ITEM 1. BUSINESS
Introduction
SPK Acquisition Corp. (“SPK,”
“the Company,” “we,” “us,” or “our”) is a Delaware company incorporated on December 31,
2020 as a blank check company for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination, with one or more target businesses.
On June 10, 2021, the Company consummated
its initial public offering (the “IPO”) of 5,000,000 units (the “Units”), each Unit consists of one share of common
stock of the Company, par value $0.0001 per share (the “Common Stock”) and one right (“Right”) to receive one-tenth
(1/10) of a share of Common Stock upon the consummation of an initial business combination. The Units were sold at an offering price of
$10.00 per Unit, generating gross proceeds of $50,000,000.
On June 10, 2021, simultaneously
with the consummation of the IPO, we consummated a private placement (“Private Placement”) with SPK Acquisition LLC (the “Sponsor”),
of 205,000 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $2,050,000. The
Private Units are identical to the Units sold in the IPO. The Sponsor agreed not to transfer, assign or sell any of the Private Units
or underlying securities (except in limited circumstances) until the completion of SPK’s initial business combination. The Sponsor
was granted certain demand and piggyback registration rights in connection with the purchase of the Private Units. The Private Units were
issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions did not involve a public offering.
On July 20, 2021, the underwriters
partially exercised the over-allotment option and purchased an additional 91,196 units at a price of $10.00 per unit resulting in total
gross proceeds of $911,960. The closing of the over-allotment option occurred on July 22, 2021. Simultaneously with the sale of the additional
Units, the Company consummated the sale of an additional 1,824 Private Units at $10.00 per additional Private Unit, generating additional
gross proceeds of $18,240. On the same date, the underwriters canceled the remainder of the over-allotment option. In connection with
the cancellation of the remainder of the over-allotment option, on July 22, 2021, the Company cancelled an aggregate of 164,701 shares
of Common Stock issued prior to the IPO and Private Placement to the Sponsor.
A total of $50,911,960 of the net
proceeds from the sale of Units in the IPO (including the over-allotment option units) and the Private Placement, were placed in a trust
account established for the benefit of the Company’s public shareholders at J.P. Morgan Chase Bank, N.A. maintained by Continental
Stock Transfer & Trust Company, acting as trustee. None of the funds held in trust will be released from the trust account, other
than interest income to pay any tax obligations, until the earlier of (i) the consummation of the Company’s initial business combination,
(ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend SPK’s amended and restated
certificate of incorporation (a) to modify the substance or timing of the ability of holders of SPK’s public shares to seek redemption
in connection with SPK’s initial business combination or SPK’s obligation to redeem 100% of its public shares if SPK does
not complete its initial business combination by March 10, 2022 (nine months from the closing of the IPO, or 12 or 15 months, if extended
as described herein), or (b) with respect to any other provision relating to stockholders’ rights or pre-business combination activity.
General
We are a Delaware blank check company
formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination
with one or more businesses or entities, which we refer to throughout this annual report as our initial business combination. Although
at the time of our IPO we initially intended to focus on operating businesses in Asia focused on the telecommunications, media, and technology
(“TMT”) sectors, due to various factors we decided to consider prospective target businesses that are not limited to a particular
industry or geographic region.
Business Combination
Merger Agreement
On February 11, 2022, SPK Acquisition
Corp., a Delaware corporation (“SPK”), entered into a Merger Agreement (the “Merger Agreement”)
by and among Varian Biopharmaceuticals, Inc., a Florida corporation (“Varian”), SPK, and SPK Merger Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of SPK (“Merger Sub”). Pursuant to the terms of the Merger Agreement, a business
combination between SPK and Varian will be effected through the merger of Merger Sub with and into Varian with Varian surviving the merger
as a wholly owned subsidiary of SPK (the “Merger”). The board of directors of SPK has (i) approved and declared advisable
the Merger Agreement, the Additional Agreements (as defined in the Merger Agreement) and the transactions contemplated thereby and (ii)
resolved to recommend approval of the Merger Agreement and related transactions by the stockholders of SPK.
The Merger is expected to be consummated
after obtaining the required approval by the stockholders of SPK and Varian and the satisfaction of certain other customary closing conditions.
Merger Consideration; Treatment of Varian Securities
The total consideration to be paid
at Closing (the “Merger Consideration”) by SPK to Varian stockholders will be an amount equal to $45 million payable
in 4,500,000 shares of common stock, par value, of SPK (“SPK Common Stock”).
At the signing of the Merger Agreement,
Varian has only one class of stock, common stock, $0.0001 per share (the “Varian Common Stock”). Each share of Varian
Common Stock, if any, that is owned by SPK or Merger Sub (or any other Subsidiary of SPK) or Varian (or any of its Subsidiaries) (as treasury
stock or otherwise), will automatically be cancelled and retired without any conversion thereof and will cease to exist, and no consideration
will be delivered in exchange therefor. Each share of Varian Common Stock, if any, held immediately prior to the consummation of the Merger
by Varian as treasury stock shall be automatically canceled and extinguished, and no consideration shall be paid with respect thereto.
Each share of Varian Common Stock issued and outstanding immediately prior to the consummation of the Merger (other than any such shares
of Varian Common Stock cancelled pursuant to the first sentence of this paragraph and any Dissenting Shares) shall be exchanged for and
otherwise converted into the right to receive the applicable Merger Consideration per share pursuant to the Merger Agreement.
Representations and Warranties
The Merger Agreement contains customary
representations and warranties of the parties thereto with respect to, among other things: (a) corporate existence and power; (b) authorization
to enter into the Merger Agreement and related transactions; (c) governmental authorization; (d) non-contravention; (e) capitalization;
(f) finders’ fees; (g) related party transactions; (h) litigation; (i) compliance with laws; (j) absence
of certain changes; (k) tax matters; and (l) certain representations related to securities law and activity. Varian has additional
representations and warranties, including (a) corporate records; (b) subsidiaries; (c) consents; (d) financial statements;
(e) books and records; (f) internal accounting controls; (g) properties; title to assets; (h) contracts; (i) licenses
and permits; (j) compliance with health care laws and certain contracts; (k) intellectual property; (l) accounts payable;
affiliate loans; (m) employee matters and benefits; (n) real property; (o) environmental laws; (p) powers of attorney,
suretyships and bank accounts; (q) directors and officers; (r) anti-money laundering laws; and (s) insurance. SPK has additional
representations and warranties, including (a) issuance of shares; (b) trust fund; (c) listing; (d) board approval;
(e) SEC documents and financial statements; and (f) expenses, indebtedness and other liabilities.
Covenants
The Merger Agreement includes customary
covenants of the parties with respect to operation of their respective businesses prior to consummation of the Merger and efforts to satisfy
conditions to consummation of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others,
access to information, cooperation in the preparation of the Form S-4 and Proxy Statement (as each such term is defined in the Merger
Agreement) required to be filed in connection with the Merger and to obtain all requisite approvals of each party’s respective stockholders.
SPK has also agreed to include in the Proxy Statement the recommendation of its board that its stockholders approve all of the proposals
to be presented at the special meeting.
Exclusivity
Each of SPK and Varian has agreed
that from the date of the Merger Agreement until the Closing Date or, if earlier, the valid termination of the Merger Agreement in accordance
with its terms, it will not initiate, encourage or engage in any negotiations with any party relating to an Alternative Transaction (as
defined in the Merger Agreement), take any action intended to facilitate an Alternative Transaction or approve, recommend or enter into
any agreement relating to an Alternative Transaction. Each of SPK and Varian has also agreed to be responsible for any acts or omissions
of any of its respective representatives that, if they were the acts or omissions of SPK and Varian, as applicable, would be deemed a
breach of such party’s obligations with respect to these non-solicitation restrictions.
Conditions to Closing
The consummation of the Merger
is conditioned upon, among other things, (i) the absence of any applicable law or order that makes the transactions contemplated by the
Merger Agreement illegal or otherwise prohibits consummation of such transactions; (ii) receipt of any consent, approval or authorization
required by any Authority (as defined in the Merger Agreement); (iii) SPK having at least $5,000,001 of net tangible assets upon consummation
of the Merger; (iv) approval by Varian’s stockholders of the Merger and related transactions; (vi) approval by SPK’s stockholders
of the Merger and related transactions; (v) the conditional approval for listing by the Nasdaq Stock Market of the shares of SPK Common
Stock to be issued in connection with the transactions contemplated by the Merger Agreement and the Additional Agreements and satisfaction
of initial and continued listing requirements; and (vi) the Form S-4 becoming effective in accordance with the provisions of the Securities
Act of 1933, as amended (“Securities Act”).
Solely with respect to SPK and
Merger Sub, the consummation of the Merger is conditioned upon, among other things: (i) Varian having duly performed or complied
with all of its obligations under the Merger Agreement in all material respects; (ii) the representations and warranties of Varian,
other than certain fundamental representations as set forth in the Merger Agreement, being true and correct in all respects unless failure
to be true and correct would not have or reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement)
on Varian’s ability to consummate the Merger and related transactions; (iii) certain fundamental representations, as set forth
in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies; (iv) no event having occurred
that would result in a Material Adverse Effect on Varian or any of its subsidiaries; (v) Varian providing SPK a certificate from
the chief executive officer of Varian as to the accuracy of the foregoing conditions; (vi) Varian providing SPK a certificate from
the secretary which has attached true and complete copies of (a) Varian’s certified articles of incorporation, (b) Varian’s
bylaws, (c) Varian’s board resolutions approving the Merger Agreement, the Additional Agreements and the transactions contemplated
thereby, and (d) Varian’s certified certificate of good standing; (vii) Varian’s stockholders shall have executed
and delivered to SPK each Additional Agreement to which they are each a party; (viii) Varian providing a certificate to SPK conforming
to certain tax-related regulations and delivering a notice to the United States Internal Revenue Service as required under certain tax-related
regulations; (ix) not more than five percent (5%) of the issued and outstanding shares of Varian Common Stock constituting Dissenting
Shares (as such term is defined in the Merger Agreement); (x) Varian having delivered executed resignations of certain Varian directors
as set forth in the Merger Agreement; (xi) Varian having delivered financial statements required to be included in any filings with
the SEC; and (xii) cumulative Indebtedness of Varian, excluding (a) accounts payable to Person(s) un-Affiliated with Varian
for goods and services incurred in the ordinary course of business consistent with past practices and (b) Indebtedness secured by
Permitted Liens, shall be less than or equal to $5,000,000.
Solely with respect to Varian,
the consummation of the Merger is conditioned upon, among other things: (i) SPK and Merger Sub having duly performed or complied
with all of their respective obligations under the Merger Agreement in all material respects; (ii) the representations and warranties
of SPK, other than certain fundamental representations as set forth in the Merger Agreement, being true and correct in all respects unless
failure would not have or reasonably be expected to have a Material Adverse Effect on SPK or Merger Sub; (iii) certain fundamental
representations, as set forth in the Merger Agreement, being true and correct in all respects other than de minimis inaccuracies; (iv) no
event having occurred that would result in a Material Adverse Effect on SPK or Merger Sub; (v) SPK providing Varian a certificate from
the chief executive officer of SPK as to the accuracy of the foregoing conditions; (vi) SPK having filed its Amended Parent Charter
(as defined in the Merger Agreement) and such Amended Parent Charter being declared effective by, the Delaware Secretary of State; (vii) SPK
providing Varian a certificate from the secretary of SPK which has attached true and complete copies of (a) SPK’s certified
articles of incorporation, (b) SPK’s bylaws, (c) SPK’s board resolutions approving the Merger Agreement, the Additional
Agreements and the transactions contemplated thereby, and (d) SPK’s certified certificate of good standing; (viii) Merger
Sub providing Varian a certificate from the secretary of Merger Sub which as attached true and complete copies of (a) Merger Sub’s
board resolutions approving the Merger Agreement, the Additional Agreements and the transactions contemplated thereby and (b) Merger
Sub’s certified certificate of good standing; (ix) SPK, SPK Ventures I, LLC (the “Sponsor”), and any other
stockholder of SPK, shall have executed and delivered to Varian each Additional Agreement to which they each are a party; (x) the
size and composition of the post-closing board of directors of SPK shall have been constituted as set forth in the Merger Agreement;
(xi) SPK having delivered executed resignations of certain SPK directors as set forth in the Merger Agreement, and (xii) cumulative
Indebtedness of SPK, excluding (a) accounts payable to Person(s) un-Affiliated with SPK for goods and services incurred in the ordinary
course of business consistent with past practices and (b) Indebtedness secured by Permitted Liens shall be less than or equal to
$2,000,000.
Termination
The Merger Agreement may be terminated
as follows:
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(i) |
In the event that the Closing of the transactions contemplated hereunder has not occurred by the 12-month anniversary of the date of the Merger Agreement (as may be extended as provided in the immediately following proviso, the “Outside Closing Date”) (provided that, if the SEC has not declared the Proxy Statement/Form S-4 effective on or prior to the four (4)-month anniversary of the date of the Merger Agreement, the Outside Closing Date shall be automatically extended by one (1) month), then SPK and Varian shall each have the right, in its sole discretion, to terminate the Merger Agreement; provided that the material breach of any representation, warranty, covenant or obligation under the Merger Agreement by the party (i.e., SPK or the Merger Sub, on one hand, or Varian, on the other hand) seeking to terminate the Merger Agreement pursuant to this Section 10.1(a) was not the cause of, or did not result in, the failure of the Closing to occur on or before the Outside Closing Date. Such right may be exercised by SPK or Varian, as the case may be, giving written notice to the other at any time after the Outside Closing Date but not after the Closing has occurred; |
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(ii) |
In the event an Authority shall have issued an order or enacted a law, having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger, which order or law is final and non-appealable, SPK or Varian shall each have the right, in its sole discretion, to terminate the Merger Agreement without liability to the other party; |
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(iii) |
SPK and Varian shall each have the right, in its sole discretion, to terminate the Merger Agreement if, at the Parent Stockholder Meeting (as defined in the Merger Agreement) (including any postponements or adjournments thereof), the Parent Proposals (as defined in the Merger Agreement) shall fail to be approved by the affirmative vote of SPK stockholders required under SPK’s organizational documents and applicable law; |
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(iv) |
by mutual written consent of SPK and Varian duly authorized by each of their respective boards of directors; |
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(v) |
by either SPK or Varian, if the other party has breached any of its covenants or representations and warranties such that it would be impossible or would reasonably be expected to be impossible to satisfy any of its closing conditions and such breach is incapable of being cured or is not cured by the earlier of (A) the Outside Closing Date and (B) five days following receipt by the breaching party of a written notice of the breach; provided that the terminating party is not then in breach of the Merger Agreement so as to prevent the satisfaction of its closing conditions; and |
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(vi) |
by SPK if Varian has not received approval from Varian’s stockholders of the Merger and related transactions by the Company Stockholder Written Consent Deadline (as defined in the Merger Agreement), provided that SPK is not then in breach of the Merger Agreement so as to prevent the satisfaction of its closing conditions, further provided that upon Varian receiving such stockholder approval, SPK will no longer have any right to so terminate the Merger Agreement. |
Effect of Termination and Termination Fees
If the Merger Agreement is terminated
in accordance with its terms, the Merger Agreement will become void and of no further force and effect without liability of any party,
except for liability arising out of any party’s breach of the Merger Agreement, intentional fraud or willful misconduct. In the
event the merger agreement is terminated due to breach by either party, a termination fee shall be payable from the breaching party to
the non-breaching party of $2,200,000 within two days of such termination.
The foregoing description of the
Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as Exhibit
2.1 to the Current Report on Form 8-K filed on February,17 2022.
Certain Related Agreements
Parent Stockholder Support Agreement
In connection with the execution
of the Merger Agreement, SPK, Varian and certain stockholders of SPK entered into those certain Parent Stockholder Support Agreements
dated February 11, 2022 (the “Parent Stockholder Support Agreements”) pursuant to which those certain SPK stockholders
who are parties thereto agreed to vote all shares of SPK Common Stock beneficially owned by them, including any additional shares of SPK
they acquire ownership of or the power to vote, in favor of the Merger and related transactions.
The foregoing description of the
Parent Stockholder Support Agreement is qualified in its entirety by reference to the full text of the Parent Stockholder Support Agreement,
a copy of which is filed as Exhibit 10.1 to the Current Report on Form 8-K, filed on February 17, 2022.
Company Stockholder Support Agreement
In connection with the execution
of the Merger Agreement, SPK, Varian and certain stockholders of Varian entered into those certain Company Stockholder Support Agreements
dated February 11, 2022 (the “Company Stockholder Support Agreements”), pursuant to which those certain Varian stockholders
parties thereto agreed to vote all Varian Common Stock beneficially owned by them, including any additional shares of Varian they acquire
ownership of or the power to vote, in favor of the Merger and related transactions.
The foregoing description of the
Company Stockholder Support Agreement is qualified in its entirety by reference to the full text of the Company Stockholder Support Agreement,
a copy of which is filed as Exhibit 10.2 to the Current Report on Form 8-K, filed on February 17, 2022.
Company Lock-Up Agreement
In connection with the execution
of the Merger Agreement, SPK and certain Varian stockholders entered into a lock-up agreement dated February 11, 2022 (the “Company
Lock-Up Agreement”), pursuant to which those certain Varian stockholders parties thereto agreed, subject to certain customary
exceptions, not to (i) sell, offer to sell, contract or agree to sell, pledge or otherwise dispose of, directly or indirectly, any shares
of SPK Common Stock held by them (such shares, together with any securities convertible into or exchangeable for or representing the rights
to receive shares of Common Stock if any, acquired during the Company Lock-Up Period (as defined below), the “Company Lock-Up
Shares”), (ii) enter into a transaction that would have the same effect, (iii) enter into any swap, hedge or other arrangement
that transfers to another, in whole or in part, any of the economic consequences of ownership of the Company Lock-Up Shares or otherwise,
or engage in any short sales or other arrangement with respect to the Company Lock-Up Shares or (iv) publicly announce any intention to
effect any transaction specified in clause (i) or (ii) until the date that is 6 months after the Closing Date (the period from the date
of the Company Lock-Up Agreement until such date, the “Company Lock-Up Period”).
The foregoing description of the
Company Lock-Up Agreement is qualified in its entirety by reference to the full text of the Company Lock-Up Agreement, a copy of which
is filed as Exhibit 10.3 to the Current Report on Form 8-K, filed on February 17, 2022.
Voting Agreement
In connection with the execution
of the Merger Agreement, SPK, the Sponsor, Varian and certain holders of SPK Common Stock entered into a voting agreement (the “Voting
Agreement”), pursuant to which such holders of SPK Common Stock, including any additional shares of SPK Common Stock they acquire
after the signing of the Merger Agreement, vote or agree to vote in favor of certain matters relating to the nomination and election of
the Board of Directors of SPK and Varian after closing of the Merger Agreement (as described in the Voting Agreement).
The foregoing description of the Voting Agreement
is qualified in its entirety by reference to the full text of the form of Voting Agreement, a copy of which is included as Exhibit C to
the Merger Agreement, filed as Exhibit 2.1 to the Current Report on Form 8-K, filed on February 17, 2022.
Agreements to be Executed at Closing
Employment Agreements
Upon closing of the Merger, SPK,
on the one hand, and each of Jeffrey Davis (the CEO of Varian) and Jonathan Lewis (the CMO of Varian), on the other hand, will enter into
employment agreements pursuant to which each such person extends the terms of their existing employment agreements and includes other
terms regarding such employees’ employment by SPK.
The foregoing description of the
Employment Agreements is qualified in its entirety by reference to the full texts of each of the form Employment Agreements, copies of
which are included as Exhibits E and F to the Merger Agreement, filed as Exhibit 2.1 to the Current Report on Form 8-K, filed on February
17, 2022.
Restrictive Covenant Agreements
Upon closing of the Merger, SPK,
on the one hand, and each of Jeffrey Davis (the CEO of Varian) and Jonathan Lewis (the CMO of Varian), on the other hand, will enter into
Restrictive Covenant Agreements pursuant to which each such person agrees to certain confidentiality, non-disparagement and other restrictive
covenants with respect to SPK.
The foregoing description of the Restrictive Covenant
Agreements is qualified in its entirety by reference to the full text of the form Restrictive Covenant Agreement, a copy of which is included
as Exhibit G to the Merger Agreement, filed as Exhibit 2.1 to the Current Report on Form 8-K, filed on February 17, 2022.
Our Management Team
Our management team is led by our
Chief Executive Officer, Sophie Ye Tao, our Chief Financial Officer, Philip Chun-Hun Kwan, and three independent directors, all of whom
have experience in the U.S. capital markets and understands what investors look for in a public company. We believe that our team has
a strong and complementary set of skills which allowed us to identify a target, execute a business combination, and will enable us to
maximize value to stockholders.
Sophie Ye Tao, our
President and Chief Executive Officer, has been an active investor in China and the US since 2007. Throughout her investment career, she
has invested in companies including Evernote, 360 DigiTech, Inc. (NASDAQ: QFIN), a leading fintech platform in China, Tricorn Technology,
a leading China-based AI company focused on natural language processing which was later acquired by Tencent in 2020, Shanghai Canxing
Culture & Broadcast Company, the largest unscripted content producer in China and Ningmeng Pictures, a leading Chinese studio
focused on television and film production. From 2016 to 2021, Ms. Tao was a partner at Hanfor Capital Management, a China-based private
equity firm and focused on investments in the TMT and consumer industries. She was a co-founder and partner at Ray Shi Capital Group
from 2010 to 2015, a US registered investment adviser focusing on equity investments in Chinese companies listed in Hong Kong and the
U.S. Ms. Tao was the senior investment manager for Greater China at Vision Capital Advisors in New York City from 2007 to 2010. At Vision,
Ms. Tao helped launch and co-managed the Vision Opportunity China Fund, focusing on sourcing, structuring and investing in small- and
medium-sized enterprises in China through reverse mergers, private placements and private equity. Previously, Ms. Tao worked at Banc of
America Securities LLC in New York City in its equity capital markets group between 2005 and 2007, where she originated and executed convertible
bond and other equity–linked issuances. She also worked at NERA Economic Consulting in its Chicago and New York City offices between
2003 and 2005 where she helped provide economics and econometrics analysis and recommendations to multi-national corporations involved
in antitrust and securities litigations. Before that, Ms. Tao worked as a policy consultant at the Organization for Economic Cooperation
and Development (OECD) in Paris from 2001 to 2002, where she advised countries on their economic and regulatory reform policies. Ms. Tao
graduated from the Woodrow Wilson School of Public and International Affairs at Princeton University in 2003 with a Master of Public Affairs
(MPA) degree concentrating in economics and advanced quantitative analysis. She also graduated from the University of International Business
& Economics in Beijing with a Bachelor of Laws degree in 2000. Ms. Tao is married to Mr. Kwan.
Philip Chun-Hun Kwan, our
Chief Financial Officer and a member of our board of directors since our inception, has spent his career in the TMT industry, as an investor,
advisor and operator since 2004. Mr. Kwan is currently the CEO of Palestra Sports, a sports-focused start-up based in China which he co-founded
in June 2017. From 2010 to 2017, Mr. Kwan was a senior vice president at The Raine Group (“Raine”), where he was a founding
member of the firm’s China practice based in Beijing and subsequently Shanghai. Raine is one of the world’s leading TMT-focused
merchant banks, with total assets under management of over $3.5 billion. At Raine, Mr. Kwan provided investment banking advisory services
to leading Chinese and international media and entertainment companies (primarily mergers and acquisitions and large-scale capital raise
transactions), and also worked on the fund side where he helped source and execute direct principal investments in China. Representative
transactions during his time at Raine include the $4.2 billion sale of the Ultimate Fighting Championship to WME IMG, the sale of 13%
of Manchester City Football Group to CMC Capital and CITIC for $400 million, Perfect World’s $250 million investment into Universal
Studios’ film slate, the creation of Flagship Entertainment, the Chinese film studio co-financed by Warner Bros and CMC Capital,
the sale of PPTV to Suning for $420 million, and the spin-off of and $80 million capital raise for IMAX China, among others. In the Singapore
region, Mr. Kwan also represented Wego in its Series A capital raise. Prior to joining Raine, Mr. Kwan worked at Southfield Capital,
a middle market private equity firm backed by Canyon Capital Advisors focused on North American buyouts. During his time at Southfield,
he executed a number of leveraged buyout transactions across a range of different industries. Mr. Kwan started his professional career
in the mergers and acquisitions advisory group at Evercore Partners in New York. He graduated from The Wharton School at the University
of Pennsylvania with a Bachelor of Science in Economics in 2004. Mr. Kwan is married to Ms. Tao.
Justin Chang has served
as our independent director since April, 2021. Mr. Chang has 15 years of technology, product development, and entrepreneurial experience.
Currently, Mr. Chang is the vice president of product at ClassPass, a marketplace aggregator of local fitness, wellness, and beauty merchants.
ClassPass provides customers with a flexible membership that gives them access toc 40,000 boutique studios, gyms, and wellness facilities
across 28 countries. He joined ClassPass in 2014 after its seed financing, helping scale the company from 1 city to 2,500 cities by leading
the engineering, product management, product design, user research, and product operations teams. In 2019, Mr. Chang helped launch ClassPass
China, a localized version of the ClassPass experience. Justin also sits on the ClassPass executive team where he oversees global product
strategy and product development. Outside ClassPass, Mr. Chang regularly advises early stage founders and executives on strategy, growth,
and product. From 2011-2014, Justin worked at AHAlife, a luxury e-commerce marketplace, where he led the product development of its merchant
portal and augmented reality shopping experiences. Prior to AHAlife, Mr. Chang co-founded MatchBright in 2006, a career discovery platform
that leveraged big data to help job seekers discover best fit careers, and operated its business until 2010. Mr. Chang began his career
as a consultant for Bain & Company where he advised Fortune 500 companies in consumer products, retail, TMT, banking, and healthcare
industries from 2004 to 2006. Justin graduated magna cum laude from The Wharton School at the University of Pennsylvania where he holds
degrees in Finance and Management in 2004.
Bryant Chou has been
a member of our board of directors since April, 2021. Mr. Bryant Chou has experience in corporate finance and the TMT industry across
the US, Asia and Europe. Since 2012, Bryant has been the CEO of Yi Shi Yi Se (Beijing) Culture Communication Co., Ltd. and its predecessor
company, VICE China, where Bryant oversees the launch and expansion of the local entity, leads commercial activities and serves as the
main liaison for key business partners domestically and across the APAC region. Prior to this, Mr. Chou worked at DMG Entertainment, a
Chinese advertising and entertainment agency from 2011 to 2012. From 2007 to 2008, he was a consultant at JL McGregor, a boutique equity
research firm, from 2007 to 2008. Bryant began his career in investment banking in New York at Miller Buckfire from 2003 to 2006, a leading
boutique restructuring firm. Bryant graduated from The Wharton School at the University of Pennsylvania in December 2002, receiving a
Bachelor of Science in Economics with concentrations in Finance and Management.
Gregory Chang has been
a member of our board of directors since April, 2021, and brings his more than 15 years of experience in technology, gaming, business
development, marketing, and entrepreneurship. Since 2020, Mr. Chang has been the general manager of RealTime Technology, a SAAS company
servicing the telecom, retail, and gaming industries. He is also an investor in multiple startups and a mentor at SOSV, one of the most
active VCs in the Asia region. From 2015 until 2019, Mr. Chang was the director of games and mobile, Greater China, at The Walt Disney
Company where he was responsible for popular titles such as Marvel Future Fight, Star Wars Commander, and Disney TsumTsum. He also developed
several multi-million dollar licensing deals with some of the top technology companies in China. From 2013 to 2015, he was the vice president
of Asia at Glu Mobile where he initiated Glu’s $100M+ strategic partnership and investment with Tencent and helped launch several
popular games including Deer Hunter, Eternity Warriors, and Kim Kardashian: Hollywood in the region. Prior to that, Mr. Chang was the
director of business at NCSoft Taiwan from 2011 to 2012 and vice president at The Ivy Group (a Temasek portfolio company) from 2009 to
2011. Mr. Chang graduated from the University of California, Berkeley with a Bachelor of Arts in 2001 and also received an MBA from Columbia
Business School in 2009.
Our Business Strategy and Acquisition Criteria
We intend to focus our efforts
on potential acquisition targets that exhibit compelling long term growth potential and highly defensible market positions. We believe
that our management team’s extensive relationships with corporate executives, investors, and entrepreneurs will provide us with
a strong pipeline of potential acquisition opportunities in our target sectors.
We have identified the following
criteria to evaluate prospective target businesses. If our business combination with Varian is not consummated, and we look to alternative
target businesses, we may decide to enter into our initial business combination with a target business that does not meet the criteria
described below, it is our intention to acquire companies that we believe:
|
● |
Strong
management team. The strength of the management team will be an important component in our review process. We will seek to partner
with a management team that is operationally strong and has demonstrated the ability to scale, but is also well-incentivized and
aligned in our future vision for creating long term shareholder value. |
|
● |
Strong
and defensible market position. We intend to favor targets that have a strong competitive advantage or are advanced in their
penetration of new and emerging markets. We will target companies that have strong intellectual property, technology, or brand equity
within their respective sectors and that can be further monetized on a global basis. |
|
● |
At
a growth inflection point. We intend to seek targets that may benefit from capital infusions that will be used to fund higher
growth through expansion into new markets and product offerings. |
|
● |
Benefit
from being a public company. We intend to seek targets that may lack experience with the capital markets but that possess
the aspiration to take advantage of improved access to capital that comes from a listing in the U.S. This improved access to capital
could allow the targets to accelerate growth, pursue new projects, retain and hire employees, and expand into new geographies
or businesses. Ultimately, this combination of enhanced liquidity and access to capital markets will enable our target to accelerate
its growth and increase its resulting value. |
While we intend to use these criteria
in evaluating the attractiveness of potential business combination opportunities, we may ultimately decide to enter into an initial business
combination with a target business that does not meet these criteria. In the event that we decide to enter into our initial business combination
with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the
above criteria and guidelines in our stockholder communications related to our initial business combination, which, will be in the form
of proxy solicitation materials that we would file with the SEC.
In evaluating Varian, we conducted
a thorough due diligence review that encompassed, among other things, meetings with incumbent management and employees, document reviews,
interviews of customers and suppliers, inspection of facilities, as well as reviewing financial and other information that was made available
to us. We also utilized our operational and capital allocation experience. Our acquisition criteria, due diligence processes and value
creation methods are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination
may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management
may deem relevant.
Effecting a Business Combination
General
We are not presently engaged in,
and we will not engage in, any operations for an indefinite period of time. Our sole focus since the IPO has been to identify a target
business for our initial business combination. We intend to utilize cash derived from the proceeds of the IPO and the Private Placement,
our share capital, debt or a combination of these in effecting an initial business combination. A business combination may involve the
acquisition of, or merger with, a company which does not need substantial additional capital but which desires to establish a public trading
market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include
time delays, significant expense, loss of voting control and compliance with various U.S. Federal and state securities laws. In the alternative,
we may seek to consummate a business combination with a company that may be in its early stages of development or growth. While we may
seek to effect simultaneous business combinations with more than one target business, we will probably have the ability, as a result of
our limited resources, to effect only a single business combination.
Sources of Target Businesses
At the time of the IPO, we anticipated
that target business candidates would be brought to our attention from various unaffiliated sources, including investment bankers, venture
capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. Also,
by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target
businesses they think we may be interested in on an unsolicited basis, since many of these sources will have read our prospectus and know
what types of businesses we are targeting. On October 21, 2021, we executed an engagement letter with LifeSci Capital (“LifeSci”)
for LifeSci to serve as our financial advisor and assist us with sourcing potential target companies in connection with our business combination.
LifeSci is a boutique investment bank focused solely on emerging life science and healthcare companies.
Our officers and directors, as
well as their respective affiliates, also brought to our attention target business candidates that they became aware of through their
business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions.
In no event, however, will any of our existing insiders, special advisors or any entity with which they are affiliated, be paid any finder’s
fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the consummation of a business
combination (regardless of the type of transaction). If we decide to enter into a business combination with a target business that is
affiliated with our insiders, we will do so only if we have obtained an opinion from an independent investment banking firm that the business
combination is fair to our unaffiliated stockholders from a financial point of view.
Selection of a Target Business and Structuring
of a Business Combination
Subject to the limitations that
a target business have a fair market value of at least 80% of the balance in the trust account (excluding any deferred underwriting discounts
and commissions and taxes payable on the income earned on the trust account) at the time of the execution of a definitive agreement for
our initial business combination, as described below in more detail, we will have virtually unrestricted flexibility in identifying and
selecting a prospective acquisition candidate. We did not establish any other specific attributes or criteria (financial or otherwise)
for prospective target businesses. To the extent we effect a business combination with a company or an entity in its early stage of development
or growth, including entities without established records of sales or earnings, we may be affected by numerous risks inherent in the business
and operations of early stage or potential emerging growth companies, which we will disclose to investors in a proxy statement or registration
statement to be filed in connection with the business combination. Although management endeavors to evaluate the risks inherent in a particular
target business, there is no assurance that it will properly ascertain or assess all significant risk factors.
Fair Market Value of Target Business or Businesses
Pursuant to the rules of the Nasdaq
Stock Market, our initial business combination must occur with one or more target businesses having an aggregate fair market value of
at least 80% of the value of the trust account (excluding any deferred underwriter’s fees and taxes payable on the income earned
on the trust account), which we refer to as the 80% test, at the time of the agreement to enter into the initial business combination.
Therefore, the fair market value of the target business will be calculated prior to any conversions of our shares in connection with a
business combination and therefore will be a minimum of $40,729,568 (based on the partial exercise of the underwriter’s over-allotment
option) in order to satisfy the 80% test. While the fair market value of the target business must satisfy the 80% test, the consideration
we pay the owners of the target business may be a combination of cash (whether cash from the trust account or cash from a debt or equity
financing transaction that closes concurrently with the business combination) or our equity securities. The exact nature and amount of
consideration would be determined based on negotiations with the target business, although we will attempt to primarily use our equity
as transaction consideration. During our negotiations with Varian, we agreed that the consideration would be in the form of 4,500,000
shares of common stock based on $10.00 per share for an aggregate consideration of $45,000,000. If our board had not been able to independently
determine the fair market value of Varian, we would have obtained an opinion from an independent investment banking firm with respect
to the satisfaction of such criteria. We would also have obtained a fairness opinion from an independent investment banking firm if we
were to have consummated a business combination with an entity affiliated with any of our officers, directors or insiders. If we are no
longer listed on Nasdaq, we will not be required to satisfy the 80% test.
We have structured the business
combination with Varian so that the post-business combination company in which our public stockholders own shares will own or acquire
100% of the equity interests in Varian. If we are unable to consummate the business combination with Varian and have to identify another
target business or businesses, we may, however, structure our initial business combination such that the post-business combination company
owns less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team
or stockholders or for other reasons, but we will only complete such business combination if the post-business combination company owns
50% or more of the outstanding voting securities of the target or otherwise owns 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-business combination company owns 50% or more of the voting securities of the target, our stockholders prior to
the business combination may collectively own a minority interest in the post-business combination 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 stockholders immediately prior
to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination.
If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-business combination
company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% test.
Competition
In identifying, evaluating and
selecting a target business, we may encounter intense competition from other entities having a business objective similar to ours. Many
of these entities are well established and have extensive experience identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources will be
relatively limited when contrasted with those of many of these competitors. While we believe there may be numerous potential target businesses
that we could complete a business combination with utilizing the net proceeds of this offering, our ability to compete in completing a
business combination with certain sizable target businesses may be limited by our available financial resources.
The following also may not be viewed favorably by
certain target businesses:
|
● | our
obligation
to seek
stockholder
approval
of our initial
business
combination
or engage
in a tender
offer may
delay the
completion
of a transaction; |
|
| |
|
● | our
obligation to convert
shares of common stock
held by our public stockholders
may reduce the resources
available to us for our
initial business combination; |
|
| |
|
● | our
obligation to pay the
deferred underwriting
commission to the underwriters
upon consummation of
our initial business
combination; |
|
| |
|
● | our
obligation to either
repay working capital
loans that may be made
to us by our insiders
or their affiliates; |
|
| |
|
● | our
obligation to register
the resale of the insider
shares, as well as the
private units (and underlying
securities) and any shares
issued to our insiders
or their affiliates upon
conversion of working
capital loans; and |
|
| |
|
● | the
impact on the target
business’ assets
as a result of unknown
liabilities under the
securities laws or otherwise
depending on developments
involving us prior to
the consummation of a
business combination. |
Any of these factors may place
us at a competitive disadvantage in successfully negotiating our initial business combination. Our management believes, however, that
our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over
privately held entities having a similar business objective as ours in connection with an initial business combination with a target business
with significant growth potential on favorable terms.
Management Operating and Investment Experience
We believe that our executive officers
possess the experience, skills and contacts necessary to source, evaluate, and execute an attractive business combination. See the section
titled “Management” for complete information on the experience of our officers and directors. Notwithstanding the foregoing,
our officers and directors are not required to commit their full time to our affairs and will allocate their time to other businesses.
We presently expect each of our employees to devote such amount of time as they reasonably believe is necessary to our business (which
could range from only a few hours a week while we are trying to locate a potential target business to a majority of their time as we move
into serious negotiations with a target business for a business combination). The past successes of our executive officers and directors
do not guarantee that we will successfully consummate an initial business combination.
As more fully discussed in “Conflicts
of Interest,” if any of our officers or directors becomes aware of a business combination opportunity that falls within the line
of business of any entity to which he has pre-existing fiduciary or contractual obligations, he may be required to present such business
combination opportunity to such entity, subject to his or her fiduciary duties under Delaware law, prior to presenting such business combination
opportunity to us. Most of our officers and directors currently have certain pre-existing fiduciary duties or contractual obligations.
Ability to Extend Time to Complete Business Combination
We have until nine months from
the closing of the IPO (or 12 months from the closing of the if we IPO, if have filed a proxy statement, registration statement or similar
filing for an initial business combination within such nine-month period, but not completed the initial business combination within such
nine-month period) to consummate our initial business combination. In addition, if we anticipate that we may not be able to consummate
our initial business combination (i) within such nine-month period, in the situation where we have not filed a proxy statement, registration
statement or similar filing for an initial business combination within such nine-month period, or (ii) within 12 months, in the situation
where we have filed within such nine-month period, our insiders or their affiliates may, but are not obligated to, extend the period of
time to consummate a business combination by an additional three months for a total of up to 15 months from the consummation of the IPO
to complete a business combination, provided that, pursuant to the terms of our amended and restated certificate of incorporation and
the trust agreement entered into between us and Continental Stock Transfer & Trust Company, our insiders or their affiliates or designees,
upon five days’ advance notice prior to the applicable deadline, deposit into the trust account $509,120, based on the partial exercise
of the underwriters’ over-allotment option, ($0.10 per share in either case, or an aggregate of $1,018,239 based on the partial
exercise of the underwriters’ over-allotment option), on or prior to the date of the applicable deadline. In the event that they
elect to extend the time to complete a business combination and deposit the applicable amount of money into trust, the insiders would
receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event
that we are unable to close a business combination unless there are funds available outside the trust account to do so. Such notes would
either be paid upon consummation of our initial business combination, or, at the relevant insider’s discretion, converted upon consummation
of our business combination into additional Private Units at a price of $10.00 per unit. In the event that we receive notice from our
insiders five days prior to the applicable deadline of their intent to effect an extension, we intend to issue a press release announcing
such intention at least three days prior to the applicable deadline. In addition, we intend to issue a press release the day after the
applicable deadline announcing whether or not the funds had been timely deposited. Our insiders and their affiliates or designees are
not obligated to fund the trust account to extend the time for us to complete our initial business combination. To the extent that some,
but not all, of our insiders, decide to extend the period of time to consummate our initial business combination, such insiders (or their
affiliates or designees) may deposit the entire amount required. If we are unable to consummate our initial business combination within
such time period, we will, as promptly as possible but not more than ten business days thereafter, redeem 100% of our outstanding public
shares for a pro rata portion of the funds held in the trust account, including a pro rata portion of any interest earned on the funds
held in the trust account and not previously released to us to pay our taxes, and then seek to dissolve and liquidate. However, we may
not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders.
In the event of our dissolution and liquidation, the Private Units will expire and will be worthless.
Emerging Growth Company Status and Other Information
We are an “emerging growth
company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited
to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market
for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the
JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth
company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth
company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b)
in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer,
which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the prior December 31, and
(2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References
herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Employees
We have two executive officers.
These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they
deem necessary to our affairs. The amount of time they will devote in any time period will vary based on whether a target business has
been selected for the business combination and the stage of the business combination process the company is in. Accordingly, once a suitable
target business to consummate our initial business combination with has been located, management will spend more time investigating such
target business and negotiating and processing the business combination (and consequently spend more time on our affairs) than had been
spent prior to locating a suitable target business. We presently expect our executive officers to devote an average of approximately 10
hours per week to our business. We do not intend to have any full time employees prior to the consummation of our initial business combination.