,147 |
|
|
|
661,147 |
|
| Net cash used in operating
activities |
|
|
(632,587 |
) |
|
|
- |
|
|
|
(632,587 |
) |
| Net cash used in investing
activities |
|
|
(414,000,000 |
) |
|
|
- |
|
|
|
(414,000,000 |
) |
| Net cash
provided by financing activities |
|
|
415,524,307 |
|
|
|
- |
|
|
|
415,524,307 |
|
| Net change in
cash |
|
$ |
891,720 |
|
|
$ |
- |
|
|
$ |
891,720 |
|
Amendment No.2
In preparation of the Company’s unaudited condensed financial
statements as of and for quarterly period ended September 30, 2021,
the Company concluded it should restate its financial statements to
classify all Class A common stock subject to possible redemption in
temporary equity. This topic is covered under EITF Topic
D-98, Classification and Measurement of Redeemable
Securities and Accounting Standards Codification (“ASC”) Topic
480-10-S99. Distinguishing Liabilities from Equity. In accordance
with the SEC and its staff’s recent guidance on redeemable equity
instruments in ASC 480-10-S99, redemption provisions not solely
within the control of the Company require common stock subject to
redemption to be classified outside of permanent equity. The
Company had been following industry practice by classifying a
portion of its Class A common stock in permanent equity and
accordingly, going forward, the Company will need to classify all
of its redeemable Public Shares as temporary equity. Although the
Company did not specify a maximum redemption threshold, its Amended
and Restated Certificate of Incorporation currently provides that
the Company will not redeem its public shares in an amount that
would cause its net tangible assets to be less than $5,000,001.
Previously, the Company did not consider redeemable shares
classified as temporary equity as part of net tangible assets. The
Company revised this interpretation to include temporary equity in
net tangible assets.
In connection with the change in presentation for the Class A
common stock subject to possible redemption, the Company also
restated its income (loss) per common share calculation to allocate
net income (loss) evenly to Class A and Class B common stock. This
presentation contemplates a Business Combination as the most likely
outcome, in which case, both classes of common stock share pro rata
in the income (loss) of the Company.
There has been no change in the Company’s total assets, liabilities
or operating results.
Impact of the Restatement
The impact of the restatement on the balance sheet, statement of
operations and statements of cash flows for the Affected Periods is
presented below:
| |
|
As of December 31, 2020 |
|
| |
|
As Previously
Reported |
|
|
Adjustment |
|
|
As
Restated |
|
| Balance Sheet |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
415,501,272 |
|
|
$ |
- |
|
|
$ |
415,501,272 |
|
|
Total liabilities |
|
$ |
38,195,264 |
|
|
|
- |
|
|
$ |
38,195,264 |
|
|
Class A common stock subject to possible redemption, $0.0001 par
value; at $10.00 redemption value |
|
|
372,306,000 |
|
|
|
41,694,000 |
|
|
|
414,000,000 |
|
|
Stockholders’ equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
| Preferred shares -
$0.0001 par value |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Class A common stock - $0.0001 par value |
|
|
417 |
|
|
|
(417 |
) |
|
|
- |
|
|
Class B common stock - $0.0001 par value |
|
|
1,035 |
|
|
|
- |
|
|
|
1,035 |
|
|
Additional paid-in-capital |
|
|
11,969,202 |
|
|
|
(11,969,202 |
) |
|
|
- |
|
|
Accumulated deficit |
|
|
(6,970,646 |
) |
|
|
(29,724,381 |
) |
|
|
(36,695,027 |
) |
|
Total stockholders’ equity (deficit) |
|
|
5,000,008 |
|
|
|
(41,694,000 |
) |
|
|
(36,693,992 |
) |
|
Total liabilities, Class A common stock subject to possible
redemption and stockholders’ equity (deficit) |
|
$ |
415,501,272 |
|
|
$ |
- |
|
|
$ |
415,501,272 |
|
| |
|
For the Period from August 27, 2020
(Inception) through December 31, 2020 |
|
| |
|
As
Previously
Reported |
|
|
Adjustment |
|
|
As
Restated |
|
| Statement of Operations |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,970,646 |
) |
|
$ |
- |
|
|
$ |
(6,970,646 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average
shares outstanding of Class A common stock, basic and diluted |
|
|
37,818,265 |
|
|
|
(30,849,948 |
) |
|
|
6,968,317 |
|
| Basic and Diluted
net income per share of Class A common stock |
|
$ |
0.00 |
|
|
$ |
(0.43 |
) |
|
$ |
(0.43 |
) |
| Weighted average
shares outstanding of Class B common stock, basic and diluted |
|
|
9,830,094 |
|
|
|
(602,866 |
) |
|
|
9,227,228 |
|
| Basic and diluted
net income per share of Class B common stock |
|
$ |
(0.71 |
) |
|
$ |
0.28 |
|
|
$ |
(0.43 |
) |
| |
|
Common Stock |
|
|
Additional |
|
|
|
|
|
Total |
|
| |
|
Class A |
|
|
Class B |
|
|
Paid-in |
|
|
Accumulated |
|
|
Shareholders’ |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Captial |
|
|
Deficit |
|
|
Equity (Deficit) |
|
| Statement of Shareholders’ Equity
(Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock - as previously reported |
|
|
4,169,400 |
|
|
$ |
417 |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
11,969,202 |
|
|
$ |
- |
|
|
$ |
11,969,619 |
|
|
Class A common stock - restatement adjustment |
|
|
(4,169,400 |
) |
|
|
(417 |
) |
|
|
- |
|
|
|
- |
|
|
|
(11,969,202 |
) |
|
|
- |
|
|
|
(11,969,619 |
) |
|
Class A common stock - as restated |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit - as previously reported |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,970,646 |
) |
|
|
(6,970,646 |
) |
|
Accumulated deficit - restatement adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(29,724,381 |
) |
|
|
(29,724,381 |
) |
|
Accumulated deficit - as restated |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(36,695,027 |
) |
|
|
(36,695,027 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at
December 31, 2020 - as previously reported |
|
|
4,169,400 |
|
|
|
417 |
|
|
|
10,350,000 |
|
|
|
1,035 |
|
|
|
11,969,202 |
|
|
|
(6,970,646 |
) |
|
|
5,000,008 |
|
|
Balance at December 31, 2020 - restatement adjustment |
|
|
(4,169,400 |
) |
|
|
(417 |
) |
|
|
- |
|
|
|
- |
|
|
|
(11,969,202 |
) |
|
|
(29,724,381 |
) |
|
|
(41,694,000 |
) |
| Balance at
December 31, 2020 - as restated |
|
|
- |
|
|
|
- |
|
|
|
10,350,000 |
|
|
|
1,035 |
|
|
|
- |
|
|
|
(36,695,027 |
) |
|
|
(36,693,992 |
) |
|
|
|
For the Period from August 27, 2020
(Inception) through December 31,
2020 |
|
|
|
|
As
Previously
Reported |
|
|
Adjustment |
|
|
As
Restated |
|
|
Statement of Cash Flows - Supplemental disclosure of noncash
activities: |
|
|
|
|
|
|
|
|
|
|
Initial value of Class A common stock subject to possible
redemption |
|
$ |
3 8,549,940 |
|
|
$ |
(378,549,940 |
) |
|
$ |
- |
|
|
Change in fair value of Class A common stock subject to possible
redemption |
|
$ |
(6,243,940 |
) |
|
$ |
6,243,940 |
|
|
$ |
- |
|
|
Accretion of Class A common stock subject to redemption amount |
|
$ |
- |
|
|
$ |
34,271,546 |
|
|
$ |
34,271,546 |
|
Note 3— Basis of Presentation and Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying financial statements are presented in U.S. dollars
in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) for financial information and
pursuant to the rules and regulations of the Securities and
Exchange Commission (“SEC”).
As described in Note 2—Restatement of Previously Issued Financial
Statements, the Company’s financial statements for the Affected
Periods are restated in this Annual Report to correct the
misapplication of accounting guidance related to the Company’s
warrants in the Company’s previously issued audited financial
statements for such periods. The restated financial statements
are indicated as “Restated” in the audited financial statements and
accompanying notes, as applicable. See Note 2—Restatement of
Previously Issued Financial Statements for further discussion.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section
2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take
advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging
growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm
attestation requirements of Section 404 of the
Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy
statements, and exemptions from the requirements of holding a
nonbinding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously
approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth
companies from being required to comply with new or revised
financial accounting standards until private companies (that is,
those that have not had a Securities Act registration statement
declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or
revised financial accounting standards. The JOBS Act provides that
an emerging growth company can elect to opt out of the extended
transition period and comply with the requirements that apply to
non-emerging growth companies but any such an election to opt
out is irrevocable. The Company has elected not to opt out of such
extended transition period, which means that when a standard is
issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company,
can adopt the new or revised standard at the time private companies
adopt the new or revised standard.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Making estimates requires management to
exercise significant judgment. It is at least reasonably possible
that the estimate of the effect of a condition, situation or set of
circumstances that existed at the date of the financial statements,
which management considered in formulating its estimate, could
change in the near term due to one or more future confirming
events. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original
maturity of three months or less when purchased to be cash
equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist of cash accounts in a
financial institution which, at times, may exceed the Federal
depository insurance coverage of $250,000, and investments held in
Trust Account. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to
significant risks on such accounts.
Investments Held in the Trust Account
Upon the closing of the Public Offering and the Private
Placement, approximately $414.0 million, was placed in
the Trust Account and invested in money market funds that invest in
U.S. government securities. All of the Company’s investments held
in the Trust Account are classified as trading securities. Trading
securities are presented on the balance sheet at fair value at the
end of each reporting period. The estimated fair values of
investments held in Trust Account are determined using available
market information, other than for investments in open-ended money
market funds with published daily net asset values (“NAV”), in
which case the Company uses NAV as a practical expedient to fair
value. The NAV on these investments is typically held constant at
$1.00 per unit.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale
of an asset or paid for transfer of a liability, in an orderly
transaction between market participants at the measurement date.
U.S. GAAP establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). These tiers include:
| |
● |
Level 1,
defined as observable inputs such as quoted prices for identical
instruments in active markets; |
| |
● |
Level 2,
defined as inputs other than quoted prices in active markets that
are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for
identical or similar instruments in markets that are not active;
and |
| |
● |
Level 3,
defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own
assumptions, such as valuations derived from valuation techniques
in which one or more significant inputs or significant value
drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might
be categorized within different levels of the fair value
hierarchy. In those instances, the fair value measurement is
categorized in its entirety in the fair value hierarchy based on
the lowest level input that is significant to the fair value
measurement.
The fair value of the Company’s assets and liabilities, which
qualify as financial instruments under ASC 820, “Fair Value
Measurements and Disclosures,” approximates the carrying amounts
represented in the balance sheet.
As of December 31, 2020, the carrying values of cash, prepaid
expenses, accounts payable, accrued expenses, accrued expenses –
related party and franchise tax payable approximate their fair
values due to the short-term nature of the instruments. The
Company’s investments in money market funds held in Trust Account
are valued using NAV as a practical expedient for fair value under
ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for
Investments in Certain Entities That Calculate Net Asset Value per
Share (or Its Equivalent) and are therefore excluded from the
levels of the fair value hierarchy.
Offering Costs Associated with the Public
Offering
The Company complies with the requirements of the ASC 340-10-S99-1
and SEC Staff Accounting Bulletin Topic 5A – “Expenses of
Offering.” Offering costs consist of costs incurred in connection
with the formation and preparation for the Public Offering. These
costs, together with the underwriting discount, were charged to
additional paid-in capital upon the completion of the Initial
Public Offering. Offering costs associated with warrant liabilities
are expensed as incurred, presented as non-operating expenses in
the statement of operations. Offering costs associated with
the common shares were charged to the initial carrying value of
temporary equity upon the completion of the Initial Public
Offering.
Class A Common Stock Subject to Possible
Redemption
The Company accounts for its Class A common stock subject to
possible redemption in accordance with the guidance in ASC Topic
480 “Distinguishing Liabilities from Equity.” Common stock subject
to mandatory redemption (if any) is classified as a liability
instrument and measured at fair value. Conditionally redeemable
common stock (including common stock that features redemption
rights that are either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely
within the Company’s control) is classified as temporary equity. At
all other times, common stock is classified as stockholders’
equity. The Company’s common stock features certain redemption
rights that are considered to be outside of the Company’s control
and subject to the occurrence of uncertain future events.
Accordingly, at December 31, 2020, 37,230,600 shares of common
stock subject to possible redemption is presented as temporary
equity, outside of the stockholders’ equity section of the
Company’s balance sheet.
Net (Loss) per Share of Common Stock (Restated, See Note
2)
The Company complies with accounting and disclosure requirements of
FASB ASC Topic 260, “Earnings Per Share.” The Company has two
classes of shares, which are referred to as Class A common stock
and Class B common stock. Income and losses are shared pro rata
between the two classes of shares. Net income (loss) per share of
common stock is calculated by dividing the net income (loss) by the
weighted average number of common stock outstanding for the
respective period.
The calculation of diluted net loss per share of common stock does
not consider the effect of the warrants underlying the Units sold
in the Initial Public Offering (including exercise of the
over-allotment option) and the Private Placement Warrants to
purchase 30,980,000 shares of Class A common stock in the
calculation of diluted loss per share, because their inclusion
would be anti-dilutive under the treasury stock method. As a
result, diluted net loss per share of common stock is the same as
basic net loss per share of common stock for the period from August
27, 2020 (inception) through December 31, 2020. Accretion
associated with the redeemable Class A common stock is excluded
from earnings per share as the redemption value approximates fair
value.
The table below presents a reconciliation of the numerator and
denominator used to compute basic and diluted net loss per share of
common stock for each class of common stock:
| |
|
For the Period from August 27, 2020
(Inception) through December 31,
2020 |
|
| |
|
Class A |
|
|
Class B |
|
| |
|
|
|
|
|
|
| Numerator: |
|
|
|
|
|
|
|
Allocation of net loss |
|
$ |
(2,999,200 |
) |
|
$ |
(3,971,446 |
) |
| Denominator: |
|
|
|
|
|
|
|
|
|
Weighted average common stock outstanding, basic and diluted |
|
|
6 ,968,317 |
|
|
|
9 ,227,228 |
|
| Basic and diluted
net loss per share of common stock |
|
$ |
(0.43 |
) |
|
$ |
(0.43 |
) |
Income Taxes
The Company follows the asset and liability method of accounting
for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that included the enactment date. Valuation
allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
FASB ASC Topic 740 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and
measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be
more likely than not to be sustained upon examination by taxing
authorities. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense.
Derivative Warrant Liabilities (see Note 2)
The Company does not use derivative instruments to hedge exposures
to cash flow, market, or foreign currency risks. The Company
evaluates all of its financial instruments, including issued stock
purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant
to ASC 480 and ASC 815-15. The classification of derivative
instruments, including whether such instruments should be recorded
as liabilities or as equity, is re-assessed at the end of each
reporting period.
The Company issued 30,980,000 common shares warrants in connection
with our Initial Public Offering (20,700,000) and Private Placement
(10,280,000) which are recognized as derivative liabilities in
accordance with ASC 815-40. Accordingly, the Company recognizes the
warrant instruments as liabilities at fair value and adjust the
instruments to fair value at each reporting period. The liabilities
are subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our
statement of operations. The fair value of warrants issued in
connection with the Initial Public Offering and Private Placement
has been estimated using Monte-Carlo simulations at each balance
sheet date.
Recently Adopted Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”)
No. 2020-06, Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s
Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06”), which simplifies accounting for convertible instruments
by removing major separation models required under current GAAP.
The ASU also removes certain settlement conditions that are
required for equity-linked contracts to qualify for the derivative
scope exception, and it simplifies the diluted earnings per share
calculation in certain areas. The Company adopted ASU 2020-06 on
January 1, 2021. Adoption of the ASU did not impact the Company’s
financial position, results of operations or cash flows.
Recently Issued Accounting Standards
The Company’s management does not believe that any other recently
issued, but not yet effective, accounting pronouncements, if
currently adopted, would have an effect on the Company’s financial
statements.
Note 4—Public Offering
On December 15, 2020, the Company consummated its Public
Offering of 41,400,000 Units, including 5,400,000
Over-Allotment Units, at $10.00 per Unit, generating gross proceeds
of $414.0 million, and incurring offering costs of
approximately $23.3 million, inclusive of approximately
$14.5 million in deferred underwriting commissions.
Each Unit consists of one share of Class A common stock and
one-half of one redeemable warrant (each, a “Public Warrant”).
Each whole Public Warrant entitles the holder to purchase one share
of Class A common stock at a price of $11.50 per share,
subject to adjustment (see Note 8).
Note 5—Related Party Transactions
Founder Shares
On August 27, 2020, the Sponsor subscribed to purchase
10,062,500 shares of the Company’s Class B common stock,
par value $0.0001 per share (the “Founder Shares”), and fully paid
for those shares on September 22, 2020. On November 23,
2020, the Sponsor surrendered 1,437,500 shares of Class B
common stock to the Company for cancellation for no consideration.
On December 10, 2020, the Company effected a 1:1.2 stock split
of Class B common stock, resulting in an aggregate of
10,350,000 shares of Class B common stock outstanding. All
shares and associated amounts have been retroactively restated to
reflect the share surrender and the stock split. The initial
stockholders agreed to forfeit up to 1,350,000 Founder Shares to
the extent that the over-allotment option was not exercised in
full by the underwriters, so that the Founder Shares would
represent 20.0% of the Company’s issued and outstanding shares of
common stock after the Public Offering. The underwriter
exercised its over-allotment option in full on December 15, 2020;
thus, these 1,350,000 Founder Shares were no longer
subject to forfeiture.
The initial stockholders agreed, subject to limited exceptions, not
to transfer, assign or sell any of the Founder Shares until the
earlier to occur of: (i) one year after the completion of the
initial Business Combination or earlier if, subsequent to the
initial Business Combination, the closing price of the Class A
common stock equals or exceeds $12.00 per share (as adjusted for
stock splits, stock capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any
30-trading day period commencing at least 150 days after
the initial Business Combination, and (ii) the date following
the completion of the initial Business Combination on which the
Company completes a liquidation, merger, capital stock exchange or
other similar transaction that results in all of the stockholders
having the right to exchange their Class A common stock for
cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Public Offering, the Company
consummated the Private Placement of 10,280,000 Private
Placement Warrants at a price of $1.00 per Private Placement
Warrant to the Sponsor, generating proceeds of approximately
$10.3 million, and incurring offering costs of approximately
$8,000.
Each whole Private Placement Warrant is exercisable for one whole
share of Class A common stock at a price of $11.50 per share,
subject to adjustment. A portion of the proceeds from the sale of
the Private Placement Warrants to the Sponsor was added to the
proceeds from the Public Offering held in the Trust Account. If the
Company does not complete a Business Combination within the
Combination Period, the Private Placement Warrants will expire
worthless. The Private Placement Warrants will be
non-redeemable for cash (except as described below) and
exercisable on a cashless basis so long as they are held by the
Sponsor or its permitted transferees.
The Sponsor agreed, subject to limited exceptions, not to transfer,
assign or sell the Private Placement Warrants until 30 days
after the completion of the initial Business Combination.
Related Party Loans
On August 27, 2020, the Sponsor, a related party, agreed to
loan the Company an aggregate of up to $300,000 to cover expenses
related to the Public Offering pursuant to a promissory note (the
“Note”). This loan is non-interest bearing and payable upon
the completion of the Public Offering. As of December 15, 2020, the
Company borrowed approximately $139,000 from the related party
under the Note. The Company repaid the Note in full on
December 16, 2020.
In addition, in order to fund working capital deficiencies or
finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated
to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, the
Company may repay the Working Capital Loans out of the proceeds of
the Trust Account released to the Company. Otherwise, the Working
Capital Loans could be repaid only out of funds held outside the
Trust Account. In the event that a Business Combination does not
close, the Company may use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans but no proceeds
held in the Trust Account would be used to repay the Working
Capital Loans. The Working Capital Loans would either be repaid
upon consummation of a Business Combination or, at the lenders’
discretion, up to $1,500,000 of such Working Capital Loans may be
convertible into warrants of the post Business Combination entity
at a price of $1.00 per warrant. The warrants would be identical to
the Private Placement Warrants. Except for the foregoing, the terms
of such Working Capital Loans, if any, have not been determined and
no written agreements exist with respect to such loans. As of
December 31, 2020, the Company had no borrowings under the Working
Capital Loans.
Service and Administrative Fees
Commencing on the date that the Company’s securities were first
listed on Nasdaq through the earlier of consummation of the initial
Business Combination and the Company’s liquidation, the Company
agreed to pay the Sponsor $10,000 per month for office space,
secretarial and administrative services provided to members of the
management team. The Company incurred $5,000 in expenses in
connection with such services for the period from August 27, 2020
(inception) through December 31, 2020, as reflected in the
accompanying statement of operations. As of December 31, 2020, an
aggregate of $5,000 in accrued expenses with related party was
outstanding, as reflected in the accompanying balance sheet.
In addition, the Sponsor, executive officers and directors, or any
of their respective affiliates will be reimbursed for any
out-of-pocket expenses incurred in connection with activities
on the Company’s behalf such as identifying potential target
businesses and performing due diligence on suitable Business
Combinations. The audit committee will review on a quarterly basis
all payments that were made to the Sponsor, executive officers or
directors, or their respective affiliates. Any such payments prior
to an initial Business Combination will be made from funds held
outside the Trust Account.
Note 6—Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and
warrants that may be issued upon conversion of Working Capital
Loans, if any, and any shares of Class A common stock issuable
upon the exercise of the Private Placement Warrants and warrants
that may be issued upon conversion of Working Capital Loans) are
entitled to registration rights pursuant to a registration rights
agreement signed upon the consummation of the Public Offering.
These holders are entitled to certain demand and “piggyback”
registration rights. The Company will bear the expenses incurred in
connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20
per unit, approximately $8.3 million, paid upon the closing of
the Public Offering. In addition, $0.35 per unit, or approximately
$14.5 million will be payable to the underwriters for deferred
underwriting commissions. The deferred fee will become payable to
the underwriters from the amounts held in the Trust Account solely
in the event that the Company completes a Business Combination,
subject to the terms of the underwriting agreement.
Risks and Uncertainties
Management is currently evaluating the impact of the
COVID-19 pandemic on the industry and has concluded that while
it is reasonably possible that the virus could have a negative
effect on the Company’s financial position, results of its
operations and/or search for a target company, the specific impact
is not readily determinable as of the date of these financial
statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Note 7—Derivative Warrant Liabilities (see Note 2 –
Amendment 1)
As of December 31, 2020, the Company had 20,700,000 Public Warrants
and 10,280,000 Private Placement Warrants.
Public Warrants may only be exercised for a whole number of shares.
No fractional Public Warrants will be issued upon separation of the
Units and only whole Public Warrants will trade. The Public
Warrants will become exercisable on the later of (a) 30 days
after the completion of a Business Combination and (b)
12 months from the closing of the Public Offering; provided in
each case that the Company has an effective registration statement
under the Securities Act covering the issuance of the shares of
Class A common stock issuable upon exercise of the Public
Warrants and a current prospectus relating to them is available and
such shares are registered, qualified or exempt from registration
under the securities, or blue sky, laws of the state of residence
of the holder (or the Company permits holders to exercise their
Public Warrants on a cashless basis under the circumstances
specified in the warrant agreement). The Company has agreed that as
soon as practicable, but in no event later than 15 business days
after the closing of the initial Business Combination, the Company
will use its commercially reasonable efforts to file, and within 60
business days following the initial Business Combination to have
declared effective, a registration statement covering the issuance
of the shares of Class A common stock issuable upon exercise
of the warrants and to maintain a current prospectus relating to
those shares of Class A common stock until the warrants expire
or are redeemed; provided, that if the Class A common stock is
at the time of any exercise of a warrant not listed on a national
securities exchange such that it satisfies the definition of a
“covered security” under Section 18(b)(1) of the Securities
Act, the Company may, at its option, require holders of Public
Warrants who exercise their warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and,
in the event the Company so elects, it will not be required to file
or maintain in effect a registration statement, but it will be
required to use its best efforts to register or qualify the shares
under applicable blue sky laws to the extent an exemption is not
available.
The warrants will have an exercise price of $11.50 per share and
will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation. If
(x) the Company issues additional shares of Class A
common stock or equity-linked securities for capital raising
purposes in connection with the closing of the initial Business
Combination at an issue price or effective issue price of less than
$9.20 per share of Class A common stock (with such issue price
or effective issue price to be determined in good faith by the
board of directors and, in the case of any such issuance to the
initial stockholders or their respective affiliates, without taking
into account any Founder Shares held by the initial stockholders or
such affiliates, as applicable, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such
issuances represent more than 60% of the total equity proceeds, and
interest thereon, available for the funding of the initial Business
Combination on the date of the consummation of the initial Business
Combination (net of redemptions), and (z) the volume weighted
average trading price of the Class A common stock during the
20 trading day period starting on the trading day prior to the day
on which the Company consummates its initial Business Combination
(such price, the “Market Value”) is below $9.20 per share, the
exercise price of the warrants will be adjusted (to the nearest
cent) to be equal to 115% of the higher of the Market Value and the
Newly Issued Price, the $18.00 per share redemption trigger price
described below will be adjusted (to the nearest cent) to be equal
to 180% of the higher of the Market Value and the Newly Issued
Price, and the $10.00 per share redemption trigger price described
below will be adjusted (to the nearest cent) to be equal to the
higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants will be identical to the Public
Warrants, except that the Private Placement Warrants will not be
transferable, assignable or salable until 30 days after the
completion of the initial Business Combination (except pursuant to
certain limited exceptions to the officers and directors and other
persons or entities affiliated with the initial purchasers of the
Private Placement Warrants) and, except as set forth below, they
will not be redeemable by the Company so long as they are held by
the Sponsor or its permitted transferees. The Sponsor, or its
permitted transferees, has the option to exercise the Private
Placement Warrants on a cashless basis. If the Private Placement
Warrants are held by holders other than the Sponsor or its
permitted transferees, the Private Placement Warrants will be
redeemable by us in all redemption scenarios and exercisable by the
holders on the same basis as the Public Warrants.
Redemption of warrants when the price per share of
Class A common stock equals or exceeds $18.00:
Once the warrants become exercisable, the Company may redeem the
outstanding warrants for cash (except as described herein with
respect to the private placement warrants):
| |
● |
in
whole and not in part; |
| |
● |
at a
price of $0.01 per Warrant; |
| |
● |
upon
a minimum of 30 days’ prior written notice of redemption;
and |
| |
● |
if,
and only if, the closing price of the Class A common stock for
any 20 trading days within a 30-trading day period ending
three trading days before the Company sends the notice of
redemption to the warrant holders (the “Reference Value”) equals or
exceeds $18.00 per share (as adjusted). |
The Company will not redeem the warrants as described above unless
an effective registration statement under the Securities Act
covering the Class A common stock issuable upon exercise of
the warrants is effective and a current prospectus relating to
those shares of Class A common stock is available throughout
the 30-day redemption period.
Redemption of warrants for when the price per share of
Class A common stock equals or exceeds $10.00:
Once the warrants become exercisable, the Company may redeem the
outstanding warrants (except as described herein with respect to
the Private Placement Warrants):
| |
● |
in
whole and not in part; |
| |
● |
at
$0.10 per warrant upon a minimum of 30 days’ prior written
notice of redemption provided that holders will be
able to exercise their warrants on a cashless basis prior to
redemption and receive that number of shares determined by
reference to an agreed table based on the redemption date and the
“fair market value” of Class A common stock; |
| |
● |
if,
and only if, the closing price of the Class A common stock
equals or exceeds $10.00 per Public Share (as adjusted) for any 20
trading days within the 30-trading day period ending three
trading days before the Company sends notice of redemption to the
warrant holders; and |
| |
● |
if
the Reference Value is less than $18.00 per share (as adjusted),
the Private Placement Warrants must also concurrently be called for
redemption on the same terms as the outstanding Public Warrants, as
described above. |
The “fair market value” of Class A common stock shall mean the
volume weighted average price of Class A common stock during
the 10 trading days immediately following the date on which the
notice of redemption is sent to the holders of warrants. In no
event will the warrants be exercisable in connection with this
redemption feature for more than 0.361 shares of Class A
common stock per warrant (subject to adjustment).
In no event will the Company be required to net cash settle any
warrant. If the Company is unable to complete a Business
Combination within the Combination Period and the Company
liquidates the funds held in the Trust Account, holders of warrants
will not receive any of such funds with respect to their warrants,
nor will they receive any distribution from the Company’s assets
held outside of the Trust Account with the respect to such
warrants. Accordingly, the warrants may expire worthless.
Note 8 – Class A Common Stock Subject to Possible Redemption
(see Note 2 – Amendment 2)
The Company’s Class A common stock feature certain redemption
rights that are considered to be outside of the Company’s control
and subject to the occurrence of future events. The Company is
authorized to issue 380,000,000 Class A common stock with a par
value of $0.0001 per share. Holders of the Company’s Class A common
stock are entitled to one vote for each share. As of December 31,
2020, there were 41,400,000 Class A common stock outstanding, which
were all subject to possible redemption and are classified outside
of permanent equity in the condensed balance sheet.
The Class A common stock subject to possible redemption reflected
on the condensed balance sheet is reconciled on the following
table:
|
Gross proceeds received from Initial Public Offering |
|
$ |
414,000,000 |
|
| Less: |
|
|
|
|
|
Fair value of Public Warrants at issuance |
|
|
(11,592,000 |
) |
|
Offering costs allocated to Class A common stock |
|
|
(22,679,546 |
) |
| Plus: |
|
|
|
|
|
Accretion on Class A common stock to redemption value |
|
|
34,271,546 |
|
| Class A common
stock subject to possible redemption |
|
$ |
414,000,000 |
|
Note 9—Stockholders’ Equity
Class A Common Stock — The Company is
authorized to issue 380,000,000 shares of Class A common
stock with a par value of $0.0001 per share. As of December 31,
2020, there were 41,400,000 shares of Class A common
stock issued or outstanding, all of which are subject to possible
redemption and classified as temporary equity in the accompanying
balance sheet (see Note 2 – Amendment 2).
Class B Common
Stock — The Company is authorized
to issue 20,000,000 shares of Class B common stock with a
par value of $0.0001 per share. On August 27, 2020, the
Sponsor subscribed to purchase 10,062,500 shares of
Class B common stock, which was fully paid on
September 22, 2020. On November 23, 2020, the Sponsor
surrendered 1,437,500 shares of Class B common stock to the
Company for cancellation for no consideration. On December 10,
2020, the Company effected a 1:1.2 stock split of Class B common
stock, resulting in an aggregate of 10,350,000 shares of Class
B common stock outstanding. All shares and associated amounts have
been retroactively restated to reflect the share surrender and the
stock split. Of the 10,350,000 shares of Class B common stock
outstanding, an aggregate of up to 1,350,000 shares were
subject to forfeiture to the Company by the initial stockholders
for no consideration to the extent that the underwriters’
over-allotment option was not exercised in full or in part, so
that the number of Founder Shares would equal 20% of the Company’s
issued and outstanding shares of common stock after the Public
Offering. The underwriter exercised its over-allotment option
in full on December 15, 2020; thus,
these 1,350,000 Founder Shares were no longer subject to
forfeiture.
Stockholders of record are entitled to one vote for each share held
on all matters to be voted on by stockholders. Holders of
Class A common stock and holders of Class B common stock
will vote together as a single class on all matters submitted to a
vote of the stockholders except as required by law.
The Class B common stock will automatically convert into
Class A common stock concurrently with or immediately
following the consummation of the initial Business Combination on a
one-for-one basis, subject to adjustment for stock splits,
stock dividends, reorganizations, recapitalizations and the like,
and subject to further adjustment as provided herein. In the case
that additional shares of Class A common stock or
equity-linked securities are issued or deemed issued in
connection with the initial Business Combination, the number of
shares of Class A common stock issuable upon conversion of all
Founder Shares will equal, in the aggregate, on an
as-converted basis, 20% of the total number of shares of
Class A common stock outstanding after such conversion (after
giving effect to any redemptions of shares of Class A common
stock by Public Stockholders), including the total number of shares
of Class A common stock issued, or deemed issued or issuable
upon conversion or exercise of any equity-linked securities or
rights issued or deemed issued, by the Company in connection with
or in relation to the consummation of the initial Business
Combination, excluding any shares of Class A common stock or
equity-linked securities or rights exercisable for or
convertible into shares of Class A common stock issued, or to
be issued, to any seller in the initial Business Combination and
any private placement warrants issued to the Sponsor, officers or
directors upon conversion of Working Capital Loans, provided that
such conversion of Founder Shares will never occur on a less than
one-for-one basis.
Preferred Stock — The Company
is authorized to issue 1,000,000 shares of preferred stock,
par value $0.0001 per share, with such designations, voting
and other rights and preferences as may be determined from time to
time by the Company’s board of directors. As of December 31, 2020,
there were no shares of preferred stock issued or outstanding.
Note 10—Fair Value Measurements
The following table presents information about the Company’s
financial assets and liabilities that are measured at fair value on
a recurring basis as of December 31, 2020 by level within the fair
value hierarchy (see Note 2):
| |
|
Fair Value Measured as of December 31, 2020 |
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| Investments held in Trust
Account - U.S. Treasury Securities |
|
$ |
414,001,702 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Warrant liabilities - public
warrants |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
15,732,000 |
|
|
$ |
15,732,000 |
|
| Warrant liabilities - private
warrants |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
7,812,800 |
|
|
$ |
7,812,800 |
|
Transfers to/from Levels 1, 2 and 3 are recognized at the
beginning of the reporting period. There were no transfers
between levels for the year ended December 31, 2020.
The Company utilized a binomial Monte-Carlo simulation at December
15, 2020 and December 31, 2020 for the public and private warrants,
with changes in fair value recognized in the statement of
operations. For the year ended December 31, 2020, the Company
recognized a charge to the statement of operations resulting from
an increase in the fair value of warrant liabilities of
approximately $6.2 million presented as change in fair value of
warrant liabilities on the accompanying statement of
operations.
The change in the fair value of the derivative warrant liabilities
for the year ended December 31, 2020 is summarized as follows:
| Derivative warrant liabilities at
August 27, 2020 (inception) |
|
$ |
- |
|
|
Issuance of public and private warrants |
|
|
17,348,800 |
|
| Change
in fair value of warrant liabilities |
|
|
6,196,000 |
|
| Derivative
warrant liabilities at December 31, 2020 |
|
$ |
23,544,800 |
|
The estimated fair value of the derivative warrant liabilities is
determined using Level 3 inputs. Inherent in a Monte-Carlo
simulation are assumptions related to expected stock-price
volatility, expected life, risk-free interest rate and dividend
yield. The Company estimates the volatility of its common shares
based on historical volatility of select peer companies that
matches the expected remaining life of the warrants. The risk-free
interest rate is based on the U.S. Treasury zero-coupon yield curve
on the grant date for a maturity similar to the expected remaining
life of the warrants. The expected life of the warrants is assumed
to be equivalent to their remaining contractual term. The dividend
rate is based on the historical rate, which the Company anticipates
remaining at zero.
The following table provides quantitative information regarding
Level 3 fair value measurements inputs as their measurement
dates:
| |
|
As of
December 15,
2020 |
|
|
As of
December 31,
2020 |
|
| Exercise price |
|
$ |
11.50 |
|
|
$ |
11.50 |
|
| Stock price |
|
$ |
9.72 |
|
|
$ |
9.91 |
|
| Term (in years) |
|
|
6.50 |
|
|
|
6.44 |
|
| Volatility |
|
|
11.3 |
% |
|
|
13.0 |
% |
| Risk-free rate |
|
|
0.59 |
% |
|
|
0.57 |
% |
| Dividend yield |
|
|
- |
|
|
|
- |
|
Note 11—Income Taxes
The Company’s general and administrative costs are generally
considered start-up costs and, along with the change in fair value
of the warrant liabilities and related offering costs, are not
currently deductible.
The income tax provision (benefit) consists of the following:
| |
|
For the
Period from
August 27,
2020 (inception)
through
December 31,
2020 |
|
| Current |
|
|
|
| Federal |
|
$ |
- |
|
| State |
|
|
- |
|
| Deferred |
|
|
|
|
|
Federal |
|
|
(23,835 |
) |
| State |
|
|
- |
|
|
Valuation allowance |
|
|
23,835 |
|
|
Income tax (benefit) provision |
|
$ |
- |
|
The Company’s net deferred tax assets are as follows:
| |
|
December 31,
2020 |
|
| Deferred tax assets: |
|
|
|
|
Net-operating loss carryforward |
|
$ |
14,227 |
|
|
Start-up/Organization costs |
|
|
9,608 |
|
|
Total deferred tax assets |
|
|
23,835 |
|
|
Valuation allowance |
|
|
(23,835 |
) |
|
Deferred tax asset, net of allowance |
|
$ |
- |
|
In assessing the realization of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which temporary
differences representing net future deductible amounts become
deductible. Management considers the scheduled reversal of deferred
tax assets, projected future taxable income and tax planning
strategies in making this assessment. After consideration of all of
the information available, management believes that significant
uncertainty exists with respect to future realization of the
deferred tax assets and has therefore established a full valuation
allowance. At December 31, 2020, the valuation allowance increased
by approximately $24,000.
As of December 31, 2020, the Company had $67,747 of U.S. federal
net operating loss carryovers, which do not expire, available to
offset future taxable income.
There were no unrecognized tax benefits as of December 31, 2020. No
amounts were accrued for the payment of interest and penalties at
December 31, 2020. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or
material deviation from its position. The Company is subject to
income tax examinations by major taxing authorities since
inception.
A reconciliation of the statutory federal income tax rate (benefit)
to the Company’s effective tax rate (benefit) is as follows:
| |
|
For
the
Period from |
|
| |
|
August 27,
2020
(inception)
through |
|
| |
|
December 31,
2020 |
|
| Statutory federal income
tax rate |
|
|
21.0 |
% |
| State taxes, net of federal tax
benefit |
|
|
0.0 |
% |
| Change in fair value of warrant
liabilities and related offering costs |
|
|
(20.7 |
)% |
| Change in
valuation allowance |
|
|
(0.3 |
)% |
| Income tax
provision expense |
|
|
0.0 |
% |
Note 12—Subsequent Events
Management has evaluated subsequent events to determine if events
or transactions occurring through the date the financial statements
were issued required potential adjustment to or disclosure in the
financial statements and has concluded that all such events that
would require recognition or disclosure have been recognized or
disclosed.
ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A. CONTROLS AND
PROCEDURES.
Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the
objective of ensuring that information required to be disclosed in
our reports filed under the Exchange Act, such as this report, is
recorded, processed, summarized, and reported within the time
period specified in the SEC’s rules and forms. Disclosure controls
are also designed with the objective of ensuring that such
information is accumulated and communicated to our management,
including the chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required
disclosure. Based upon their evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure
controls and procedures (as defined in Rules 13a-15 (e) and 15d-15
(e) under the Exchange Act) were not effective as of December 31,
2020 because of a material weakness in our internal control over
financial reporting due solely to the material weakness in our
internal control over financial reporting over the accounting for
complex financial instruments, which resulted in the restatement of
the Company’s financial statements as described in the Explanatory
Note to this Amendment. In light of this, we performed additional
analysis as deemed necessary to ensure that our financial
statements were prepared in accordance with U.S. GAAP. Accordingly,
management believes that the financial statements included in this
Amendment No. 2 present fairly in all material respects our
financial position, results of operations and cash flows for the
period presented.
We do not expect that our disclosure controls and procedures going
forward will prevent all errors and all instances of fraud.
Disclosure controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance
that the objectives of the disclosure controls and procedures are
met. Further, the design of disclosure controls and procedures must
reflect the fact that there are resource constraints, and the
benefits must be considered relative to their costs. Because of the
inherent limitations in all disclosure controls and procedures, no
evaluation of disclosure controls and procedures can provide
absolute assurance that we have detected all our control
deficiencies and instances of fraud, if any. The design of
disclosure controls and procedures also is based partly on certain
assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.
Management’s Report on Internal Controls Over Financial
Reporting
This Annual Report on Form 10-K does not include a report of
management’s assessment regarding internal control over financial
reporting or an attestation report of our independent registered
public accounting firm due to a transition period established by
rules of the SEC for newly public companies.
Changes in Internal Control over Financial
Reporting
During the fourth quarter of the fiscal year covered by this Annual
Report, there has been no change in our internal control over
financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting, as the circumstances that led to the restatement of our
financial statements described in this Annual Report had not yet
been previously identified.
Management has implemented remediation steps to address the
circumstances causing this restatement and to enhance our internal
control over financial reporting. Specifically, we expanded and
improved our review process for complex securities and related
accounting standards. We plan to further improve this process by
enhancing access to accounting literature, identification of
third-party professionals with whom to consult regarding complex
accounting applications and consideration of additional staff with
the requisite experience and training to supplement existing
accounting professionals.
ITEM 9B. OTHER
INFORMATION.
None.
PART III
ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Our directors and executive officers are as follows:
|
Name |
|
Age |
|
Position |
| Richard
T. Burke |
|
77 |
|
Chief
Executive Officer and Chairman |
| Isaac
Applbaum |
|
60 |
|
President
and Director |
| Ryan
Burke |
|
47 |
|
Chief
Financial Officer and Director |
| Steven
Schwartz |
|
57 |
|
Executive
Vice President of M&A |
| Jeffrey
A. Leerink |
|
56 |
|
Director |
| Lee
Shapiro |
|
64 |
|
Director |
| Mark
A. Thierer |
|
61 |
|
Director |
Richard T. Burke, our Chief
Executive Officer and Chairman, was the founder, former Chief
Executive Officer and Chairman until late 2017, and current Lead
Independent Director of, UnitedHealth. Until November 2000,
Mr. Burke was the owner, Chief Executive Officer and Governor
of the Phoenix Coyotes, a National Hockey League team. He has
served as a director of numerous private and public companies, is a
private investor in many others, and is a Managing Partner at
Rainy, an investment fund that owns and operates a number of
businesses. Mr. Burke has had extensive experience serving the
senior market through his tenure at UnitedHealth, and he is the
principal investor in and Executive Chairman of a
senior-oriented business, Secure. From 2004 to 2019,
Mr. Burke was a director for Meritage Homes Corporation; he
also previously served on the audit committees of the board of
directors of UnitedHealth, Meritage Homes Corporation and First
Cash Financial Services, Inc. Mr. Burke holds a MBA in Finance
from Georgia State University. Mr. Burke is the father of Ryan
Burke, our Chief Financial Officer and a director. We believe
Mr. Burke is well qualified to serve on our board of directors
based on his extensive experience in the healthcare industry, as
well as his significant leadership, finance and operational
experience.
Isaac “Yitz” Applbaum, our President and a member of
our board of directors, is a Co-founder and Partner of MizMaa,
a fund which invests in Israeli startup companies in the mobility,
cloud and digital healthcare space. Mr. Applbaum is also
currently a Special Advisor to EIGHT, a venture fund which invests
in enterprise software and healthcare technologies, and 7Wire, a
digital healthcare venture group that was one of the early
investors in Livongo. In addition, Mr. Applbaum is a
co-founder of Secure, where he has been a director since
January 2019. Mr. Applbaum also helped found and build
SecureKey, a blockchain technologies company, where he currently
serves as a board observer, a position he has held since 2012.
Mr. Applbaum also served as an early investor and director of
mobile payments company Kili from 2013 to 2017 before it was
acquired by Square, Inc. From 1997 to 2000, Mr. Applbaum was a
board member of 7/24. Mr. Applbaum was a partner at Lightspeed
Venture Partners, a global venture fund, from 2001 to 2006.
Mr. Applbaum was also a founder and the Chief Executive
Officer at Concorde from 1994 to 1999, when it was sold to Bank of
America. Mr. Applbaum holds a BA from Yeshiva University. We
believe Mr. Applbaum is well qualified to serve on our board
of directors due to his broad experience in the healthcare
industry, along with his significant leadership, finance and
operational experience.
Ryan Burke, our Chief Financial Officer, has been
Chief Investment Officer for Rainy since 2008, where he evaluates
all new investment opportunities and helps manage Rainy’s portfolio
of private investments, publicly traded securities, and operating
businesses. Mr. Burke is currently Chief Investment Officer of
BFO, LLC, a Partner at Prime Macaya Capital Management, LP, a
New York-based hedge fund. Prior to its recent sale to
Galaxy Digital Holdings, he was also a partner and director at Blue
Fire Capital, a proprietary trading firm and global liquidity
provider specializing in cryptocurrencies. Mr. Burke is
currently acting Chief Financial Officer of Secure, and previously
served as Chief Financial Officer for various Rainy portfolio
companies. Prior to 2008, he was a Portfolio Manager and Chief Risk
Officer at Alpine, a New York-based long-short hedge
fund. Mr. Burke began his career as a financial analyst at
Morgan Capital, a then $1.9 billion private equity fund.
Mr. Burke holds a master’s degree in business administration
from the Fuqua School of Business and a bachelor’s degree from Duke
University. Mr. Burke is the
son of Richard T. Burke, our Chief Executive Officer and Chairman.
We believe Mr. Burke is qualified to serve on our board of
directors due to his extensive finance and operational
experience.
Steven Schwartz, our Executive Vice President of
M&A, brings over 30 years of digital health industry
transaction experience to the team. For the past four years
Mr. Schwartz was the Senior Vice President of business and
corporate development at Livongo, where he was responsible for the
series acquisitions which culminated in Livongo’s
$18.5 billion merger with Teladoc. Previously,
Mr. Schwartz held Senior Vice President of corporate
development and strategy roles at Tivity and prior to that at
23andMe, Inc. Earlier in his career Mr. Schwartz held
executive leadership positions in business and corporate
development at Allscripts for 14 years, and senior management roles
at LabCorp for 10 years. Mr. Schwartz currently serves on the
board of directors of illuma Care Connections and the Kline Galland
senior care organization. Mr. Schwartz holds a BA in business
administration from the Michael G. Foster School of Business at the
University of Washington and a BA in psychology also from the
University of Washington. We believe Mr. Schwartz is
well-qualified to serve on our management team due to his
extensive transactional experience and broad digital health domain
knowledge, as well as his specific knowledge of the senior care
market.
Jeffrey A. Leerink, one of our directors, is
currently the Chief Executive Officer of SVB Leerink, a leading
investment bank serving the healthcare industry. Mr. Leerink
founded Leerink Partners in 1995; under Mr. Leerink’s
leadership, Leerink Partners co-founded a private equity
business focused on the healthcare industry that consisted of two
fund companies; Leerink Transformation Partners, focused on
investing in technology-enabled healthcare companies, and
Leerink Revelation Partners, a secondary investment fund focused on
commercial companies with proven business models or companies with
novel technologies. In 2008, Mr. Leerink co-founded and
was a member of the board of directors of Humedica, Inc.
Mr. Leerink currently serves on the board of directors of
FogPharma. Additionally, Mr. Leerink currently serves as a
member of the Harvard Medical School Board of Fellows.
Mr. Leerink holds a BA in Economics from Union College. We
believe Mr. Leerink is qualified to serve on our board of
directors due to his extensive experience in both the financial and
healthcare sectors.
Lee Shapiro, one of our directors, is the Chief
Financial Officer of Livongo and Managing Partner at 7Wire, an
investment firm he co-founded over a decade ago. Previously,
he was President of Allscripts from 2002 to 2012.
Mr. Shapiro’s responsibilities included the company’s
strategy, international operations, business development and
partnerships, legal, government relations, health plan initiatives
and business activities in the areas of analytics and information
services. At times during his tenure at Allscripts, he served as
the company’s Chief Operating Officer leveraging his unique grasp
of the business operations across the spectrum of development,
sales, marketing, services and support. Mr. Shapiro previously
served on the board of directors of Livongo, where he chaired the
audit committee and served as a member of the compensation
committee. He also was a member of the executive leadership team,
with a focus on strategy and business development. Mr. Shapiro
served on the board of directors of Medidata (Nasdaq: MDSO), where
he served on the audit committee and nominating and governance
committee, from 2011 until its sale to Dassault in 2019.
Mr. Shapiro also served on the board of Tivity (Nasdaq: TVTY),
where he chaired the audit committee and served on the compensation
committee, from 2015 until May 2020. He also currently serves
on the board and committees of various 7Wire portfolio companies.
Since 2016, Mr. Shapiro has been a member of the National
Board of Directors of the American Heart Association, where he
chairs the audit committee and serves on the business operations
committee. Mr. Shapiro practiced commercial law at Barack,
Ferrazzano, Kirschbaum, Perlman and Nagelberg, a prominent Chicago
law firm. Mr. Shapiro holds a JD degree from The University of
Chicago Law School and a BS in Accounting from the University of
Illinois. We believe Mr. Shapiro is qualified to serve on our
board of directors due to his extensive experience in both the
financial and healthcare sectors.
Mark A. Thierer, one of our
directors, has served as a Managing Partner at
Assetblue, an investment company, since August 2017. Before
joining Assetblue, Mr. Thierer served as the interim Chief
Executive Officer of Dentsply from September 2017 to
February 2018. Prior to Dentsply, Mr. Thierer served as
the Chief Executive Officer of OptumRx, overseeing all Optum
pharmacy care services, including the management of pharmacy
benefits, pharmacy network, home delivery pharmacy and specialty
pharmacy programs, from July 2015 to September 2017.
Prior to OptumRx, Mr. Thierer served on the board of directors
at Catamaran from September 2006 to July 2015, and as the
Chairman of the Board and Chief Executive Officer from
March 2011 to July 2015. Earlier in his career,
Mr. Thierer served as President, Chief Executive Officer and
Chairman of SXC, which merged with Catalyst in 2012 to create
Catamaran. Prior to this, Mr. Thierer led Allscripts (Nasdaq:
MDRX) as President from 2003 to 2006. Before that, he served in a
variety of executive roles at CaremarkRx, including most recently
as Senior Vice President, New Ventures, and was responsible for
developing Caremark’s growth strategy. Prior to Caremark,
Mr. Thierer worked in various management positions within the
health industry of IBM (NYSE: IBM). Mr. Thierer has served on
the board of directors of Rightway Healthcare, Inc. since
April 2020, Xeris Pharmaceuticals, Inc. since
October 2019, where he sits on the audit committee, and
Discover Financial Services, Inc. since April 2013.
Mr. Thierer is also an advisor to the Jeffrey Pride Foundation
for Pediatric Cancer Research. Mr. Thierer received a BS in
Finance from the University of Minnesota and an MBA from Nova
Southern University. Mr. Thierer also holds the designation of
CEBS (Certified Employee Benefits Specialist) from The Wharton
School of the University of Pennsylvania. We believe
Mr. Thierer is qualified to serve on our board of directors
due to his extensive experience in both the financial and
healthcare sectors.
Number and Terms of Office of Officers and Directors
Our board of directors consists of six members and is divided into
three classes with only one class of directors being elected in
each year, and with each class (except for those directors
appointed prior to our first annual meeting of stockholders)
serving a three-year term. In accordance with Nasdaq corporate
governance requirements, we are not required to hold an annual
meeting until one year after our first fiscal year end following
our listing on Nasdaq. The term of office of the first class of
directors, consisting of Jeffrey A. Leerink and Isaac Applbaum,
will expire at our first annual meeting of stockholders. The term
of office of the second class of directors, consisting of Lee
Shapiro and Ryan Burke, will expire at the second annual meeting of
stockholders. The term of office of the third class of directors,
consisting of Mark A. Thierer and Richard T. Burke, will expire at
the third annual meeting of stockholders.
Our officers are appointed by the board of directors and serve at
the discretion of the board of directors, rather than for specific
terms of office. Our board of directors is authorized to appoint
officers as it deems appropriate pursuant to our amended and
restated certificate of incorporation.
Director Independence
Nasdaq rules and our amended and restated certificate of
incorporation require that a majority of our board of directors be
independent within one year of our Public Offering. An “independent
director” is defined generally as a person who, in the opinion of
the company’s board of directors, has no material relationship with
the listed company (either directly or as a partner, stockholder or
officer of an organization that has a relationship with the
company). We have three “independent directors” as defined in
Nasdaq rules and applicable SEC rules. Our board of directors has
determined that Jeffrey A. Leerink, Lee Shapiro and Mark A. Thierer
are “independent directors” as defined in Nasdaq listing standards
and applicable SEC rules. Our independent directors will have
regularly scheduled meetings at which only independent directors
are present.
Board Committees
Audit Committee
We have established an audit committee of the board of directors.
Jeffrey A. Leerink, Lee Shapiro and Mark A. Thierer will serve as
members of our audit committee. Under Nasdaq listing standards and
applicable SEC rules, we are required to have three members of the
audit committee, all of whom must be independent. Jeffrey A.
Leerink, Lee Shapiro and Mark A. Thierer are independent.
Lee Shapiro serves as the chairman of the audit committee. Each
member of the audit committee is financially literate and our board
of directors has determined that Lee Shapiro qualifies as an “audit
committee financial expert” as defined in applicable SEC rules.
The audit committee is responsible for:
| |
● |
meeting
with our independent registered public accounting firm regarding,
among other issues, audits, and adequacy of our accounting and
control systems; |
| |
● |
monitoring
the independence of the independent auditor; |
| |
● |
verifying
the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner
responsible for reviewing the audit as required by law; |
| |
● |
inquiring
and discussing with management our compliance with applicable laws
and regulations; |
| |
● |
pre-approving
all audit services and permitted non-audit services to be performed
by our independent auditor, including the fees and terms of the
services to be performed; |
| |
● |
appointing
or replacing the independent auditor; |
| |
● |
determining
the compensation and oversight of the work of the independent
auditor (including resolution of disagreements between management
and the independent auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or related
work; |
| |
● |
establishing
procedures for the receipt, retention and treatment of complaints
received by us regarding accounting, internal accounting controls
or reports which raise material issues regarding our financial
statements or accounting policies; |
| |
● |
monitoring
compliance on a quarterly basis with the terms of the Public
Offering and, if any noncompliance is identified, immediately
taking all action necessary to rectify such noncompliance or
otherwise causing compliance with the terms of the Public Offering;
and |
| |
● |
reviewing
and approving all payments made to our existing stockholders,
executive officers or directors and their respective affiliates.
Any payments made to members of our audit committee will be
reviewed and approved by our board of directors, with the
interested director or directors abstaining from such review and
approval. |
Compensation Committee
We have established a compensation committee of our board of
directors. The members of our compensation committee will be Lee
Shapiro and Mark A. Thierer, and Mark A. Thierer serves as chairman
of the compensation committee. We have adopted a compensation
committee charter, which details the principal functions of the
compensation committee, including:
| |
● |
reviewing
and approving on an annual basis the corporate goals and objectives
relevant to our chief executive officer’s compensation, evaluating
our chief executive officer’s performance in light of such goals
and objectives and determining and approving the remuneration (if
any) of our chief executive officer’s based on such
evaluation; |
| |
● |
reviewing
and approving the compensation of all of our other Section 16
executive officers; |
| |
● |
reviewing
our executive compensation policies and plans; |
| |
● |
implementing
and administering our incentive compensation equity-based
remuneration plans; |
| |
● |
assisting
management in complying with our proxy statement and annual report
disclosure requirements; |
| |
● |
approving
all special perquisites, special cash payments and other special
compensation and benefit arrangements for our executive officers
and employees; |
| |
● |
producing
a report on executive compensation to be included in our annual
proxy statement; and |
| |
● |
reviewing,
evaluating and recommending changes, if appropriate, to the
remuneration for directors. |
The charter also provides that the compensation committee may, in
its sole discretion, retain or obtain the advice of a compensation
consultant, legal counsel or other adviser and will be directly
responsible for the appointment, compensation and oversight of the
work of any such adviser.
However, before engaging or receiving advice from a compensation
consultant, external legal counsel or any other adviser, the
compensation committee will consider the independence of each such
adviser, including the factors required by Nasdaq and the SEC.
Director Nominations
We do not have a standing nominating committee though we intend to
form a corporate governance and nominating committee as and when
required to do so by law or Nasdaq rules. In accordance with
Rule 5605(e)(2) of Nasdaq rules, a majority of the independent
directors may recommend a director nominee for selection by our
board of directors. Our board of directors believes that the
independent directors can satisfactorily carry out the
responsibility of properly selecting or approving director nominees
without the formation of a standing nominating committee. The
directors who will participate in the consideration and
recommendation of director nominees are Jeffrey A. Leerink, Lee
Shapiro and Mark A. Thierer. In accordance with
Rule 5605(e)(1)(A) of Nasdaq rules, all such directors are
independent. As there is no standing nominating committee, we do
not have a nominating committee charter in place.
The board of directors will also consider director candidates
recommended for nomination by our stockholders during such times as
they are seeking proposed nominees to stand for election at the
next annual meeting of stockholders (or, if applicable, a special
meeting of stockholders). Our stockholders that wish to nominate a
director for election to our board of directors should follow the
procedures set forth in our bylaws.
We have not formally established any specific, minimum
qualifications that must be met or skills that are necessary for
directors to possess. In general, in identifying and evaluating
nominees for director, our board of directors considers educational
background, diversity of professional experience, knowledge of our
business, integrity, professional reputation, independence, wisdom,
and the ability to represent the best interests of our
stockholders.
Compensation Committee Interlocks and Insider
Participation
None of our executive officers currently serves, and in the past
year has not served, as a member of the compensation committee of
any entity that has one or more executive officers serving on our
board of directors.
Code of Ethics and Committee Charters
We have adopted a Code of Ethics applicable to our directors,
officers and employees. We have filed a copy of our form of the
Code of Ethics and our audit committee and compensation committee
charters as exhibits to the registration statement of which this
prospectus is a part. You will be able to review this document by
accessing our public filings at the SEC’s web site at www.sec.gov.
In addition, a copy of the Code of Ethics and the charters of the
committees will be provided without charge upon request from us.
See the section of this prospectus entitled “Where You Can Find
Additional Information.” If we make any amendments to our Code of
Ethics other than technical, administrative or other
non-substantive amendments, or grant any waiver, including any
implicit waiver, from a provision of the Code of Ethics applicable
to our principal executive officer, principal financial officer
principal accounting officer or controller or persons performing
similar functions requiring disclosure under applicable SEC or
Nasdaq rules, we will disclose the nature of such amendment or
waiver.
ITEM 11. EXECUTIVE
COMPENSATION.
None of our executive officers or directors has received any cash
compensation for services rendered. We will reimburse an affiliate
of the Sponsor for office space, secretarial and administrative
services provided to members of our management team in an amount
not to exceed $10,000 per month in the event such space and/or
services are utilized and we do not pay directly for such services.
Upon completion of our initial business combination or our
liquidation, we will cease making these payments. In addition, the
Sponsor, executive officers and directors, or any of their
respective affiliates will be reimbursed for any out-of-pocket
expenses incurred in connection with activities on our behalf such
as identifying potential target businesses and performing due
diligence on suitable business combinations. Our audit committee
will review on a quarterly basis all payments that were made to the
Sponsor, officers or directors, or our or their affiliates. Other
than these payments and reimbursements, no compensation of any
kind, including finder’s and consulting fees, will be paid to the
Sponsor, executive officers and directors, or any of their
respective affiliates, prior to completion of our initial business
combination.
It is possible that some or all of our officers and directors may
negotiate employment or consulting arrangements with the
post-transaction company after our initial business combination.
Any such arrangements will be disclosed in the proxy solicitation
or tender offer materials, as applicable, furnished to our
stockholders in connection with a proposed business combination, to
the extent they are known at such time.
The existence or terms of any such employment or consulting
arrangements may influence our management’s motivation in
identifying or selecting a target business, but we do not believe
that such arrangements will be a determining factor in our decision
to proceed with any potential business combination.
ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
We have no compensation plans under which equity securities are
authorized for issuance.
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2021, by:
| |
● |
each
person known by us to be a beneficial owner of more than 5% of our
outstanding common stock of, on an as-converted basis; |
| |
● |
each
of our officers and directors; and |
| |
● |
all
of our officers and directors as a group. |
The following table is based on 51,750,000 shares of common stock
of outstanding at March 31, 2021, of which 41,400,000 were shares
of Class A common stock and 10,350,000 were shares of Class B
common stock. Unless otherwise indicated, it is believed that all
persons named in the table below have sole voting and investment
power with respect to all shares of common stock beneficially owned
by them.
|
Name
and Address of Beneficial Owner(1) |
|
Number of
Class A
Common
Stock
Beneficially
Owned |
|
|
Approximate
Percentage of
Outstanding
Class A
Common
Stock |
|
|
Number of
Class B
Common
Stock
Beneficially
Owned |
|
|
Approximate
Percentage of
Outstanding
Class B
Common
Stock |
|
|
Health
Connect Acquisitions Holdings LLC(2)(3) |
|
|
— |
|
|
|
— |
|
|
|
10,350,000 |
|
|
|
100 |
% |
|
Richard
T. Burke(2)(3) |
|
|
— |
|
|
|
— |
|
|
|
10,350,000 |
|
|
|
100 |
% |
| Isaac
Applbaum(2)(3) |
|
|
— |
|
|
|
— |
|
|
|
10,350,000 |
|
|
|
100 |
% |
| Ryan
Burke(2)(3) |
|
|
— |
|
|
|
— |
|
|
|
10,350,000 |
|
|
|
100 |
% |
|
Steven Schwartz |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Jeffrey A. Leerink |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Lee Shapiro |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Mark A. Thierer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
All executive officers and directors as a group (7
individuals) |
|
|
— |
|
|
|
— |
|
|
|
10,350,000 |
|
|
|
100 |
% |
|
Aristeia
Capital, L.L.C.(4) |
|
|
2,125,000 |
|
|
|
5.1 |
% |
|
|
— |
|
|
|
— |
|
|
Eminence
Capital, LP and Ricky C. Sandler(5) |
|
|
3,072,278 |
|
|
|
7.4 |
% |
|
|
— |
|
|
|
— |
|
| (1) |
Unless
otherwise noted, the business address of each of our stockholders
listed is 7114 East Stetson Drive, Suite 400, Scottsdale, AZ
85251. |
| (2) |
Interests
shown consist solely of Founder Shares, classified as shares of
Class B common stock. Such shares will automatically convert into
shares of Class A common stock at the time of our initial business
combination on a one-for-one basis, subject to adjustment, as
described elsewhere herein. |
| (3) |
Health
Connect Acquisitions Holdings LLC is the record holder of the
shares reported herein. Each of Messrs. Applbaum, Richard T. Burke
and Ryan Burke are the managers of Health Connect Acquisitions
Holdings LLC. Any action by our sponsor with respect to our company
or the founder shares, including voting and dispositive decisions,
requires a majority vote of the managers. Under the so-called “rule
of three,” if voting and dispositive decisions regarding an
entity’s securities are made by three or more individuals, and a
voting or dispositive decision requires the majority of those
individuals, then none of the individuals is deemed a beneficial
owner of the entity’s securities. Based on the foregoing, no
individual manager exercises voting or dispositive control over any
of the securities held by our sponsor, even those in which he
directly owns a pecuniary interest. Accordingly, none of them will
be deemed to have or share beneficial ownership of such
securities. |
| (4) |
According
to a Schedule 13G filed on February 16, 2021, Aristeia Capital,
L.L.C., a Delaware limited liability company, is the investment
manager of, and has voting and investment control with respect to
the 2,125,000 shares of Class A common stock held by, one or more
private investment funds. The business address for this stockholder
is One Greenwich Plaza, 3rd Floor, Greenwich, CT
06830. |
| (5) |
According
to a Schedule 13G filed on February 16, 2021, Eminence Capital, LP
serves as the management company or investment adviser to, and may
be deemed to have shared voting and dispositive power over the
3,072,278 shares of Class A common stock held by, various
investment funds and separately managed accounts under its
management and control. The general partner of Eminence Capital, LP
is Eminence Capital GP, LLC, the sole managing member of which is
Mr. Sandler. Mr. Sandler is the Chief Executive Officer of Eminence
Capital, LP and may be deemed to have shared voting and dispositive
power with respect to the shares of Class A common stock described
herein. The business address for this stockholder is 399 Park
Avenue, 25th Floor, New York, NY 10022. |
ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Founder Shares
On August 27, 2020, our Sponsor purchased an aggregate of
10,062,500 Founder Shares in exchange for a capital contribution
of $25,000, or approximately $0.002 per share. On November 23,
2020, our sponsor surrendered 1,437,500 founder shares to us for
cancellation for no consideration resulting in our sponsor holding
8,625,000 founder shares. Such shares were fully paid, and the cash
amount of the subscription price therefor was received on September
22, 2020. On December 10, 2020, we effected a 1:1.2 stock split of
our Class B common stock, resulting in an aggregate of 10,350,000
founder shares outstanding, all of which are held by our sponsor.
The number of founder shares outstanding was determined based on
the expectation that the total size of the Public Offering would be
a maximum of 41,400,000 units if the underwriters’ over-allotment
option was exercised in full, and therefore that such founder
shares would represent 20% of the outstanding shares after the
Public Offering.
Private Placement Warrants
Simultaneously with the closing of the Public Offering, we
consummated the Private Placement of 10,280,000 Private Placement
Warrants at a price of $1.00 per Private Placement Warrant to the
Sponsor, generating proceeds of approximately $10,280,000. Each
whole Private Placement Warrant is exercisable for one whole share
of Class A common stock at a price of $11.50 per share,
subject to adjustment. A portion of the proceeds from the sale of
the Private Placement Warrants to the Sponsor was added to the
proceeds from the Public Offering held in the Trust Account. If the
Company does not complete a Business Combination by December 15,
2022, the Private Placement Warrants will expire worthless. The
Private Placement Warrants will be non-redeemable for cash
(except as described elsewhere in this Annual Report on Form 10-K)
and exercisable on a cashless basis so long as they are held by the
Sponsor or its permitted transferees. The Sponsor agreed, subject
to limited exceptions, not to transfer, assign or sell the Private
Placement Warrants until 30 days after the completion of the
initial Business Combination.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and
warrants that may be issued upon conversion of Working Capital
Loans, if any, and any shares of Class A common stock issuable upon
the exercise of the Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans) will be
entitled to registration rights pursuant to a registration rights
agreement signed on December 10, 2020. These holders will be
entitled to certain demand and “piggyback” registration rights. The
Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Administrative Services
The Company will pay the Sponsor for office space, secretarial and
administrative services provided to members of the Company’s
management team in an amount not to exceed $10,000 per month in the
event such space and/or services are utilized and the Company does
not pay a third party directly for such services, from the date of
closing of the Public Offering. Upon completion of a business
combination or the Company’s liquidation, the Company will cease
paying these monthly fees.
ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES.
The firm of Marcum LLP, or Marcum, acts as our independent
registered public accounting firm. The following is a summary of
fees paid to Marcum for services rendered.
Audit Fees. Audit fees consist of fees billed for
professional services rendered for the audit of our year-end
financial statements, reviews of our quarterly financial statements
and services that are normally provided by our independent
registered public accounting firm in connection with statutory and
regulatory filings. The aggregate fees billed by Marcum for audit
fees, inclusive of required filings with the SEC for the period
from August 27, 2020 (inception) through December 31, 2020 and of
services rendered in connection with our Public Offering, totaled
$38,625.
Audit-Related Fees. Audit-related fees consist of fees
billed for assurance and related services that are reasonably
related to performance of the audit or review of our year-end
financial statements and are not reported under “Audit Fees.” These
services include attest services that are not required by statute
or regulation and consultation concerning financial accounting and
reporting standards. For the period from August 27, 2020
(inception) through December 31, 2020, we did not pay Marcum any
audit-related fees.
Tax Fees. Tax fees consist of fees billed for professional
services relating to tax compliance, tax planning and tax advice.
For the period from August 27, 2020 (inception) through December
31, 2020, we did not pay Marcum any tax fees.
All Other Fees. All other fees consist of fees billed for
all other services. For the period from August 27, 2020 (inception)
through December 31, 2020, we did not pay Marcum any other
fees.
PART IV
ITEM 15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.
| (a) |
The
following documents are filed as part of this report: |
Reference is made to the Index to Financial Statements of the
Company under Item 8 of Part II above.
| |
(2) |
Financial
Statement Schedule |
All financial statement schedules are omitted because they are not
applicable or the amounts are immaterial, not required, or the
required information is presented in the financial statements and
notes thereto in Item 8 of Part II above.
We hereby file as part of this report the exhibits listed in the
attached Exhibit Index.
Exhibit
Number |
|
Description |
| 3.1 |
|
Amended
and Restated Certificate of Incorporation (Incorporated by
reference to the corresponding exhibit to the Company’s Current
Report on Form 8-K (File No. 001-39793), filed with the SEC on
December 15, 2020). |
| |
|
|
| 3.2 |
|
Bylaws
(Incorporated by reference to Exhibit 3.4 to the Company’s
Registration Statement on Form S-1 (File No. 333-250932), filed
with the SEC on November 24, 2020). |
| |
|
|
| 4.1 |
|
Specimen
Unit Certificate (Incorporated by reference to the corresponding
exhibit to the Company’s Registration Statement on Form S-l (File
No. 333-250932), filed with the SEC on November 24,
2020). |
| |
|
|
| 4.2 |
|
Specimen
Class A Common Stock Certificate (Incorporated by reference to the
corresponding exhibit to the Company’s Registration Statement on
Form S-l (File No. 333-250932), filed with the SEC on November 24,
2020). |
| |
|
|
| 4.3 |
|
Specimen
Warrant Certificate (Incorporated by reference to the corresponding
exhibit to the Company’s Registration Statement on Form S-l (File
No. 333-250932), filed with the SEC on November 24,
2020). |
| |
|
|
| 4.4 |
|
Warrant
Agreement between Senior Connect Acquisition Corp. I and
Continental Stock Transfer & Trust Company, dated as of
December 10, 2020 (Incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K (File No. 001-39793), filed
with the SEC on December 15, 2020). |
| |
|
|
| 4.5 |
|
Description
of Securities (Incorporated by reference to Exhibit 4.5 to the
Company’s Annual Report on Form 10-K (File No. 001-3973), filed
with the SEC on March 31, 2021). |
| |
|
|
| 10.1 |
|
Letter
Agreement among Senior Connect Acquisition Corp. I, Health Connect
Acquisitions Holdings LLC, its officers and directors, dated as of
December 10, 2020 (Incorporated by reference to the corresponding
exhibit to the Company’s Current Report on Form 8-K (File No.
001-39793), filed with the SEC on December 15,
2020). |
| |
|
|
| 10.2 |
|
Investment
Management Trust Agreement between Senior Connect Acquisition Corp.
I and Continental Stock Transfer & Trust Company, dated as of
December 10, 2020 (Incorporated by reference to the corresponding
exhibit to the Company’s Current Report on Form 8-K (File No.
001-39793), filed with the SEC on December 15,
2020). |
| |
|
|
| 10.3 |
|
Registration
Rights Agreement between Senior Connect Acquisition Corp. I and
Health Connect Acquisitions Holdings LLC, dated as of December 10,
2020 (Incorporated by reference to the corresponding exhibit to the
Company’s Current Report on Form 8-K (File No. 001-39793), filed
with the SEC on December 15, 2020). |
| 10.4 |
|
Private
Placement Warrants Purchase Agreement between Senior Connect
Acquisition Corp. I and Health Connect Acquisitions Holdings LLC,
dated as of December 10, 2020 (Incorporated by reference to the
corresponding exhibit to the Company’s Current Report on Form 8-K
(File No. 001-39793), filed with the SEC on December 15,
2020). |
| |
|
|
| 10.5 |
|
Administrative
Services Agreement, dated December 10, 2020, between the Company
and Health Connect Acquisitions Holdings LLC (Incorporated by
reference to the corresponding exhibit to the Company’s Current
Report on Form 8-K (File No. 001-39793), filed with the SEC on
December 15, 2020). |
| |
|
|
| 10.6 |
|
Promissory
Note, dated as of August 27, 2020, issued to Health Connect
Acquisitions Holdings LLC (Incorporated by reference to the
corresponding exhibit to the Company’s Registration Statement on
Form S-l (File No. 333-250932), filed with the SEC on November 24,
2020). |
| |
|
|
| 10.7 |
|
Securities
Subscription Agreement between Health Connect Acquisitions Holdings
LLC and Senior Connect Acquisition Corp. I (Incorporated by
reference to the corresponding exhibit to the Company’s
Registration Statement on Form S-1 (File No. 333-250932), filed
with the SEC on November 24, 2020). |
| |
|
|
| 14.1 |
|
Code
of Ethics (Incorporated by reference to Exhibit 14 to the Company’s
Registration Statement on Form S-1 (File No. 333-250932), filed
with the SEC on November 24, 2020). |
| |
|
|
| 24.1 |
|
Power
of Attorney (included on the signature page
herein). |
| |
|
|
| 31.1 |
|
Certification
of Chief Executive Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
| |
|
|
| 31.2 |
|
Certification
of Chief Financial Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
| |
|
|
| 32.1 |
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
| |
|
|
| 32.2 |
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
| |
|
|
| 101.INS |
|
XBRL
Instance Document |
| |
|
|
| 101.SCH |
|
XBRL
Taxonomy Extension Schema Document |
| |
|
|
| 101.CAL |
|
XBRL
Taxonomy Extension Calculation Linkbase Document |
| |
|
|
| 101.DEF |
|
XBRL
Taxonomy Extension Definition Linkbase Document |
| |
|
|
| 101.LAB |
|
XBRL
Taxonomy Extension Label Linkbase Document |
| |
|
|
| 101.PRE |
|
XBRL
Taxonomy Extension Presentation Linkbase Document |
| |
† |
Schedules
to this exhibit have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. The registrant hereby agrees to furnish a copy of
any omitted schedules to the SEC upon request. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
| |
SENIOR
CONNECT ACQUISITION CORP. I |
| |
|
| |
By: |
/s/
Richard T. Burke |
| |
|
Name: |
Richard
T. Burke |
| Dated:
December 27, 2021 |
|
Title: |
Chief
Executive Officer and Chairman
(Principal Executive Officer) |
POWER OF
ATTORNEY
The undersigned directors and officers of Senior Connect
Acquisition Corp. I hereby constitute and appoint each of Richard
T. Burke, Isaac Applbaum and Ryan Burke, with the power to act
without the others and with full power of substitution and
resubstitution, our hue and lawful attorney-in-fact and agent with
full power to execute in our name and behalf in the capacities
indicated below any and all amendments to this report and to file
the same, with all exhibits and other documents relating thereto
and hereby ratify and confirm all that such attorney-in-fact, or
such attorney-in-fact’s substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons in
the capacities and on the dates indicated below.
|
Name |
|
Title |
|
Date |
| |
|
|
|
|
|
/s/
Richard T. Burke |
|
Chief
Executive Officer and Chairman |
|
December
27, 2021 |
| Richard
T. Burke |
|
(Principal
Executive Officer) |
|
|
| |
|
|
|
|
|
/s/
Isaac Applbaum |
|
President
and Director |
|
December 27,
2021 |
| Isaac
Applbaum |
|
|
|
|
| |
|
|
|
|
|
/s/
Ryan Burke |
|
Chief
Financial Officer and Director |
|
December 27,
2021 |
| Ryan
Burke |
|
(Principal
Financial and Accounting Officer) |
|
|
| |
|
|
|
|
|
/s/
Steven Schwartz |
|
Executive
Vice President of M&A |
|
December 27,
2021 |
| Steven
Schwartz |
|
|
|
|
| |
|
|
|
|
|
/s/
Jeffrey A. Leerink |
|
Director |
|
December
27, 2021 |
| Jeffrey
A. Leerink |
|
|
|
|
| |
|
|
|
|
|
/s/
Lee Shapiro |
|
Director |
|
December
27, 2021 |
| Lee
Shapiro |
|
|
|
|
| |
|
|
|
|
|
/s/
Mark A. Thierer |
|
Director |
|
December 27,
2021 |
| Mark
A. Thierer |
|
|
|
|
62
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