Item
1. Business
General
We
are an early stage blank check company incorporated in April 2021 as a Delaware corporation whose business purpose is to effect an initial
business combination. Since our initial public offering, we have focused our search for an initial business combination with businesses
that may provide significant opportunities for attractive investor returns. Our efforts to identify a prospective target business are
not limited to a particular industry or geographic region, although we expect to focus our search
for a target business addressing a large market opportunity with a company that is driving its growth in the medicinal cannabis or cannabinoid
industry, which are compliant with all applicable laws and regulations within the jurisdictions in which they are located or operate.
In particular, we will not invest in or consummate a business combination with a target business that we determine has been operating,
or whose plan is to operate, in violation of U.S. federal laws, including the U.S. Controlled Substances Act.
Initial
Public Offering
On
November 30, 2021, we consummated our initial public offering of 20,000,000 units. Each unit consists of one share of Class A common
stock of the Company, par value $0.000001 per share and one redeemable warrant of the Company, with each warrant entitling the holder
thereof to purchase one share of Class A common stock for $11.50 per whole share. The units were sold at a price of $10.00 per unit,
generating gross proceeds to the Company of $230,000,000, which included an additional 3,000,000 Option Units in connection with the
exercise of the underwriters’ over-allotment option.
Simultaneously
with the closing of the initial public offering, we completed the private sale of an aggregate of 802,500
units to our sponsor at a purchase price of $10.00 per placement unit, generating gross proceeds of $8,025,000.
A
total of $233,450,000, comprised of the proceeds from the IPO after offering expenses and the proceeds of the sale of the placement units,
was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee.
It
is the job of our sponsor and management team to complete our initial business combination. Our management team is led by J. Gerald (Gerry)
Combs, our Chief Executive Officer, and Sharwin Sinnan, our Chief Financial Officer. Mr. Combs
brings more than 30 years of leadership experience across numerous engagements with a focus on investment management, manufacturing,
and business growth working with a range of businesses from start-ups to established enterprises. His extensive experience includes debt
restructuring, corporate reorganizations, private placements and public offerings, most recently focused on quantitative asset management
and incubation. In addition, Mr. Combs has served as the Chief Executive Officer of both public and private companies and has assisted
clients in all phases of business development. His experience spans a wide range of companies from manufacturing and distribution to
software and high-tech. We must complete our initial business combination by May 2, 2023, subject to seven (7) one-month extensions to
December 2, 2023 (the “Termination Date”). If our initial business combination is not consummated by the Termination Date,
then our existence will terminate, and we will distribute all amounts in the trust account.
Extension
Amendment
As
previously announced on Form 8-K filed with the SEC on December 1, 2022, on November 28, 2022, at 10:00 a.m. ET, we held a special
meeting of our shareholders pursuant to due notice (the “Special Meeting”). Our shareholders entitled to vote at the
Special Meeting cast their votes and approved an amendment to the Trust Agreement (the “Extension Amendment Proposal”),
pursuant to which the Trust Agreement was amended to extend the date on which the trustee must liquidate the Trust Account if we
have not completed our initial business combination, from December 2, 2022 to December 2, 2023 provided we deposit $0.045 per share
of Canna-Global public Class A Common Stock per month extended.
Our
shareholders also approved the First Amendment to our second amended and restated certificate of incorporation at the Special
Meeting, giving us the right to extend the date by which we must (i) consummate an initial business combination, (ii) cease our
operations if we fail to complete such initial business combination, and (iii) redeem or repurchase 100% of our public shares of
Class A Common Stock included as part of the units sold in our IPO from December 2, 2022 by up to twelve (12) one-month
extensions to December 2, 2023.
In
connection with the voting on the Extension Amendment Proposal at the Special Meeting, holders of 20,630,630 shares of our Class A
common stock exercised their right to redeem those shares for cash at an approximate price of $10.26 per share, for an aggregate of
approximately $211,651,029. As of December 31, 2022, the Trust Account had a balance of $24,599,703.
In
connection with the exercise of the first monthly extension of the Termination Date, we caused
$0.045 per outstanding share of our Class A common stock, giving effect to the redemptions disclosed above, or approximately $106,622
for the remaining 2,369,370 Class A common stock to be deposited in the Trust Account on November 30, 2022 in advance of the December
2, 2022 due date. In connection with the second, third, fourth and fifth monthly extensions of the Termination Date, we caused
$0.045 per outstanding share of our Class A Common Stock or approximately $106,622 for the remaining 2,369,370 Class A common stock
to be paid to the Trust Account on each of January 2, January 27, February 27, and March 24, 2023, respectively, in advance of each
monthly due date.
Business
Strategy
While
we may pursue a business combination target in any business, industry or geographic region, we intend to focus our search on businesses
in the cannabis industry that are compliant with all applicable laws and regulations within the jurisdictions in which they are located
or operate and, in particular, we will not invest in, or consummate a business combination with, a target business that we determine
has been operating, or whose business plan is to operate, in violation of U.S. federal laws, including the U.S. Controlled Substances
Act. However, we expressly disclaim any intent to and will not consummate a business combination with a target business located in China
or Hong Kong.
Our
business strategy is to identify and complete one or more business combinations with a target operating in the cannabis industry that
is compliant with all applicable laws and regulations within the jurisdictions in which it is located or operates. We will seek potential
targets which we believe can materially grow revenue and earnings both organically and inorganically through the efforts of our management
team. These may include targets that can benefit from access to capital in order to: (i) increase spending on strategic initiatives that
are expected to generate favorable returns and which can accelerate revenue and earnings growth; (ii) invest in infrastructure or technology;
or (iii) fundamentally restructure their business operations.
We
plan to leverage our management team’s network of potential proprietary and public transaction sources where we believe a combination
of our relationships, knowledge and experience in the technology sector could effect a positive transformation or augmentation of existing
businesses to improve their overall value. Over the course of their careers, the members of our management team have developed a comprehensive
network of contacts and corporate relationships that we believe will serve as a useful source of acquisition opportunities. We plan to
leverage relationships with management teams of public and private companies, investment professionals at private equity firms and other
financial sponsors, owners of private businesses, investment bankers, restructuring advisers, consultants, attorneys and accountants,
which we believe should provide us with a number of business combination opportunities.
There
is no geographic limitation to the location of targets, as these types of opportunities are not necessarily bound by geography, however,
we expressly disclaim any intent to and will not consummate a business combination with a target business located in China or Hong Kong.
While evaluating any business combination our team believes that the stage of the market should be considered whether it is a new, transitioning,
or a mature market.
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Companies
in new and transitioning markets will have a first mover advantage, with significant revenue potential and profit margins. As inexperienced
competition enters these markets, supply increases with the resulting sales erosion. If the cyclical nature of the new market strategy
is understood and proper practices are applied, our team believes that there is opportunity to capture significant revenues while
building a sustainable and established business. |
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Companies
in mature markets experience less volatility and more market/price stability. This stability allows for a traditional approach in
managing the business, market growth, operations and forecasting sales. |
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Entering
either a new market or a mature market both have a positive and negative effect, mature markets typically offer better stability
but less growth potential. |
Our
management team has been communicating with their networks of relationships to articulate the parameters for our search for a target
business and a potential business combination, and has begun the process of pursuing and reviewing potential opportunities. After the
initial business combination, our management team intends to apply a rigorous approach to enhancing shareholder value, including examining
opportunities for revenue enhancement, cost savings, operating efficiencies and strategic acquisitions and divestitures and developing
and implementing corporate strategies and initiatives to improve profitability and long-term value. We also plan to evaluate additional
opportunities in the cannabis industry that offer broad portfolio synergies and conduct appropriate risk-weighted analyses to capture
opportunities for growth and value at every level of the cannabis industry supply chain.
The
Industry Opportunity
Given
the rapid and continued growth of the legal cannabis market, management believes that the ability to move quickly to capitalize on new
opportunities will be critical to success in creating stakeholder value. Potential areas of interest in the cannabis industry include
but are not limited to domestic and international businesses that are involved in the production, distribution and sale of cannabis as
well as businesses that legally cultivate, process and/or aid in the retail and direct-to-consumer distribution of cannabis.
The
global legal marijuana market size was valued at $9.1 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR)
of 26.7% from 2021 to 2028 according to a May 2021 study by Grand View Research, called “Legal Marijuana Market Size,”
Share & Trends Analysis Report By Marijuana Type (Medical, Adult Use), By Product Type (Flower, Oil), By Medical Application (Chronic
Pain, Mental Disorders), And Segment Forecasts, 2021 – 2028.
One
of the major factors fueling the market growth is the expanding demand for legal cannabis owing to the growing number of legal cannabis
countries according to the study. Owing to the recent legalizations in different countries, the use of medical marijuana for various
aliments is gaining momentum worldwide. Patients suffering from chronic illnesses, such as Parkinson’s, cancer, Alzheimer’s,
and many neurological disorders, are administered medical marijuana, as are children for the treatment of disorders like epilepsy. Unlike
other emerging industries, which have been driven by massive technological advances, cannabis has supported therapeutic treatments for
thousands of years across a wide variety of cultures. The evolution of its public perception is being progressed by consumers seeking
cannabis-based treatments for a variety of health and wellness needs.
The
adult-use segment dominated the market with a revenue share of 54.6% in 2020 and is expected to witness significant growth from 2021
to 2028 according to the May 2021, Grand View Research Report. The legalization of cannabis for adult use is one of the major factors
driving the demand for legal marijuana, according to Grand View Research. In particular, the cannabis industry has seen a dynamic increase
in usage among patients opting to use marijuana in Canada and the U.S., where cannabis for adult use has been legalized, which can be
due to its low prices and fast availability according to an April 22, 2021, article in Rolling Stone magazine titled “The United
States of Weed.” North America dominated the legal marijuana market with a revenue share of 79.6% in 2020 according to the
Grand View Research Report; this change in pattern is very evident in nations where reimbursement for medical marijuana is not available.
The
medical segment is expected to grow at a steady rate from 2021 to 2028 according to a May 2021 study that attributes the growth to the
increased awareness of the medical benefits of cannabis, surging demand for plant-based treatments in pain management, and increasing
legalization of cannabis for medical purposes are some of the key factors driving the segment. We believe that as the number of countries
that are legalizing medical marijuana increases, the market will continue to expand thus achieving lucrative growth through 2028.
According
to the Grand View Research Report, key factors that are driving the legal cannabis market growth include the high prevalence of cancer,
expanding demand for legal marijuana due to the growing number of legal cannabis countries, and changes in government policies. A number
of studies of smoked marijuana found that it can be helpful in treating nausea and vomiting from cancer chemotherapy and other studies
have found that inhaled (smoked or vaporized) marijuana can be helpful treatment of neuropathic pain (pain caused by damaged nerves)
according to the American Cancer Society. With an increasing number of people becoming aware of the benefits of cannabis consumption,
the market is expected to grow at a CAGR of 14.6% during 2021 to 2030 according to a July 7, 2021, Market Watch article, “Legal
Marijuana Market Will Reach US$ 85.0 Billion by 2030.”
The
chronic pain segment dominated the market in 2020 with a share of 44.8%. The different types of chronic pain include neurogenic pain,
arthritis pain, cancer pain, low back pain, headache, neck pain, and face pain among others according to an October 2010 National Institutes
of Health (NIH) study called “Cannabinoid Delivery Systems for Pain and Inflammation Treatment.” Preclinical studies
have shown that cannabinoid receptor agonists block pain in various acute and chronic pain models and that inflammation is attenuated
according to the NIH study. Further, the NIH study reveals that data from clinical trials on synthetic and plant-derived cannabis-based
medicines is promising for the management of chronic neuropathic pain of different origins. It is also hypothesized that cannabis reduces
the alterations in cognitive and autonomic processing that are present in chronic pain states of being.
Cannabinoids
and endocannabinoids are a hot topic in the fields of chemical and biomedical research with more than 1,000 articles being published
per year and research into cannabinoid delivery systems is growing. We believe that recent developments in pharmacological, pharmaceutical
and technological sciences will result in new therapeutic strategies using both known cannabinoids for new therapeutic strategies as
well as cannabinoid synthetic derivatives.
There
has been an increase in the adoption of cannabis and its products among patients suffering from mental disorders, such as anxiety, owing
to their antipsychotic effect on the nervous system. Anxiety is expected to be effectively treated by cannabis-based products owing to
their high therapeutic benefits. According to the Anxiety and Depression Association of America in 2021, around 18.1% of the total population
in the U.S. suffers from anxiety disorders each year, and the number is growing at a significant pace.
Thus,
we believe that there will be significant growth through the broader adoption of cannabis for medical, pain relief and other non-recreational
use. Potential sources for additional growth include the disruption of a variety of health-related market segments including pain management,
sleep, skin care and cosmetics and anxiety, as well as many other applications that are being explored. We believe that the ability to
move quickly to capitalize on these new opportunities will be critical to success in creating stakeholder value.
As
the industry continues to evolve, we believe that it is crucial to identify the most important end-markets, which we believe are social
consumption, pharmaceutical applications, health and wellness and industrial applications through hemp.
Our
Acquisition Philosophy
Our
acquisition philosophy is rooted in several core tenets, consistent with those that have been utilized in the past by members of our
management team as they have evaluated investment opportunities. We have identified the following general and non-exclusive criteria
and guidelines that we believe are consistent with our acquisition strategy and management’s experience, and that we believe are
important in evaluating prospective target businesses. We plan to use these criteria and guidelines in evaluating acquisition opportunities,
but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines.
We
intend to focus on companies that we believe possess some or all of the following characteristics:
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Market
leaders: Leading companies by sales, geographic reach, in our target sub-sectors; |
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Institutional-level
operations and financial controls: Companies that have the underlying infrastructure and operations to build a public company
platform; |
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Established
growth: Rapidly growing businesses with a proven financial track record or demonstrated success in business model; |
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Scalability:
Companies with a clear strategy and demonstrated ability to scale in their respective state markets and beyond; |
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Innovation:
Innovative and disruptive solutions to industry problems and pain points, including development of new production methods, products
or new markets; |
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Exceptional
managers: Talented management teams with integrity that seek to increase their companies’ growth trajectories and be trailblazing
innovators; and |
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Opportunity
for value creation: Like-minded operators open to strategic resources and influence at the board level. |
These
criteria and guidelines 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 criteria and guidelines as well as other considerations, factors and criteria
that our management may deem relevant. 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 shareholder communications related to our initial business combination, which would be in the form of proxy solicitation
or tender offer materials that we would file with the SEC.
Initial
Business Combination
We
will have until the Termination Date to consummate our initial business combination unless extended by the Company’s stockholders
in accordance with the first amendment to our second amended and restated certificate of incorporation.
In
the event that our sponsor elects to extend the time to complete a business combination and deposits the applicable amount into the trust
account, as it has done for the first five monthly extensions of the Termination Date, it will 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
placement units at a price of $10.00 per unit. Our shareholders have approved the issuance of the placement units upon conversion of
such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of our initial business combination.
Our
sponsor is not obligated to fund the trust account to extend the time for us to complete our initial business combination. If we are
unable to consummate our initial business combination by the Termination Date, 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 placement units
will expire and will be worthless. The public shareholders will not be able to vote on or redeem their public shares in connection with
any such extensions.
Nasdaq
rules require that we complete one or more initial business combinations having an aggregate fair market value of at least 80% of the
value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on interest earned on
the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of
directors will make the determination as to the fair market value of our initial business combination.
If
our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain
an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect
to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent
determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced
with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets
or prospects.
We
anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders 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 for the post-acquisition company 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-transaction company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires an interest in the target or assets sufficient for it not to be required to register as
an investment company under the Investment Company Act of 1940, as amended.
Even
if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial
business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the
target and us in the initial business combination. 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-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 net assets test.
If the initial business combination involves more than one target business, the 80% of net assets 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 the purposes
of a tender offer or for seeking stockholder approval, as applicable.
The
net proceeds of the IPO and the sale of the placement units released to us from the trust account upon the closing of our initial business
combination may be used as consideration to pay the sellers of a target business with which we complete our initial business combination.
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 redemption of our public shares,
we may use the balance of the cash released to us from the trust account following the closing 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, to fund the purchase of other companies or for working capital. In addition,
we may be required to obtain additional financing in connection with the closing of our initial business combination to be used following
the closing for general corporate purposes as described above.
There
is no limitation on our ability to raise funds through the issuance of equity or 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
agreements we may enter into following consummation of this offering. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our initial business combination. At this time, we are not a party
to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities
or otherwise. None of our sponsors, officers, directors or stockholders is required to provide any financing to us in connection with
or after our initial business combination. We may also obtain financing prior to the closing of our initial business combination to fund
our working capital needs and transaction costs in connection with our search for and completion of our initial business combination.
Our
second amended and restated certificate of incorporation, as amended, provides that, prior to the consummation of our initial business
combination, we will be prohibited from issuing additional securities 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 second amended and restated certificate of incorporation, as amended, to (x) extend the time we have to consummate a business
combination or (y) amend the foregoing provisions, unless (in connection with any such amendment to our second amended and restated certificate
of incorporation, as amended) we offer our public stockholders the opportunity to redeem their public shares.
Our
sponsor, Canna-Global LLC, is a Delaware limited liability company. Our sponsor currently beneficially owns 5,650,000 shares of our Class
B common stock and 802,500 Private Placement Units. Our sponsor is controlled by one or more non-U.S. persons. While we do believe that
our sponsor may constitute a “foreign person” under CFIUS rules and regulations, we do not believe any future initial business
combination between us and a target company would be subject to CFIUS review in view of the asset class in which we seek to complete
a business combination. If, however, our future business combination does fall within the scope of applicable foreign ownership restrictions,
we may be unable to consummate the business combination so we may be required to seek other potential targets. The pool of potential
targets with which we could complete an initial business combination may be limited as a result of any such regulatory restriction. Moreover,
the process of any government review, whether by CFIUS or otherwise, could be lengthy, which could delay our ability to close our initial
business combination within the requisite time period, which means we may be required to liquidate. If we make a mandatory filing or
determine to submit a voluntary notice to CFIUS, or proceed with the business combination without notifying CFIUS, we risk CFIUS intervention,
before or after closing the business combination.
Financial
Position
With
funds available in the trust account in the amount of $24,599,703 as of December 31, 2022 for an initial business combination (or $16,549,703 after
payment of $8,050,000 of deferred underwriting fees), we offer a target business a variety of options such as creating a liquidity event
for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing
its debt leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities,
or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration
to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing
and there can be no assurance it will be available to us.
Effecting
our Initial Business Combination
We
will have until the Termination Date to consummate our initial business combination unless extended by the Company’s stockholders
in accordance with the first amendment to our second amended and restated certificate of incorporation.
In
the event that our sponsor elects to extend the time to complete a business combination and deposits the applicable amount into the trust
account, as it has done for the first five monthly extensions of the Termination Date, it will 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
placement units at a price of $10.00 per unit. Our shareholders have approved the issuance of the placement units upon conversion of
such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of our initial business combination.
Our
sponsor is not obligated to fund the trust account to extend the time for us to complete our initial business combination. If we are
unable to consummate our initial business combination by the Termination Date, 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 placement units
will expire and will be worthless. The public shareholders will not be able to vote on or redeem their public shares in connection with
any such extensions.
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 from the proceeds of the IPO, the private placement of the placement units, 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 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.
We
have not currently selected any business combination target. Accordingly, there is no current basis for investors to evaluate the possible
merits or risks of the target business with which we may ultimately complete our initial business combination. Although our management
will assess the risks inherent in a particular target business with which we may combine, we cannot assure you that this assessment will
result in our identifying all risks that a target business may encounter. Furthermore, some of those risks may be outside of our control,
meaning that we can do nothing to control or reduce the chances that those risks will adversely affect a target business.
We
may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash
than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public
shares upon completion of the initial business combination, in which case we may issue additional securities or incur debt in connection
with such business combination. There are no prohibitions on our ability to issue securities or incur debt in connection with our initial
business combination. We are not currently a party to any arrangement or understanding with any third party with respect to raising any
additional funds through the sale of securities, the incurrence of debt or otherwise.
Sources
of Target Businesses
Our
process of identifying acquisition targets will leverage our sponsor and our management team’s industry experiences, proven deal
sourcing capabilities and broad and deep network of relationships in numerous industries, including executives and management teams,
private equity groups and other institutional investors, large business enterprises, lenders, investment bankers and other investment
market participants, restructuring advisers, consultants, attorneys and accountants, which we believe should provide us with a number
of business combination opportunities. We expect that the collective experience, capability and network of our sponsor, our directors
and officers, combined with their individual and collective reputations in the investment community, will help to create prospective
business combination opportunities.
In
addition, we anticipate that target business candidates may be brought to our attention from various unaffiliated sources, including
investment bankers and private investment funds. Target businesses may be brought to our attention by such unaffiliated sources as a
result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think
we may be interested on an unsolicited basis, since many of these sources will have read our prospectus filed with the SEC and know what
types of businesses we are targeting. Our officers and directors, as well as their respective affiliates, may also bring to our attention
target business candidates of which they become aware 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.
We
also expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result
of the business relationships of our officers and directors. While we do not presently anticipate engaging the services of professional
firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals
in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s
length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the
use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis
with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily
tied to completion of a transaction; in which case any such fee will be paid out of the funds held in the trust account. In no event,
however, will our sponsor or any of our existing officers or directors, or any entity with which they are affiliated, be paid any finder’s
fee, consulting fee or other compensation by the Company prior to, or for any services they render in order to effectuate, the completion
of our initial business combination (regardless of the type of transaction that it is). None of our sponsor, executive officers or directors,
or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective
business combination target in connection with a contemplated acquisition of such target by us.
We
are not prohibited from pursuing an initial business combination with a business that is affiliated with our sponsor, officers or directors.
In the event we seek to complete our initial business combination with a business that is affiliated with our sponsor, officers or directors,
we, or a committee of independent directors, will obtain an opinion from either an independent investment banking firm that is a member
of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view.
Furthermore, in the event that we seek such a business combination, we expect that the independent members of our board of directors
would be involved in the process for considering and approving the transaction.
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, including entities that are affiliates of our sponsor, pursuant to which such officer or director is or will be required
to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business
combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he
or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject
to their fiduciary duties under Delaware law.
Evaluation
of a Target Business and Structuring of our Initial Business Combination
Nasdaq
rules require that we consummate 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 (net of amounts disbursed to management for working capital purposes,
if permitted, and excluding the amount of any deferred underwriting commissions). The fair market value of our initial business combination
will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as
discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses or a valuation based on the financial
metrics of M&A transactions of comparable businesses. If our board of directors is not able to independently determine the fair market
value of our initial business combination (including with the assistance of financial advisors), we will obtain an opinion from an independent
investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such
criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair
market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of
a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do
not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this
requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target
businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar
company with nominal operation.
In
any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities
of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business
or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be
valued for purposes of the 80% of fair market value test. There is no basis for investors in this offering to evaluate the possible merits
or risks of any target business with which we may ultimately complete our initial business combination.
To
the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages
of development or growth we may be affected by numerous risks inherent in such company or business. 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.
In
evaluating a prospective target business, we expect to conduct a thorough due diligence review, which will encompass, among other things,
meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities,
as well as a review of financial, operational, legal and other information which will be made available to us. If we determine to move
forward with a particular target, we will proceed to structure and negotiate the terms of the initial business combination transaction.
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, and negotiation with, 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. The Company
will not pay any consulting fees to members of our management team, or any of their respective affiliates, for services rendered to or
in connection with our initial business combination.
Lack
of Business Diversification
For
an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely
on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with
multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate
the risks of being in a single line of business. By completing our initial business combination with only a single entity, our lack of
diversification may:
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● |
subject
us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the
particular industry in which we operate after our initial business combination; and |
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cause
us to depend on the marketing and sale of a single product or limited number of products or services. |
Limited
Ability to Evaluate the Target’s Management Team
Although
we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial
business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition,
the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future
role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination
as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial
business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following
our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial
business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge
relating to the operations of the particular target business.
We
cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The
determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business
combination. Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the
target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will
have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders
May Not Have the Ability to Approve our Initial Business Combination
We
may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC subject to the provisions of our second
amended and restated certificate of incorporation, as amended. However, we will seek stockholder approval if it is required by law or
applicable stock exchange rule, or we may decide to seek stockholder approval for business or other reasons.
Type
of Transaction |
|
Whether
Stockholder
Approval is
Required |
Purchase
of assets |
|
No |
Purchase
of stock of target not involving a merger with the company |
|
No |
Merger
of target into a subsidiary of the company |
|
No |
Merger
of the company with a target |
|
Yes |
Under
Nasdaq’s listing rules, stockholder approval would be required for our initial business combination if, for example:
|
● |
we
issue shares of common stock that will be equal to or in excess of 20% of the number of our shares of common stock then outstanding
(other than in a public offering); |
|
|
|
|
● |
any
of our directors, officers or substantial stockholders (as defined by the Nasdaq rules) has a 5% or greater interest (or such persons
collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise
and the present or potential issuance of common stock could result in an increase in outstanding common stock or voting power of
5% or more; or |
|
|
|
|
● |
the
issuance or potential issuance of common stock will result in our undergoing a change of control. |
The
decision as to whether we will seek stockholder approval of a proposed business combination in those instances in which stockholder approval
is not required by law will be made by us, solely in our discretion, and will be based on business and legal reasons, which include a
variety of factors, including, but not limited to:
|
● |
the
timing of the transaction, including in the event we determine stockholder approval would require additional time and there is either
not enough time to seek stockholder approval or doing so would place the Company at a disadvantage in the transaction or result in
other additional burdens on the Company; |
|
|
|
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● |
the
expected cost of holding a stockholder vote; |
|
|
|
|
● |
the
risk that the stockholders would fail to approve the proposed business combination; |
|
|
|
|
● |
other
time and budget constraints of the Company; and |
|
|
|
|
● |
additional
legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders. |
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 sponsor, initial stockholders, directors, officers, advisors or their affiliates
may purchase public 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 or warrants our initial stockholders, directors,
officers, advisors or their 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. If they engage in such transactions, they will not make 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. 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.
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. None of the funds held in the trust account will be used to purchase shares or public warrants in such
transactions prior to completion of our initial business combination.
Our
insider trading policy requires insiders to: (i) refrain from purchasing our securities during certain blackout periods when they are
in possession of any material non-public information and (ii) clear all trades of company securities with a compliance officer prior
to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will
be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances,
our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.
The
purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase
the likelihood of obtaining stockholder approval of the initial 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. In addition, if such purchases are made, the public “float” of our shares of Class
A common stock or 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
sponsor, officers, directors and/or any of their affiliates anticipate that they may identify the stockholders with whom our sponsor,
officers, directors or their affiliates may pursue privately-negotiated purchases by either the stockholders contacting us directly or
by our receipt of redemption requests tendered by stockholders following our mailing of proxy materials in connection with our initial
business combination. To the extent that our sponsor, officers, directors, advisors or their 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. Such persons would select the stockholders from whom to acquire shares based
on the number of shares available, the negotiated price per share and such other factors as any such person may deem relevant at the
time of purchase. The price per share paid in any such transaction may be different than the amount per share a public stockholder would
receive if it elected to redeem its shares in connection with our initial business combination. Our sponsor, officers, directors, advisors
or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal
securities laws.
Any
purchases by our sponsor, officers, directors and/or their respective affiliates who are affiliated purchasers under Rule 10b-18 under
the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor
from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements
that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their
respective affiliates will not make purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange
Act. 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.
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) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed 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
requirement or whether we were deemed to be a foreign private issuer (which would require a tender offer rather than seeking stockholder
approval under SEC rules). Asset acquisitions and share 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 shares of outstanding common stock
or seek to amend our second amended and restated certificate of incorporation, as amended, would require stockholder approval. We currently
intend to conduct redemptions in connection with a stockholder vote unless stockholder approval is not required by applicable law or
stock exchange listing requirement and we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or
other reasons. So long as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with Nasdaq rules.
If
we held a stockholder vote to approve our initial business combination, we will, pursuant to our second amended and restated certificate
of incorporation, as amended:
|
● |
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 |
|
|
|
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● |
file
proxy materials with the SEC. |
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 submit our initial business combination to our public stockholders for a vote, we will complete our initial business combination only
if a majority of the outstanding shares of common stock present and entitled to vote at the meeting to approve the initial business combination
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 sponsor, officers, directors, and director nominees will count towards
this quorum. Our sponsor, officers, directors, and director nominees have agreed to vote their founder shares and any public shares purchased
during or after this offering in favor of our initial business combination. These quorum and voting thresholds, and the voting agreements
of our sponsor, officers, directors, and director nominees may make it more likely that we will consummate our initial business combination.
Additionally, each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed
transaction, or abstained from voting. Public stockholders will not be offered the opportunity to vote on or redeem their shares in connection
with any extension of the period to complete our initial business combination.
The
quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will complete 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. In addition, our sponsor, directors and each member of our management, have entered into a letter agreement with
us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares, including
with respect to any shares obtained through the placement units, held by them in connection with (i) the completion of a business combination
and (ii) a stockholder vote to approve an amendment to our second amended and restated certificate of incorporation, as amended, that
would affect 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 have not completed an initial business combination within the period to consummate the initial
business combination.
If,
however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder
approval for business or other reasons, we will, pursuant to our second amended and restated certificate of incorporation, as amended:
|
● |
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. |
Upon
the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with
Rule 10b5-1 to purchase Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply
with Rule 14e-5 under the Exchange Act. 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 the number of public shares we are permitted to redeem. 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.
Our
second amended and restated certificate of incorporation, as amended, will provide 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 (so that we are not subject to the SEC’s “penny
stock” rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement pursuant
to an agreement relating to our initial business combination. For example, the proposed business combination may require: (i) cash consideration
to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes
or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the
event the aggregate cash consideration we would be required to pay for all shares of our 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 initial business combination or redeem any shares, and all shares
of our Class A common stock submitted for redemption will be returned to the holders thereof.
Limitation
on Redemption upon Completion of Our Initial Business Combination If We Seek Stockholder Approval
Notwithstanding
the foregoing, 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 second amended and restated certificate of incorporation, as
amended, will provide 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 the Excess Shares. 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 IPO 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 IPO 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.
Tendering
Stock Certificates in Connection with a Tender Offer or Redemption Rights
Public
stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,”
will be required to either tender their certificates (if any) to our transfer agent prior to the date set forth in the proxy solicitation
or tender offer materials, as applicable, mailed to such holders, or to deliver their shares to the transfer agent electronically using
The Depository Trust Company’s DWAC (Deposit/ Withdrawal At Custodian) System, at the holder’s option, in each case up to
two business days prior to the initially scheduled vote to approve the initial business combination. The proxy solicitation or tender
offer materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination
will indicate the applicable delivery requirements, which will include the requirement that a beneficial holder must identify itself
in order to validly redeem its shares. Accordingly, a public stockholder would have from the time we send out our tender offer materials
until the close of the tender offer period, or up to two days prior to the initial vote on the initial business combination if we distribute
proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short
period in which to exercise redemption rights, it is advisable for stockholders to use electronic delivery of their public shares.
There
is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through
the DWAC System. The transfer agent will typically charge the tendering broker a fee of approximately $80.00 and it would be up to the
broker whether to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether we require holders
seeking to exercise redemption rights to 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.
The
foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with
their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial
business combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating
such holder was seeking to exercise his or her redemption rights. After the initial business combination was approved, the Company would
contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder
then had an “option window” after the completion of the initial business combination during which he or she could monitor
the price of the Company’s shares in the market. If the price rose above the redemption price, he or she could sell his or her
shares in the open market before actually delivering his or her shares to the Company for cancellation. As a result, the redemption rights,
to which stockholders were aware they needed to commit before the general meeting, would become “option” rights surviving
past the completion of the initial business combination until the redeeming holder delivered its certificate. The requirement for physical
or electronic delivery prior to the meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the initial
business combination is approved.
Any
request to redeem such shares, once made, may be withdrawn at any time up to two business days prior to the vote on the proposal to approve
the initial business combination, unless otherwise agreed to by us. 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 business
combination is not completed, we may continue to try to complete a business combination with a different target until the Termination
Date.
Redemption
of Public Shares and Liquidation if no Initial Business Combination
Our
second amended and restated certificate of incorporation, as amended, provides that we will have until the Termination Date to complete
our initial business combination. If we are unable to complete our business combination within such 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), subject to applicable
law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and
our board of directors, dissolve and liquidate, subject in 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 business combination by the Termination Date. In the event that our sponsor elects to extend the time to complete a business combination
and deposits the applicable amount into the trust account, as it has done for the first five monthly extensions of the Termination Date,
it will 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 placement units at a price of $10.00 per unit. Our shareholders have approved
the issuance of the placement units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time
of the consummation of our initial business combination.
Our
shareholders have approved the issuance of the placement units upon conversion of such notes, to the extent the holder wishes to so convert
such notes at the time of the consummation of our initial business combination. Our sponsor is not obligated to fund the trust account
to extend the time for us to complete our initial business combination. The public shareholders will not be able to vote on or redeem
their public shares in connection with any such extensions.
Our
sponsor, directors and each member of our management 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 do not complete an initial
business combination within the period to consummate the initial business combination including with respect to any shares obtained through
the placement units. However, if our sponsor, directors or members of our management team acquire public shares in or after this offering,
they will be entitled to liquidating distributions from the trust account with respect to such public shares if we do not complete an
initial business combination within the period to consummate the initial business combination.
Our
sponsor, executive officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment
to our second amended and restated certificate of incorporation, as amended, that would affect 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 the period to consummate the initial business combination, unless we provide our 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 earned on the funds held in the trust account and not previously
released to us to pay our taxes, if any divided by the number of the then outstanding public shares. However, we may not redeem our public
shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s
“penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares
such that we cannot satisfy the net tangible asset requirement, we would not proceed with the amendment or the related redemption of
our public shares at such time. This redemption right shall apply in the event of the approval of any such amendment, whether proposed
by our sponsor, any executive officer, director or director nominee, or any other person.
We
expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be
funded from amounts remaining out of the approximately $700,000 of proceeds held outside the trust account plus up to $100,000 of funds
from the interest on the trust account available to us to pay dissolution expenses, although we cannot assure you that there will be
sufficient funds for such purpose.
If
we were to expend all of the net proceeds of this offering the sale of the placement warrants, other than the proceeds deposited in the
trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received
by stockholders upon our dissolution would be approximately $10.15. The proceeds deposited in the trust account could, however, become
subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure
you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.15. Under Section 281(b)
of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made
in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of
our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient
to pay or provide for all creditors’ claims.
Although
we will seek to have all vendors, service providers (other than 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, there is no guarantee that they will execute
such agreements or even if they execute such agreements that they would 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 an 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 perform an analysis of the alternatives available to it and will only enter into an agreement with a third party
that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial
to us than any alternative. 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.
The
underwriters will not execute agreements with us waiving such claims to the monies held in the trust account. 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. In order to protect the amounts
held in the trust account, 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 (other than our independent registered public accounting firm), or a prospective target business with
which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i) $10.15
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 $10.15 per unit, due to reductions in the value of the trust assets, in each case net of the interest that may be
withdrawn to pay our taxes, if any, provided that such liability will not apply to any claims by a third party or prospective target
business that executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity
of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act.
In
the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent
of any liability for such third-party claims. 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 their 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. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims
by vendors and prospective target businesses.
In
the event that the proceeds in the trust account are reduced below the lesser of (i) $10.15 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 $10.15 per unit, due to
reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, if any, and our
sponsor asserts that they are unable to satisfy its indemnification 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 may choose
not to do so in any particular instance. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share
redemption price will not be less than $10.15 per unit.
We
will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring
to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses
or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or
to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of
this offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately
$700,000 from the proceeds of this offering and the sale of the placement units with which to pay any such potential claims (including
costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $25,000). In the
event that we liquidate, and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders
who received funds from our trust account could be liable for claims made by creditors, however such liability will not be greater than
the amount of funds from our trust account received by any such stockholder. In the event that our offering expenses exceed our estimate
of $425,000, we may fund such excess with funds from the 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 $425,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding
amount.
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 the period to consummate the initial business combination
may be considered a liquidating distribution under Delaware law. If the 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.
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 the period to consummate the initial business combination, 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. If we do not complete our initial business combination within the period
to consummate the initial business combination, 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 that
may be released to us to pay our taxes, if any (less up to $100,000 of interest to pay taxes and if needed, 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, dissolve and liquidate, subject in each
case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly,
it is our intention to redeem our public shares as soon as reasonably possible following our 18th month and, therefore, we do not intend
to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions
received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because
we will not be complying with Section 280, 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 subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be
limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as
lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our
underwriting agreement, we will seek to have all vendors, service providers, prospective target businesses or 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. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any
claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent
necessary to ensure that the amounts in the trust account are not reduced below (i) $10.15 per public share or (ii) such lesser amount
per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the
trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity
of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. In the event that an
executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability
for such third-party claims.
If
we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed,
the proceeds held in the trust account could be subject to applicable bankruptcy or insolvency law and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims
deplete the trust account, we cannot assure you we will be able to return $10.15 per unit to our public stockholders. Additionally, if
we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed,
any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy or insolvency laws as either
a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy or insolvency court could seek
to recover some, or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its
fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive
damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that
claims will not be brought against us for these reasons.
Our
public stockholders will be entitled to receive funds from the trust account only (i) in the event of the redemption of our public shares
if we do not complete an initial business combination within the period to consummate the initial business combination, (ii) in connection
with a stockholder vote to amend our second amended and restated certificate of incorporation, as amended, (A) 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 the period to consummate the initial business combination or (B) with respect
to any other provisions relating to the rights of holders of our Class A common stock, or (iii) if they redeem their respective shares
for cash upon the completion of the initial business combination. Public stockholders who redeem their Class A common stock in connection
with a stockholder vote described in clause (ii) in the preceding sentence shall not be entitled to funds from the trust account upon
the subsequent completion of an initial business combination or liquidation if we have not completed an initial business combination
within the period to consummate the initial business combination, with respect to such shares of our Class A common stock so redeemed.
In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek
stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the initial
business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the
trust account. Such stockholder must have also exercised its redemption rights described above. These provisions of our amended and restated
certificate of incorporation, like all provisions of our second amended and restated certificate of incorporation, as amended, may be
amended with a stockholder vote.
Competition
In
identifying, evaluating and selecting a target business for our initial business combination, we may encounter competition from other
entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout
funds, public companies and operating businesses seeking strategic business combinations. Many of these entities are well established
and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these
competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses
will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business
combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their
redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the
future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place
us at a competitive disadvantage in successfully negotiating an initial business combination.
Employees
We
currently have two executive officers. 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 initial 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.
Periodic
Reporting and Financial Information
Our
Class A common stock and warrants are registered under the Exchange Act and have reporting obligations, including the requirement that
we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports
contain financial statements audited and reported on by our independent registered public accounting firm.
We
will provide stockholders with audited financial statements of the prospective target business as part of the proxy solicitation or tender
offer materials, as applicable, sent to stockholders to assist them in assessing the target business. In all likelihood, these financial
statements may be required to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the
historical financial statements may be required to be audited in accordance with the standards of the 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 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. We cannot assure you that any particular target business identified by us as a potential acquisition candidate
will have financial statements prepared in accordance with the requirements outlined above, or that the potential target business will
be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements
cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates,
we do not believe that this limitation will be material.
We
are required to evaluate our internal control procedures for the fiscal year ending December 31, 2022, as required by the Sarbanes-Oxley
Act. 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 have our internal control procedures audited. A target business may not be in compliance with the provisions
of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity
to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
We
have filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange
Act. As a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing
a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial
business combination.
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such,
we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive
as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of
the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant
to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class
A common stock that is held by non-affiliates equals or exceeds $700.0 million as of the prior June 30th, and (2) the date on which we
have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.