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This report, including, without
limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking
statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,”
“anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,”
“projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other
variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such
statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination
and any other statements that are not statements of current or historical facts. These statements are based on management’s current
expectations, but actual results may differ materially due to various factors, including, but not limited to:
The forward-looking statements
contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects
on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of
risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially
different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited
to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize,
or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking
statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities laws.
PART I
ITEM 1. BUSINESS
Overview
We are an early-stage blank check
company incorporated in February 2021 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout
this Annual Report on Form 10-K as our “initial business combination.”
Recent Events
On March 5, 2021, our sponsor
acquired 100 shares of the Company’s common stock in exchange for a capital contribution of $25,000, or approximately $250.00 per
share. On March 15, 2021, we effected a 64,687.5-for-one forward stock split of our issued and outstanding shares of common stock and
reclassified those issued and outstanding shares into shares of Class B common stock. On June 21, 2021, we effected an approximately 1.11-for-one
forward stock split of our issued and outstanding shares of Class B common stock. On October 26, 2021, we effected an approximately one-for-1.11
reverse stock split of our issued and outstanding shares of Class B common stock. At the time of our IPO, the sponsor held 6,468,750 founder
shares (reflecting an aggregate capital contribution of approximately $0.004 per share). The number of founder shares issued was determined
based on the expectation that such founder shares would represent 20% of the issued and outstanding shares of our common stock upon completion
of the IPO. On November 19, 2021, our sponsor transferred 20,000 founder shares to each of our independent directors at their original
purchase price. In addition, at the closing of our initial business combination, our anchor investor will be entitled to purchase from
our sponsor an aggregate of 12.5% of the number of founder shares outstanding upon the final closing of the IPO, at a purchase price of
approximately $0.004 per share.
On November 19, 2021, we completed
our IPO of 25,875,000 units, including 3,375,000 units purchased by the underwriter pursuant to the over-allotment option granted by the
Company to the underwriter. Each “Unit” consists of one share Class A common stock and one-half of one redeemable warrant
of the Company (“Public Warrant”), with each whole warrant entitling the holder thereof to purchase one share of Class A common
stock for $11.50 per share, subject to adjustment. The units were sold at a price of $10.00 per unit, generating gross proceeds to the
Company of $258,750,000.
Simultaneously with the closing
of the IPO, we completed the private sale of warrants to purchase an aggregate of 12,350,000 shares of Class A common stock at $11.50
per share (the “Private Placement Warrants”) to our sponsor, the anchor investor and the underwriter at a purchase price of
$1.00 per private placement warrant, generating gross proceeds of $12,350,000.
A total of $263,925,000, comprised
of $253,575,000 of the proceeds from the IPO (which amount includes $9,056,250 of the underwriter’s deferred fee) and $10,350,000
of the proceeds from the sale of the Private Placement Warrants, were placed in a U.S.-based trust account (the “Trust Account”)
maintained by Continental Stock Transfer & Trust Company, acting as trustee.
On January 7, 2022, we announced
that the holders of our Units may elect to separately trade on Nasdaq the Class A common stock and Public warrants included in the units
under the symbols “LFAC” and “LFACW,” respectively. Those units not separated will continue to trade on Nasdaq
under the symbol “LFACU” and each of the shares of Class A common stock and warrants that are separated will trade on Nasdaq
under the symbols “LFAC” and “LFACW,” respectively.
Our Business Model
Although we may pursue an acquisition
opportunity in any business industry, sector or geographical location, we intend to capitalize on the ability of our management and board
to identify and acquire a business with a disruptive business model that may provide opportunities for attractive risk-adjusted returns
in the financial technology or services, technology, digital asset or consumer sectors. We believe that our management team is well positioned
to identify attractive risk-adjusted returns in the marketplace and that their contacts and transaction sources, ranging from industry
executives, private owners, private equity funds, and investment bankers will enable us to pursue an attractive set of opportunities.
Our management team believes that its ability to identify and implement value creation initiatives will remain central to its differentiated
acquisition strategy.
Our management team’s objective
is to generate attractive risk-adjusted returns and create value for our stockholders by applying a disciplined strategy of underwriting
intrinsic worth and partnering with management to build long-term stockholder value. Our management team intends to apply a disciplined
approach which will focus on (i) large addressable market opportunities; (ii) attractive business models with strong competitive advantages;
(iii) businesses with significant opportunities for growth; and (iv) capable management teams looking for a value-added partner. We do
not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Our management
team has an in-depth understanding of high growth business opportunities where we believe technology is creating disruption, and the ability
to leverage technology to increase stockholder value.
Our management team has extensive
experience in identifying and executing attractive investments across a number of sectors, including financial technology, a sector that
is a focus for us, which we believe presents an opportunity to take advantage of the intersection of technology, process improvements
and business model innovations. In addition, our team has significant hands-on experience working with private companies in preparing
for and executing an initial public offering and serving as active owners and directors post-public offering by working closely with these
companies to continue their transformations and help create value in the public markets.
Business Strategy
Our acquisition and value creation
strategy is to identify, acquire and, after our initial business combination, build a company with a disruptive business model that could
benefit from a hands-on owner with extensive operational experience in the financial technology or services, technology, digital asset
or consumer sectors that complements the experience of our management team and board of directors and can benefit from their extensive
knowledge of these sectors. Our acquisition strategy will leverage our management team’s network of proprietary transaction sources
where we believe a combination of the relationships, knowledge and experience of our management and board members could effect a positive
transformation or augmentation of existing businesses or properties to improve their overall value proposition.
Over the course of their careers,
the members of our management team and their affiliates have developed a broad network of contacts and corporate relationships that we
believe will serve as a useful source of acquisition opportunities. This network has been developed through our management team’s
extensive experience in both investing in a wide variety of industries and business situations. We expect these networks will provide
our management team with a robust flow of acquisition opportunities. In addition, we anticipate that target business candidates may be
sourced from various unaffiliated sources, which may include investment market participants, private equity groups, investment banking
firms, consultants, accounting firms and large business enterprises. Members of our management team are communicating with their networks
of relationships to articulate the parameters for our search for a target company and a potential business combination and begin the process
of pursuing and reviewing potentially interesting leads.
Acquisition Criteria
Consistent with our business strategy,
we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses.
We 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 acquire companies or assets that we believe:
|
● |
can utilize the extensive networks and insights we have built in the financial technology or services, technology, digital asset or consumer sectors; |
|
● |
are at an inflection point, such as requiring additional management expertise, are able to innovate through new operational techniques, or where we believe we can drive improved financial performance; |
|
● |
exhibit unrecognized value or other characteristics, desirable returns on capital, and a need for capital to achieve the company’s growth strategy, that we believe have been incorrectly valued by the marketplace based on our analysis and due diligence review; |
|
● |
offer an attractive risk-adjusted return for our stockholders. We will seek to acquire the target on terms and in a manner that leverages our management team’s experience in investing within the financial technology or services, technology, digital asset or consumer sectors. Potential upside from growth in the target business and an improved capital structure will be weighed against any identified downside risks; and |
|
● |
is in good standing with any applicable regulatory authorities. |
These criteria are not intended
to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant,
on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. 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 some or all of the above criteria in our stockholder communications related to
our initial business combination, which would be in the form of tender offer documents or proxy solicitation materials that we would file
with the Securities and Exchange Commission (the “SEC”).
Initial Business Combination
The Nasdaq rules require that
we must complete one or more 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 fees and taxes payable on the 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
of the fair market value of our initial business combination, based upon its assessment of the target, including, but not limited to,
the target’s assets, operating results, and prospects. In connection with our board of directors’ determination as to its
opinion of the fair market value of the target business, our board of directors may, in its discretion, seek the analyses and advice of
third parties on which the board may rely, including seeking to obtain an opinion from an independent investment banking firm that is
a member of FINRA or an independent entity that commonly renders valuation opinions with respect to the fair market value of business
combinations. Our stockholders may not be provided with a copy of such advice or opinion, nor will they be able to rely on such advice
or opinion. We can offer no assurance our board of directors will seek such advice or opinion in connection with our initial business
combination, or will be able to obtain such advice or opinion if desired. Additionally, pursuant
to the Nasdaq rules, any initial business combination must be approved by a majority of our independent directors.
We may raise additional proceeds
to complete an acquisition opportunity by making a specified future issuance. The amount and other terms and conditions of any such specified
future issuance would be determined at the time thereof. We are not obligated to make any specified future issuance and may determine
not to do so. Pursuant to the anti-dilution provisions of our Class B common stock, any such specified future issuance would result in
an adjustment to the conversion ratio such that our initial stockholders and their permitted transferees, if any, would retain their aggregate
percentage ownership at 20% of the sum of the total number of all shares of common stock outstanding upon completion of the IPO plus all
shares issued in the specified future issuance, unless the holders of a majority of the then-outstanding shares of our Class B common
stock agreed to waive such adjustment with respect to the specified future issuance at the time thereof. We cannot determine at this time
whether a majority of the holders of our Class B common stock at the time of any such specified future issuance would agree to waive such
adjustment to the conversion ratio. If such adjustment is not waived, the specified future issuance would not reduce the percentage ownership
of holders of our Class B common stock, but would reduce the percentage ownership of holders of our Class A common stock. If such adjustment
is waived, the specified future issuance would reduce the percentage ownership of holders of both classes of our common stock.
We anticipate structuring our
initial business combination so that the post-transaction company in which our public stockholders own shares will comply with any applicable
regulatory requirements and own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however,
structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or
assets of the target business in order to meet certain objectives of the prior owners of the target business, the target management team
or stockholders, or for other reasons. However, 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 the post-transaction company not to be required to register as an investment company under the Investment Company Act. Even if the
post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to our initial business
combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and
us in an initial business combination transaction.
For example, we could pursue a
transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock, shares or other
equity interests 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 issued and 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 Nasdaq’s 80% fair market value test. If our initial business combination
involves more than one target business, Nasdaq’s 80% fair market value test will be based on the aggregate value of all of the target
businesses, and we will treat the target businesses together as our initial business combination for purposes of a tender offer or for
seeking stockholder approval, as applicable.
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.
The time required to select and
evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process,
are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of
a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses
and will reduce the funds we can use to complete another business combination.
Our Acquisition Process
In evaluating a prospective target
business, we expect to conduct a thorough due diligence review including, 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 made available to us (including any relevant and applicable regulatory filings). We cannot currently ascertain 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. Any costs incurred with respect to prospective target businesses with which we do not ultimately complete an initial
business combination will result in our incurring losses and will reduce the funds we can use to complete another business combination.
We are not prohibited from pursuing
an initial business combination with a company that is affiliated with our sponsor, executive officers or directors. In the event we seek
to complete our initial business combination with a company that is affiliated with such persons, we, or a committee of independent directors,
will obtain an opinion from an independent investment banking firm which 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.
Members of our management team
and our independent directors own, directly or indirectly, shares of our common stock and/or private placement warrants and, accordingly,
may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate
our initial business combination. Further, each of our executive officers and directors may have a conflict of interest with respect to
evaluating a particular business combination if the retention or resignation of any such executive officers and directors is included
by a target business as a condition to any agreement with respect to our initial business combination.
Our executive officers and directors
are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their
time between our operations and our search for a business combination and their other businesses. Each of our executive officers and directors
presently has, and any of them in the future may have, additional, fiduciary or contractual obligations to other entities pursuant to
which such officer or director is or will be required to present a business combination opportunity to such entity or is subject to other
contractual restrictions. Accordingly, if any of our executive officers or directors becomes aware of a business combination opportunity
which is suitable for an entity to which they have then-current fiduciary or contractual obligations, then, subject to such executive
officer’s or director’s fiduciary duties under Delaware law, they will need to honor their fiduciary or contractual obligations
to present such opportunity to such entity before we can pursue such opportunity. If these other entities decide to pursue any such opportunity,
we may be precluded from pursuing the same. We do not expect, however, that the fiduciary duties or contractual obligations of our executive
officers or directors will materially affect our ability to complete our initial business combination. Our amended and restated certificate
of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or executive officer unless
such opportunity is expressly offered to such person solely in their capacity as a director or executive officer of our company and such
opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Status as a Public Company
We believe our structure as a
public company makes us an attractive business combination partner to target businesses. As an existing public company, we offer a target
business an alternative to the traditional initial public offering through a merger or other business combination with us. In a business
combination transaction with us, the owners of the target business may, for example, exchange their shares of stock, shares or other equity
interests in the target business for our Class A common stock (or shares of a new holding company) or for a combination of our Class A
common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. We believe target businesses will
find this method a more expeditious and cost-effective method to becoming a public company than the typical initial public offering. The
typical initial public offering process takes a significantly longer period of time than the typical
business combination transaction process, and there are significant expenses in the initial public offering process, including underwriting
fees, that may not be present to the same extent in connection with a business combination with us.
Furthermore, after a proposed
business combination is completed, the target business will have effectively become public, whereas an initial public offering is always
subject to the underwriter’s ability to complete the offering, as well as general market conditions, which could delay or prevent
the offering from occurring or could have negative valuation consequences. Once public, we believe the target business would then have
greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests and
the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s
profile among potential new customers and vendors and aid in attracting talented employees.
Although we believe that our structure
and our management team’s backgrounds will make us an attractive business partner, some potential target businesses may view our
status as a blank check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed
initial business combination, negatively.
Implications of Being an Emerging Growth Company
We are an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (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 have elected 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, or (c) in which we are deemed to be a large accelerated filer,
which means the market value of our common stock that is held by non-affiliates 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.
Additionally, we are a “smaller
reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced
disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller
reporting company until the last day of the fiscal year in which (1) the market value of our common stock that is held by non-affiliates
equaled or exceeded $250.0 million as of the prior June 30th and (2) our annual revenues equaled or exceeded $100.0 million
during such completed fiscal year or the market value of our common stock that is held by non-affiliates equaled or exceeded $700.0 million
as of the prior June 30th.
Facilities
Our executive offices are located
at 1909 Woodall Rodgers Freeway, Suite 500, Dallas, Texas 75201, and our telephone number is (214) 740-6105. We pay an affiliate of our
sponsor a total of $15,000 per month for office space, utilities and secretarial and administrative support. We consider our current office
space adequate for our current operations.
Employees
We currently have three 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 business combination process we are in. We do not intend to have any full-time employees prior to the consummation of
our initial business combination.
Periodic Reporting and Financial Information
Our units, Class A common stock
and warrants are registered under the Exchange Act, and we have reporting obligations, including the requirement that we file annual,
quarterly and current reports with the SEC.
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, U.S. 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 Public Company Accounting Oversight Board (“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 will be 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.
Available Information
We are required to file Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to disclose certain material
events (e.g., changes in corporate control, acquisitions or dispositions of a significant amount of assets other than in the ordinary
course of business and bankruptcy) in a Current Report on Form 8-K. The SEC maintains an Internet website that contains reports, proxy
and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s Internet website
is located at http://www.sec.gov. In addition, the Company will provide copies of these documents without charge upon request from us
in writing at 1909 Woodall Rodgers Freeway, Suite 500, Dallas, Texas 75201 or on our website, www.lfcapital.co.
ITEM 1A. RISK FACTORS
As a smaller reporting company,
we are not required to include risk factors in this Annual Report on Form 10-K. However, below is a partial list of material risks, uncertainties
and other factors that could have a material effect on the Company and its operations:
|
● |
we are an early-stage Company with minimal revenue or basis to evaluate our ability to select a suitable business target; |
|
● |
we may not be able to complete our initial business combination in the prescribed time frame; |
|
● |
our expectations around the performance of a prospective target business or businesses may not be realized; |
|
● |
we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination; |
|
● |
our officers and directors may have difficulties allocating their time between the Company and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination; |
|
● |
we may not be able to obtain additional financing to complete our initial business combination or reduce the number of stockholders requesting redemption; |
|
|
|
|
● |
we may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time; |
|
● |
you may not be given the opportunity to choose the initial business target or to vote on the initial business combination; |
|
● |
trust account funds may not be protected against third party claims or bankruptcy; |
|
● |
an active market for our public securities may not develop and you will have limited liquidity and trading; |
|
● |
the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination; and |
|
● |
our financial performance following a business combination with an entity may be negatively affected by their lack of an established record of revenue, cash flows and experienced management. |
For the complete list of risks
relating to our operations, see the section titled “Risk Factors” contained in our prospectus dated November 16, 2021.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our executive offices are located
at 1909 Woodall Rodgers Freeway, Suite 500, Dallas, Texas 75201, and our telephone number is (214) 740-6105. Our executive offices are
provided to us by an affiliate of our sponsor, and we pay such affiliate of our sponsor a total of $15,000 per month for office space,
utilities and secretarial and administrative support. We consider our current office space adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
There is no material litigation,
arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such, and
we and the members of our management team have not been subject to any such proceeding in the twelve months preceding the date of this
Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Directors and Executive Officers
As of the date of this Annual
Report on Form 10-K, our directors and executive officers are as follows:
Name |
|
Age |
|
Position |
Elias Farhat |
|
55 |
|
Executive Chairman of the Board |
Baudouin Prot |
|
70 |
|
Non-Executive Chairman of the Board |
Scott Reed |
|
51 |
|
President, Chief Executive Officer and Director |
Alberto Bianchinotti |
|
45 |
|
Chief Financial Officer |
Robert Black |
|
62 |
|
Director |
James Hodge |
|
69 |
|
Director |
Habib Kairouz |
|
55 |
|
Director |
Jodi Shelton |
|
56 |
|
Director |
Djemi Traboulsi |
|
54 |
|
Director |
Elias Farhat has served
as our Executive Chairman of the Board since March 2021 and as a member of our board of directors since February 2021. Mr. Farhat is the
former Chief Strategy Officer for Candriam, an asset management company with over $175 billion under management. He served in that role
from 2016 to 2021. Mr. Farhat was also member of Candriam’s Group Strategic Committee and its Executive Committee and served as
a member of its board of directors. From 2003 to 2016, Mr. Farhat was a Partner of Capital E Advisors, Inc., a private equity and real
estate firm, and held several board and advisory positions at portfolio companies affiliated with Capital E. Mr. Farhat founded Velocity
Advisors, Inc, a private equity advisory firm that sourced and structured transactions on behalf of institutional investors, and served
as its Managing Partner from 2002 to 2016. From 1990 to 2002, Mr. Farhat served in various management consultancy positions at Bain &
Company, including as a Vice President and Partner from 1998 to 2002. At Bain, Mr. Farhat advised boards, CEOs and senior management of
Fortune 1000 companies as well as several private equity funds on a broad range of strategic, operational, financial and organizational
issues. Mr. Farhat led Bain’s Private Equity Group activities in the Southern United States and was involved in its Investment Committee.
Mr. Farhat currently serves as a member of the boards of directors of Lakeside Capital Advisors, L.P., a private equity firm, and Landsea
Homes. Mr. Farhat also previously served as a member of the boards of directors of Huron Inc., a manufacturing company, CBI Laboratories,
Inc., a cosmetics company, and LFAC I from its inception through the completion of its business combination with Landsea Homes in January
2021. Mr. Farhat is a graduate of Ecole Supérieure des Sciences Economiques et Commerciales (ESSEC) in Paris. Mr. Farhat’s
extensive experience in business and investing in and advising companies qualifies him to serve on our board of directors.
Baudouin Prot has served
as a member of our board of directors since March 2021 and was appointed Non-Executive Chairman of the Board in March 2021. Mr. Prot is
a Senior Advisor to Boston Consulting Group, a position he has held since 2015. From 1996 to 2014, Mr. Prot served in various leadership
positions at BNP Paribas S.A., including (i) as its Chairman from 2011 to 2014 and as a member of its board of directors from 2000 to
2011 before being appointed as its Chairman; (ii) as its Chief Executive Officer and President from 2003 to 2011; and (iii) as its Chief
Operating Officer from 1996 to 2003. Between 2003 and 2014, the French bank tripled its shareholders’ equity (from €28.3B to
€89.4B), doubled revenues (from €18B to €39B) and doubled headcount (from 89,000 to 188,000 employees). During his tenure
as Chairman and Chief Executive Officer of BNP Paribas, Mr. Prot implemented a successful expansion strategy in the United States via
its U.S.-based subsidiary, BancWest, including a: (i) $1.2 billion acquisition of Community First Bankshares, Inc.; (ii) $1.36 billion
acquisition of Commercial Federal Corporation; and (iii) $245 million acquisition of USDB Bancorp. Prior to his time at BNP, Mr. Prot
served as an inspecteur des finances at the French Ministry of Finance from 1976 to 1980. Mr. Prot serves on the boards of directors of
Kering S.A., a group of luxury brands, Foncia Group S.A., a provider of real estate management services, Finastra, a financial technology
company, and Alstom S.A., a world leader in rolling stock. Mr. Prot previously served as a member of the boards of directors of Veolia
Environment, S.A., a provider of resource management solutions, and Lafarge S.A., a supplier of construction materials. Mr. Prot also
previously served as Chairman of the Association Francaise des Banques and as the Chairman and a member of the board of directors of LFAC
I from its inception through the completion of its business combination with Landsea Homes in January 2021. Mr. Prot was named “Financier
of the Year” by Les Echos in 2006 and 2009 and received the Foreign Policy Association award (USA) for “Corporate Social Responsibility”
in 2007. Mr. Prot was named “Strategist of the Year” by the financial daily newspaper La Tribune in 2009 and, in 2010, the
Institutional Investor magazine named Mr. Prot “Best European Banking CEO.” Mr. Prot has also been named Officer of the Legion
of Honor and Officer of the National Order of Merit by the French Republic. Mr. Prot is a graduate of the École Nationale d’Administration
and earned his master of business administration from HEC Paris. Mr. Prot’s extensive experience in financial institutions and successful
acquisitions qualifies him to serve on our board of directors.
Scott Reed has served our
President, Chief Executive Officer and as a member of our board of directors since March 2021. Mr. Reed is the co-founder of BankCap Partners,
a private equity firm that focuses on investments in the U.S. commercial banking space, and has served as a Partner and Director of BankCap
Partners since 2005. Prior to founding BankCap Partners, Mr. Reed served from 2002 to 2004 as the Senior Vice President, Director of Corporate
Strategy and Planning of Carreker Corporation, a financial technology company based in Dallas. From 2000 to 2002, Mr. Reed was an investment
banker in the Financial Institutions Group at Bear Stearns and, from 1997 to 2000, Mr. Reed worked as a consultant at Bain & Company.
Mr. Reed began his career as a derivatives trader at Swiss Bank Corporation (formerly O’Connor) from 1992 to 1995. Mr. Reed earned
his bachelor’s degrees in commerce and history from the University of Virginia and his master of business administration from the
Amos Tuck School at Dartmouth College, where he was an Edward Tuck Scholar. Mr. Reed is a member of the board of directors of InBankshares
Corp., Silvergate Capital Corporation, Vista Bancshares (as well as the boards of directors of each of the three institutions’ underlying
commercial banks), Nobul Corporation, PT Financial Holdings, and Uncommon Giving and previously served as a member of the board of directors
of Xenith Bankshares and the board of directors of its underlying commercial bank. Mr. Reed is also a member of Landsea Homes’ board
of directors and served as LFAC I’s President and as a member of its board of directors from its inception through the completion
of its business combination with Landsea Homes in January 2021, and served as Chief Executive Officer of LFAC I from July 2020 through
the completion of its business combination with Landsea Homes in January 2021. Mr. Reed’s extensive experience in the financial
services and strategic consulting industries qualifies him to serve on our board of directors.
Alberto Bianchinotti has
served as our Chief Financial Officer since March 2021. Mr. Bianchinotti is the owner of AM Knight Financial Services, a CPA firm that
he founded in 2013, and has experience working with new businesses in the life sciences, software and real estate industries. Mr. Bianchinotti
is a Certified Public Accountant and consultant with an expertise in the launching of investment advisers and start-ups. He has served
as the Chief Financial Officer and Chief Compliance Officer of Merlin Biomed Private Equity Advisors, a crossover private equity fund,
since 2007. Prior to that, Mr. Bianchinotti was a Financial Analyst and Controller at Merlin Biomed Investment Advisors from 2004 to 2007
and a Financial Services Audit Supervisor at Anchin, Block and Anchin LLP from 1999 to 2004. Mr. Bianchinotti served as the Chief Financial
Officer of LFAC I from July 2020 through the completion of its business combination with Landsea Homes in January 2021. He also assisted
in the oversight of the finances and operations of LFAC I from December 2017 through July 2020 through his firm, AM Knight Financial Services.
Mr. Bianchinotti earned his bachelor’s degree in accounting from Binghamton University and a certification in financial planning
from New York University.
Robert Black has served
as a member of our board of directors since March 2021. Mr. Black serves as the Chairman of the board of directors of RTIC Outdoors, LLC,
a direct-to-consumer retailer of outdoor gear, a position he has held since 2020. He also serves as an Executive Advisory Partner of Wind
Point Partners, a private equity firm, a position he has held since 2013, and a Senior Advisor to Boston Consulting Group’s Global
Consumer Practice, a position he has held since 2012. From 2006 to 2012, Mr. Black served in various leadership positions at Kimberly-Clark
Corporation (NYSE: KMB), including as its Group President from 2007 to 2012, its Chief Strategy Officer from 2006 to 2007 and its Chief
Innovation Officer from 2006 to 2007. Prior to that, from 2004 to 2006, Mr. Black served as the President, Chief Operating Officer and
a member of the board of directors of Sammons Enterprises, a privately held financial consumer oriented and service-based business. From
1994 to 2004, Mr. Black served in a number of leadership positions at Steelcase, Inc. (NYSE: SCS), including as President of Steelcase
International and as a member of the Steelcase, Inc. Executive Committee. Prior to that, he also held senior positions at McKinsey &
Company, Baxter International, Inc. and Hard Manufacturing Co., Inc. Since 2018, Mr. Black has served on the board of directors of Edgewell
Personal Care Company (NYSE: EPC). Mr. Black also serves on the boards of directors of good2grow, a manufacturer of healthy drinks and
snacks for kids; Targeted PetCare Goup, a manufacturer of animal litter, bedding products and dental pet treats; and Corsicana Bedding,
one of the nation’s largest bedding producers. Mr. Black has also previously served on the boards of directors of a number of public
companies, including Annie’s, Inc. (formerly NYSE: BNNY) (from 2014 to 2015), North American Technologies Group, Inc. (from 2004
to 2005), Modernform Group Public Company Ltd. (in 2002) and Kimberly-Clark de Mexico (from 2008 to 2012), Pestell Nutrition and DecoPac.
Mr. Black earned his bachelor’s degree in management from the State University of New York at Buffalo and his master of business
administration from Harvard Business School. Mr. Black’s extensive experience in the consumer products industry qualifies him to
serve on our board of directors.
James Hodge has served
as a member of our board of directors since March 2021. Mr. Hodge founded Arrowsmith, LLC, an investment management firm, in 1999 and
has served as its President and Chief Investment Officer since its inception. From 1987 to 2016, Mr. Hodge served as the President and
Chief Investment Officer of Permal Asset Management, an investment management firm. Mr. Hodge is a member of the advisory board of Alpha
Japan Asset Advisors Ltd., an asset management company, and the board of directors of China Alpha Fund Management Ltd., an investment
management firm. He also serves on the boards of directors for a number of investment funds, including China Alpha II Fund Ltd., China
Alpha Master Fund Ltd., Hel Ved Master Fund, WF Asian Reconnaissance Fund Limited and WF Asian Smaller Companies Fund Limited. Mr. Hodge
earned his bachelor’s degree in business administration and management from Indiana University at Bloomington and his master of
business administration from Harvard Business School. Mr. Hodge’s extensive experience in leading and advising investment management
firms qualifies him to serve on our board of directors.
Habib Kairouz has served
as a member of our board of directors since March 2021. Mr. Kairouz is a Managing Partner of Rho Capital Partners, a private equity and
venture capital firm with a focus on technology investments, where he has been employed since 1993 and a position he has held since 1999.
Mr. Kairouz is a member of the boards of directors of Kasisto, Inc., a software developer of conversational AI platforms for the financial
services industry, Passport Labs, Inc., a software developer of parking payment and enforcement solutions, Snagajob, Inc. an online marketplace
for hourly work, Pawlicy Advisor, Inc., a pet insurance marketplace, and Dashlane Inc., a provider of password management solutions. Mr.
Kairouz also previously served on the boards of directors of a number of public companies, including iVillage (formerly Nasdaq: IVIL)
(from 1997-2006), IntraLinks Holdings, Inc. (formerly NYSE: IL) (from 2001-2017), Everyday Health, Inc. (formerly NYSE: EVDY) (from 2003-2016)
and ReachLocal, Inc. (formerly Nasdaq: RLOC) (from 2007-2016). Mr. Kairouz earned his bachelor’s degrees in engineering and economics
from Cornell University and his master of business administration from Columbia Business School. Mr. Kairouz’s extensive experience
in venture capital and investing in and advising technology companies qualifies him to serve on our board of directors.
Jodi Shelton has served
as a member of our board of directors since March 2021. In 1994, Ms. Shelton co-founded the Global Semiconductor Alliance, an industry
organization that strives to prepare the semiconductor industry for paradigm shifts by aligning leadership from more than 300 companies
in more than 30 countries, and has served as its Chief Executive Officer and as a member of its board of directors since its inception.
Ms. Shelton also founded the Shelton Group, an integrated investor relations and public relations agency, in 1994 and has served as its
Chief Executive Officer since its inception. From 1990 to 1994, Ms. Shelton served as the Director of Investment Relations at Cyrix Corporation,
a manufacturer of computer processor solutions. Ms. Shelton has served on the board of advisors
of Nanotronics Imaging, Inc., an emerging technology company using artificial intelligence and robotics to transform manufacturing, since
April 2021 and has served on the board of directors of Curic Inc., a start-up developing
a patented smart-diaper technology, since June 2020. Ms. Shelton previously served
as a member of the board of advisors of the Saratoga County Prosperity Partnership and as a member of the boards of directors of Silicon
Border Holding Company LLC, a commercial development along the western border of the United States and Mexico; Yellowstone Club Community
Foundation; and Aurora Dallas, a public art installation and event that takes place in downtown Dallas. Ms. Shelton earned her bachelor’s
degree in political science from San Diego State University, where she currently serves on the Board of Advisors for its International
Business Program, and her master of political philosophy from the University of Houston. Ms. Shelton’s extensive experience within
the semiconductor industry and in advising companies with respect to investor relations qualifies her to serve on our board of directors.
Djemi Traboulsi has served
as a member of our board of directors since March 2021. Mr. Traboulsi serves as President of Capital E Advisors, Inc., Capital E Group’s
US private equity and real estate research arm, a position he has held since 2005. Mr. Traboulsi served as a member of LFAC I’s
board of directors from its inception through the completion of its business combination with Landsea Homes in January 2021. From 1991
to 2001, Mr. Traboulsi served as the Managing Director of Kenmar Capital Advisors (formerly Kenmar Advisory Corp.), an alternative asset
manager. Prior to 1991, Mr. Traboulsi held various M&A and corporate finance positions with Mabon, Nugent & Co., an international
investment bank and brokerage firm. Mr. Traboulsi earned his bachelor’s degree in business administration from the American University
of Paris, and he has attended the Leonard N. Stern School of Business at New York University. Mr. Traboulsi’s extensive experience
in business and investing in and advising companies qualifies him to serve on our board of directors.
Number and Terms of Office of Officers and Directors
We have eight directors. Our board
of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those
directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with Nasdaq corporate
governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing
on Nasdaq. The term of office of the first class of directors, consisting of Robert Black and Habib Kairouz, will expire at our first
annual meeting of stockholders. The term of office of the second class of directors, consisting of James Hodge, Scott Reed and Jodi Shelton,
will expire at our second annual meeting of stockholders. The term of office of the third class of directors, consisting of Elias Farhat,
Baudouin Prot and Djemi Traboulsi, will expire at our third annual meeting of stockholders. We may not hold an annual meeting of stockholders
until after we complete our initial business combination.
Prior to the completion of an
initial business combination, any vacancy on the board of directors may be filled by a nominee chosen by holders of a majority of our
founder shares. In addition, prior to the completion of an initial business combination, only holders of a majority of our founder shares
may remove a member of the board of directors for any reason.
Pursuant to an agreement entered
into at the time of our IPO, our sponsor, upon completion of an initial business combination, will be entitled to nominate two individuals
for election to our board of directors, as long as our sponsor holds any securities covered by the registration rights agreement.
Our officers are appointed by
the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors
is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers
may consist of a Chief Executive Officer, a Chief Financial Officer, a Secretary and such other officers (including without limitation,
an Executive Chairman of the Board, Presidents, Vice Presidents, Assistant Secretaries and a Treasurer) as the board of directors from
time to time may determine.
Committees of the Board of Directors
Our board of directors has two
standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited exception, the Nasdaq rules
and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors.
Subject to phase-in rules and a limited exception, the Nasdaq rules require that the compensation committee of a listed company be comprised
solely of independent directors.
Audit Committee
We have established an audit committee
of our board of directors. James Hodge, Robert Black and Jodi Shelton serve as members of our audit committee, each of whom our board
of directors has determined to be independent under Nasdaq listing standards and applicable SEC rules. James Hodge serves as the chairperson
of our audit committee.
Each member of the audit committee
is financially literate, and our board of directors has determined that James Hodge qualifies as an “audit committee financial expert”
as defined in applicable SEC rules.
We have adopted an audit committee
charter, which details the principal functions of the audit committee, including:
|
● |
the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us; |
|
● |
pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
|
● |
reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence; |
|
● |
setting clear hiring policies for employees or former employees of the independent auditors; |
|
● |
setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
|
● |
obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
|
● |
reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
|
● |
reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
The audit committee is a separately
designated standing committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.
Compensation Committee
We have established a compensation
committee of our board of directors. Jodi Shelton, Robert Black and Habib Kairouz serve as members of our compensation committee, each
of whom our board of directors has determined to be independent under Nasdaq listing standards and applicable SEC rules. Jodi Shelton
serves as the chairperson of our compensation committee.
We have adopted a compensation
committee charter, which details the principal functions of the compensation committee, including:
|
● |
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
|
● |
reviewing and approving on an annual basis the compensation of all of our other officers; |
|
● |
reviewing on an annual basis our executive compensation policies and plans; |
|
● |
implementing and administering our incentive compensation equity-based remuneration plans; |
|
● |
assisting management in complying with our proxy statement and annual report disclosure requirements; |
|
● |
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
|
● |
if required, producing a report on executive compensation to be included in our annual proxy statement; and |
|
● |
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Notwithstanding the foregoing,
as indicated above, other than the $15,000 per month administrative fee payable to an affiliate of our sponsor, no compensation of any
kind, including finders, consulting or other similar fees, will be paid by us to any of our existing stockholders, officers, directors
or any of their respective affiliates, prior to, or for any services they render in order to effectuate the completion of a business combination.
Accordingly, it is likely that prior to the completion of an initial business combination, the compensation committee will only be responsible
for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The compensation committee’s
charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant,
legal counsel or other adviser and is directly responsible for the appointment, compensation and oversight of the work of any such adviser.
However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation
committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Director Nominations
We do not have a standing nominating
committee, though we intend to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules.
In accordance with Rule 5605(e)(2) of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection
by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility
of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who will
participate in the consideration and recommendation of director nominees are Robert Black, Habib Kairouz and Jodi Shelton. In accordance
with Rule 5605 of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we do not have a
nominating committee charter in place.
The board of directors will also
consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to
stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders
that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.
We have not formally established
any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying
and evaluating nominees for director, our board of directors considers educational background, diversity of professional experience, knowledge
of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Compensation Committee Interlocks and Insider Participation
None of our executive officers
currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has
one or more executive officers serving on our board of directors.
Code of Ethics
We have adopted a Code of Ethics
applicable to our directors, officers and employees. We have filed a copy of our Code of Ethics and our audit committee charter as exhibits
to the registration statement in connection with our IPO. You will be able to review these documents by accessing our public filings at
the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us.
We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Conflicts of Interest
In general, officers and directors
of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation
if:
|
● |
the corporation could financially undertake the opportunity; |
|
● |
the opportunity is within the corporation’s line of business; and |
|
● |
it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation. |
Certain of our officers and directors
presently have, 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 or is subject to other contractual restrictions. Accordingly, if any of our officers or directors becomes aware
of a business combination opportunity which is suitable for an entity to which they have then-current fiduciary or contractual obligations,
they will honor their fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to
their fiduciary duties under Delaware law. We do not expect, however, that the fiduciary duties or contractual obligations of our officers
or directors will materially affect our ability to complete our initial business combination.
Below is a table summarizing the
entities to which our executive officers and directors currently have fiduciary duties, contractual obligations or other material management
relationships:
Individual |
|
Entity |
|
Entity’s Business |
|
Affiliation |
Elias Farhat |
|
|
|
|
|
|
|
Landsea Homes |
|
Residential Construction |
|
Director |
|
Lakeside Capital Advisors |
|
Real Estate Investment |
|
Director |
Baudouin Prot |
|
Kering S.A. |
|
Luxury Goods |
|
Director |
|
Alstom S.A. |
|
Transportation Equipment |
|
Director |
|
Foncia Group S.A. |
|
Real Estate Services |
|
Director |
|
Finastra |
|
Financial Technology |
|
Director |
|
Boston Consulting Group |
|
Management Consulting |
|
Senior Advisor |
Scott Reed |
|
Silvergate Capital Corp. |
|
Banking |
|
Director |
|
Vista Bancshares |
|
Banking |
|
Director |
|
BankCap Equity Partners |
|
Private Equity |
|
Partner |
|
Landsea Homes
InBankshares Corp.
Uncommon Giving |
|
Residential Construction
Banking
Technology |
|
Director
Director
Director |
|
|
Nobul Corporation |
|
Technology |
|
Director |
|
|
PT Financial Holdings |
|
Financial Services |
|
Director |
Alberto Bianchinotti |
|
AM Knight Financial Services |
|
Financial Services |
|
Owner |
|
Merlin Biomed Private Equity Advisors |
|
Private Equity |
|
Chief Financial Officer |
Robert Black |
|
Wind Point Partners |
|
Private Equity |
|
Executive Advisory Partner |
|
Boston Consulting Group |
|
Management Consulting |
|
Senior Advisor |
|
Edgewell Personal Care Company |
|
Consumer Products |
|
Director |
|
RTIC Outdoors, LLC |
|
Consumer Products |
|
Chairman |
|
good2grow |
|
Consumer Products |
|
Chairman |
|
Targeted PetCare Group |
|
Consumer Products |
|
Chairman |
|
Corsicana Bedding |
|
Consumer Products |
|
Director |
James Hodge |
|
Arrowsmith, LLC |
|
Asset Management |
|
Chief Investment Officer |
|
Alpha Japan Asset Advisors Ltd. |
|
Asset Management |
|
Member of Advisory Board |
|
China Alpha Fund Management Ltd. |
|
Investment Management |
|
Director |
|
China Alpha II Fund Ltd. |
|
Investment Fund |
|
Director |
|
China Alpha Master Fund Ltd. |
|
Investment Fund |
|
Director |
|
Hel Ved Master Fund |
|
Investment Fund |
|
Director |
|
WF Asian Reconnaissance Fund Limited |
|
Investment Fund |
|
Director |
|
WF Asian Smaller Companies Fund Limited |
|
Investment Fund |
|
Director |
Habib Kairouz |
|
Rho Capital Partners |
|
Private Equity |
|
Managing Partner |
|
Kasisto, Inc. |
|
Software |
|
Director |
|
Passport Labs, Inc. |
|
Software |
|
Director |
|
Snagajob, Inc. |
|
Job Marketplace |
|
Director |
|
Dashlane Inc. |
|
Software |
|
Director |
|
Pawlicy Advisor, Inc. |
|
Pet Insurance Marketplace |
|
Director |
Jodi Shelton |
|
Shelton Group |
|
Investor Relations |
|
Chief Executive Officer |
|
|
Nanotronics Imaging, Inc. |
|
Technology |
|
Advisor |
|
|
Curic Inc. |
|
Technology |
|
Director |
Djemi Traboulsi |
|
Capital E Advisors |
|
Private Equity |
|
President |
Potential investors should also
be aware of the following other potential conflicts of interest:
|
● |
Our executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our executive officers and directors is engaged in several other business endeavors for which they may be entitled to substantial compensation, and our executive officers and directors are not obligated to contribute any specific number of hours per week to our affairs. |
|
● |
Our sponsor subscribed for founder shares prior to the date of this prospectus and will purchase private placement warrants in a transaction that will close simultaneously with the closing of this offering. |
|
● |
Our initial stockholders have entered into agreements with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and public shares in connection with (i) the completion of our initial business combination and (ii) a stockholder vote to approve an amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to allow redemption in connection with our initial business combination or 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 prescribed time frame. Additionally, our sponsor has agreed to waive its rights to liquidating distributions from the trust account with respect to its founder shares if we do not complete our initial business combination within the prescribed time frame. Except as described herein, our sponsor and each of our executive officers and directors have agreed not to transfer, assign or sell any of their founder shares until the earliest of (A) one year after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the last reported sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30- trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their common stock for cash, securities or other property. The private placement warrants will not be transferable until 30 days following the completion of our initial business combination. Because each of our executive officers and director nominees will own common stock or warrants directly or indirectly, they may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effect our initial business combination. |
|
● |
Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. |
|
● |
Our sponsor, officers or directors may have a conflict of interest with respect to evaluating a business combination and financing arrangements as we may obtain loans from our sponsor or an affiliate of our sponsor or any of our officers or directors to finance transaction costs in connection with an intended initial business combination. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. |
We are not prohibited from pursuing
an initial business combination with a business combination target that is affiliated with our sponsor, officers or directors or making
the acquisition through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek
to complete our initial business combination with a business combination target that is affiliated with our sponsor, executive officers
or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is
a member of FINRA or from an independent accounting firm, that such initial business combination is fair to our company from a financial
point of view. We are not required to obtain such an opinion in any other context. Furthermore, in no event will our sponsor or any of
our existing officers or directors, or any of their respective affiliates, be paid by the company any finder’s fee, consulting fee
or other compensation prior to, or for any services they render in order to effectuate, the completion of our initial business combination.
Further, commencing on the date of this prospectus, we will also reimburse an affiliate of our sponsor for office space and administrative
support services provided to us in the amount of $15,000 per month.
We cannot assure you that any
of the above-mentioned conflicts will be resolved in our favor.
In the event that we submit our
initial business combination to our public stockholders for a vote, our initial stockholders have agreed to vote their founder shares,
and our sponsor and each of our executive officers and directors have agreed to vote any shares purchased during or after this offering,
in favor of our initial business combination.
Limitation on Liability and Indemnification of
Officers and Directors
Our amended and restated certificate
of incorporation provides that our executive officers and directors will be indemnified by us to the fullest extent authorized by Delaware
law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that
our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors,
unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from
their actions as directors.
We have entered into agreements
with our executive officers and directors to provide contractual indemnification in addition to the indemnification provided for in our
amended and restated certificate of incorporation. Our bylaws also permit us to secure insurance on behalf of any officer, director or
employee for any liability arising out of their actions, regardless of whether Delaware law would permit such indemnification.
We have purchased a policy of
directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement
or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors. Each of
our executive officers and directors has agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust
account, and has agreed to waive any right, title, interest or claim of any kind they may have in the future as a result of, or arising
out of, any services provided to us and will not seek recourse against the trust account for any reason whatsoever (except to the extent
they are entitled to funds from the trust account due to their ownership of public shares). Accordingly, any indemnification provided
will only be able to be satisfied by us if (i) we have sufficient funds outside of the trust account or (ii) we complete an initial business
combination.
Our indemnification obligations
may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may
have the effect of reducing the likelihood of derivative litigation against our executive officers and directors, even though such an
action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely
affected to the extent we pay the costs of settlement and damage awards against our executive officers and directors pursuant to these
indemnification provisions.
We believe that these provisions,
the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented
and experienced officers and directors.
Delinquent Section 16(a) Reports
Section
16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class
of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and
other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to
furnish us with copies of all Section 16(a) forms filed by such reporting persons.
Based
solely upon our review of the Section 16(a) filings that have been furnished to us and representations by our directors and executive
officers (where applicable), we believe that all filings required to be made under Section 16(a) during the fiscal year ended December
31, 2021 were timely made, except that during the fiscal year ended December 31, 2021, Mr. James Hodge failed to timely report the initial
ownership of our common stock on Form 3 and failed to timely report one transaction on Form 4, and as a result, one Form 4 was not timely
filed.
ITEM 11. EXECUTIVE COMPENSATION
Other than the monthly payment
of $15,000 to an affiliate of our sponsor for office space, utilities and secretarial and administrative and support, none of our executive
officers or directors has received any cash (or non-cash) compensation for services rendered to us. Our sponsor, executive officers and
directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities
on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our independent
directors, review on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates.
After the completion of our initial
business combination, directors or members of our management team who remain with us may be paid consulting, management or other fees
from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials
or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. It is unlikely the amount
of such compensation will be known at the time, because the directors of the post-combination business will be responsible for determining
executive and director compensation. Any compensation to be paid to our officers will be determined by our compensation committee.
We do not intend to take any action
to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination,
although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to
remain with us after the initial business combination. The existence or terms of any such employment or consulting arrangements to retain
their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe
that the ability of our management to remain with us after the consummation of our initial business combination will be a determining
factor in our decision to proceed with any potential business combination. We are not party to any agreements with our executive officers
and directors that provide for benefits upon termination of employment.
The Compensation Committee has
reviewed and discussed the Compensation Discussion and Analysis with management and, based upon its review and discussions, the Compensation
Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Annual Report on Form
10-K for the year ended December 31, 2021.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth
information regarding the beneficial ownership of our common stock as of March 10, 2022 based on information obtained from the
persons named below, with respect to the beneficial ownership of common stock, by:
|
● |
each person known by us to be the beneficial owner of more than 5% of our outstanding common stock; |
|
● |
each of our executive officers and directors that beneficially owns our common stock; and |
|
● |
all our executive officers and directors as a group. |
In the table below, percentage
ownership is based on 32,343,750 shares of our common stock, consisting of (i) 25,875,000 shares of our Class A common stock and (ii)
6,468,750 shares of our Class B common stock, issued and outstanding as of March 10, 2022. Voting power represents the combined
voting power of shares of Class A common stock and shares of Class B common stock owned beneficially by such person. On all matters to
be voted upon, the holders of the shares of Class A common stock and shares of Class B common stock vote together as a single class. Currently,
all of the shares of Class B common stock are convertible into Class A common stock on a one-for-one basis. The table below does not include
the Class A common stock underlying the private placement warrants held or to be held by our officers or sponsor because these securities
are not exercisable within 60 days of this report.
Unless otherwise indicated, we
believe that all persons named in the table have sole voting and investment power with respect to all common stock beneficially owned
by them.
| |
Class A Common Stock | |
Class B Common Stock | |
|
Name and Address of Beneficial Owner(1) | |
Number of Shares Beneficially Owned | |
Approximate Percentage of Class | |
Number of Shares Beneficially Owned | |
Approximate Percentage of Class | |
Approximate Percentage of Outstanding Common Stock |
Level Field Capital II, LLC(2)(3) | |
| — | | |
| — | | |
| 6,388,750 | | |
| 98.8 | % | |
| 19.8 | % |
Elias Farhat(3) | |
| — | | |
| — | | |
| 6,388,750 | | |
| 98.8 | % | |
| 19.8 | % |
Baudouin Prot | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Scott Reed | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Alberto Bianchinotti | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Robert Black | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| * | |
James Hodge | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| * | |
Habib Kairouz | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| * | |
Jodi Shelton | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| * | |
Djemi Traboulsi(3) | |
| — | | |
| — | | |
| 6,388,750 | | |
| 98.8 | % | |
| 19.8 | % |
All executive officers and directors as a group (9 individuals) | |
| — | | |
| — | | |
| 6,468,750 | | |
| 100.0 | % | |
| 20.0 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Other 5% Stockholders | |
| | | |
| | | |
| | | |
| | | |
| | |
Saba Capital Management(4) | |
| 2,135,451 | | |
| 8.3 | % | |
| — | | |
| — | | |
| 6.6 | % |
Beryl Capital Management(5) | |
| 1,600,000 | | |
| 6.2 | % | |
| — | | |
| — | | |
| 4.9 | % |
(1) |
Unless otherwise noted, the business address of each of the following entities or individuals is c/o LF Capital Acquisition Corp. II, 1909 Woodall Rodgers Freeway, Suite 500, Dallas, Texas 75201. |
(2) |
Interests shown consist solely of founder shares, classified as shares of Class B common stock. Such shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment pursuant to the anti-dilution provisions contained therein. |
(3) |
Level Field Capital II, LLC, our sponsor, is the record holder of the shares reported herein. Level Field Partners II, LLC is the managing member of Level Field Capital II, LLC. Level Field Management II, LLC is the managing member of Level Field Partners II, LLC. Level Field Management II, LLC is managed by its two members, Elias Farhat and Djemi Traboulsi. Messrs. Farhat and Traboulsi disclaim beneficial ownership of these shares other than to the extent of any pecuniary interest they may have therein. |
(4) |
According to a Schedule 13G filed with the SEC on November 26, 2021by Saba Capital Management, L.P., a Delaware limited partnership, Saba Capital Management GP, LLC, a Delaware limited liability company, and Boaz R. Weinstein, who have voting and dispositive power over the 2,135,451 shares of Class A common stock reported. The business address for these reporting persons is 405 Lexington Avenue, 58th Floor, New York, New York 10174. |
(5) |
According to a Schedule 13G filed with the SEC on November 29, 2021 by Beryl Capital Management LLC, a Delaware limited liability company, Beryl Capital Management LP, a Delaware limited partnership, Beryl Capital Partners II LP, a Delaware limited partnership (the “Partnership”), and David A. Witkin, who each have voting and dispositive power over the 1,600,000 shares of Class A common stock reported (except for the Partnership, which only shares voting and dispositive control over 1,401,836 shares of Class A common stock). Each of these reporting persons disclaims beneficial ownership of the reported shares, except to the extent of that reporting person’s pecuniary interest therein. The business address for these reporting persons is 1611 S. Catalina Ave., Suite 309, Redondo Beach, California 90277. |
Immediately after the IPO, our
initial stockholders beneficially owned 20% of the then-issued and outstanding shares of our common stock (assuming they do not purchase
any units in this offering) and had the right to appoint all of our directors prior to the completion of our initial business combination.
Holders of our public shares will not have the right to appoint any directors to our board of directors prior to the completion of our
initial business combination. Because of this ownership block, our initial stockholders may be able to effectively influence the outcome
of all other matters requiring approval by our stockholders, including amendments to our amended and restated certificate of incorporation
and approval of significant corporate transactions, including approval of our initial business combination.
Our initial stockholders have
agreed (A) to vote any founder shares owned by them in favor of any proposed business combination and (B) not to redeem any founder shares
in connection with a stockholder vote to approve a proposed initial business combination.
Our sponsor and our executive
officers and directors are deemed to be our “promoters” as such term is defined under the federal securities laws.
Our anchor investor owns 1,125,000
public units. As a result of the founder shares and private placement warrants that our anchor investor may hold, it may have different
interests with respect to a vote on an initial business combination than other public stockholders.
Securities Authorized for Issuance under Equity
Compensation Table
None.
Changes in Control
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Founder Shares
On March 5, 2021, our sponsor
acquired 100 shares of the Company’s common stock in exchange for a capital contribution of $25,000, or approximately $250.00 per
share. On March 15, 2021, we effected a 64,687.5-for-one forward stock split of our issued and outstanding shares of common stock and
reclassified those issued and outstanding shares into shares of Class B common stock. On June 21, 2021, we effected an approximately 1.11-for-one
forward stock split of our issued and outstanding shares of Class B common stock. On October 26, 2021, we effected an approximately one-for-1.11
reverse stock split of our issued and outstanding shares of Class B common stock. At the time of our IPO, the sponsor held 6,468,750 founder
shares (reflecting an aggregate capital contribution of approximately $0.004 per share). The number of founder shares issued was determined
based on the expectation that such founder shares would represent 20% of the issued and outstanding shares of our common stock upon completion
of the IPO. On November 19, 2021, our sponsor transferred 20,000 founder shares to each of our independent directors at their original
purchase price. In addition, at the closing of our initial business combination, our anchor investor will be entitled to purchase from
our sponsor an aggregate of 12.5% of the number of founder shares outstanding upon the final closing of the IPO, at a purchase price of
approximately $0.004 per share.
Subject
to certain exceptions, our sponsor and each of our executive officers and directors have agreed not to transfer, assign or sell
any of their founder shares until the earliest of (A) one year after the completion of our initial business combination or (B) subsequent
to our initial business combination, (x) if the last reported sale price of our Class A common stock equals or exceeds $12.00 per share
(as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within
any 30- trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a
liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right to exchange
their common stock for cash, securities or other property.
Private Placement Warrants
In
connection with the closing of our IPO, our sponsor, the anchor investor and the underwriter purchased 12,350,000 private placement warrants
at a price of $1.00 per warrant, or $12,350,000. Each private placement warrant entitles the holder to purchase one share of Class A common
stock at an exercise price of $11.50 per share. The private placement warrants are identical to the warrants included in the units
sold in the IPO, except for (i) certain transfer restrictions with respect to the former described below and (ii) the registration rights
with respect to the former that are described below. In addition, the private placement warrants held by the underwriter will not be exercisable
more than five years from the commencement of sales in the IPO in accordance with FINRA Rule 5110(g)(8).
Subject to certain exceptions,
the private placement warrants (including the shares of our Class A common stock issuable upon exercise of the private placement warrants)
will not be transferable, assignable or salable until 30 days after the completion of our initial business combination.
Registration Rights
Pursuant to a registration rights
agreement we entered into with our initial stockholders in connection with the IPO, we may be required to register certain securities
for sale under the Securities Act. These holders, and holders of warrants issued upon conversion of working capital loans, if any, are
entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for
sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities
Act. In addition, these holders have the right to include their securities in other registration statements filed by us. However, the
registration rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective
until the securities covered thereby are released from their lock-up restrictions, as described herein. We will bear the costs and expenses
of filing any such registration statements.
Administrative Support Agreement
We agreed to pay an affiliate
of our sponsor $15,000 per month for office space, utilities and secretarial and administrative support, commencing on the date that our
securities were first listed on Nasdaq. Upon consummation of our initial business combination or our liquidation, we will cease paying
these monthly fees.
Related Party Notes
On March 5, 2021, our sponsor agreed to loan the us an aggregate of up to $300,000 to cover
expenses related to the IPO pursuant to a promissory note. On June 18, 2021, our Sponsor amended the Note to increase the principal amount
to $600,000. The loan was non-interest bearing and payable on the earlier of December 31, 2021 or the completion of the IPO. A total
of $425,000 under the Note was borrowed from our Sponsor and repaid in full from the proceeds of the Initial Public Offering not being
placed in the Trust Account on November 19, 2021.
Other than the foregoing, no compensation
of any kind, including finder’s and consulting fees, will be paid to our sponsor, officers and directors, or any of their respective
affiliates, for services rendered prior to or in connection with the completion of an initial business combination. However, these individuals
will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments
that were made to our sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses
that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection
with activities on our behalf.
In addition, in order to finance
transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of
our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination,
we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working
capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment.
Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender. Such warrants
would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. We do not expect
to seek loans from parties other than our sponsor or an affiliate of our sponsor, as we do not believe third parties will be willing to
loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
After our initial business combination,
members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any
and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials,
as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution
of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable,
as it will be up to the directors of the post-combination business to determine executive and director compensation.
Policy for Approval of Related Party Transactions
The audit committee of our board
of directors has adopted a charter, providing for the review, approval and/or ratification of “related party transactions,”
which are those transactions required to be disclosed pursuant to Item 404 of Regulation S-K as promulgated by the SEC, by the audit committee.
At its meetings, the audit committee is provided with the details of each new, existing or proposed related party transaction, including
the terms of the transaction, any contractual restrictions that the Company has already committed to, the business purpose of the transaction
and the benefits of the transaction to the Company and to the relevant related party. Any member of the committee who has an interest
in the related party transaction under review by the committee will abstain from voting on the approval of the related party transaction,
but may, if so requested by the chairman of the committee, participate in some or all of the committee’s discussions of the related
party transaction. Upon completion of its review of the related party transaction, the committee may determine to permit or to prohibit
the related party transaction.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following is a summary of
fees paid or to be paid to Citrin Cooperman & Company, LLP (“Citrin”) for services rendered.
Audit Fees. During the
year ended December 31, 2021, audit fees for our independent registered public accounting firm were approximately $47,500.
Audit-Related Fees. During
the year ended December 31, 2021, audit-related fees for our independent registered public accounting firm were approximately $17,500.
Tax Fees. During the year
ended December 31, 2021, fees for tax services for our independent registered public accounting firm were approximately $0.
All Other Fees. During
the year ended December 31, 2021, fees for other services for our independent registered public accounting firm were approximately $0.
Pre-Approval Policy
Our audit committee was formed
upon the consummation of our IPO. As a result, the audit committee did not pre-approve all of the foregoing services, although any services
rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee,
and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be
performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described
in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
NOTES TO FINANCIAL STATEMENTS
Note 1 – Description of Organization and Business Operations
LF Capital Acquisition Corp. II
(the “Company”) was incorporated in Delaware on February 19, 2021. The Company is a blank check company formed for the purpose
of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business
combination with one or more businesses or entities (the “Business Combination”). The Company has selected December 31 as
its fiscal year end.
The Company is not limited to
a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging
growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2021, the Company
had not commenced any operations. All activity from February 19, 2021 (inception) through December 31, 2021, relates to the Company’s
formation and Initial Public Offering (“IPO”), which is described below and, since the IPO, the search for a prospective
Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination,
at the earliest. The Company will generate non-operating income in the form of interest income earned on investments from the proceeds
derived from the IPO. The registration statement for the Company’s IPO was declared effective on November 16, 2021. On November
19, 2021, the Company consummated the IPO and sold 22,500,000 units (“Units”) with each Unit consisting of one share of Class
A common stock and one-half of one redeemable warrant to purchase one share of Class A common stock at $11.50 per share (each, a “Public
Warrant”) at $10.00 per Unit, generating gross proceeds of $225,000,000, which is discussed in Note 3.
Simultaneously with the closing
of the IPO, the Company consummated the sale of warrants at a price of $ per warrant in a private placement (“Private
Placement Warrants”) to the Company’s sponsor, Level Field Capital II, LLC (the “Sponsor”), the underwriter of
the IPO and certain funds and accounts managed by subsidiaries of a strategic investor (the “anchor investor”), generating
gross proceeds of $ which is described in Note 4.
Simultaneously with the closing
of the IPO, the Company consummated the closing of the sale of 3,375,000 additional Units upon receiving notice of the underwriter’s
election to fully exercise its overallotment option (“Overallotment Units”), generating additional gross proceeds of $33,750,000.
Simultaneously with the exercise of the overallotment, the Company consummated the Private Placement of an additional Private
Placement Warrants to the Sponsor and the underwriter, generating gross proceeds of $1,350,000.
Offering costs for the IPO and
the exercise of the underwriter’s over-allotment option amounted to $15,030,508, consisting of $14,231,250 of underwriting fees,
of which $9,056,250 is deferred and held in the Trust Account (defined below) and $799,258 of other offering costs. As described in Note
5, the $9,056,250 of deferred underwriting fees payable is contingent upon the consummation of a Business Combination within 15 months
from the closing of IPO (or, following the extension of the period of time to complete the initial business combination up to six times
by an additional period of one month each time for a total of up to 21 months), subject to the terms of the underwriting agreement.
Following the closing of the IPO
and the exercise of the underwriter’s over-allotment option, $263,925,000 ($10.20 per Unit) from the net proceeds from the sale
of the Units in the IPO and the Private Placement Warrants were placed in a trust account (“Trust Account”) and have been
invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended
(the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself
out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the
Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account, as described below.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more
initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding
the deferred underwriting fees and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the
initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or
acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient
for it not to be required to register as an investment company under the Investment Company Act. There is no assurance the Company will
be able to successfully effect a Business Combination.
The Company will provide the
holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the
Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business
Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares
for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20 per Public Share, plus any pro rata
interest then in the Trust Account, net of taxes payable). The warrants will subject to redemption, as further described in Note 6.
All of the Public Shares contain
a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there
is a stockholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments
to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) Subtopic 10-S99, redemption provisions not solely within the control of a company
require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares were issued with
other freestanding instruments (i.e., Public Warrants), the initial carrying value of Class A common stock classified as temporary equity
was the allocated proceeds determined in accordance with ASC 470-20 “Debt with Conversion and other Options”. The Class A
common stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option
to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable
that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in
the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the
end of each reporting period. The Company has elected to recognize the changes immediately. Although redemptions cannot cause the Company’s
net tangible assets to fall below $5,000,001, the Public Shares are redeemable and are classified as such on the balance sheet until
such date that a redemption event takes place.
Redemptions of the Company’s
Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating
to the Company’s Business Combination. If the Company seeks stockholder approval of the Business Combination, the Company will
proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such other vote
as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements
and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to the Certificate
of Incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC
prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock
exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will
offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules.
If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares
(as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination. Additionally,
each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote
for or against the proposed transaction.
Notwithstanding the foregoing,
the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person
with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate
of 15% or more of the Class A common stock sold in the Initial Public Offering, without the prior consent of the Company.
The Company’s Sponsor,
officers and directors (collectively, the “Initial Stockholders”) have agreed not to propose an amendment to the Certificate
of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the
Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem
their shares of Class A common stock in conjunction with any such amendment.
If the Company is unable to complete
a Business Combination within 15 months from the closing of the IPO (unless extended in connection with an Extension Election as described
below or as a result of an amendment to our amended and restated certificate of incorporation, which would require the approval of the
holders of at least 65% of all of our then outstanding common stock) (“Combination Period”), the Company will (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter,
redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s franchise
and income 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 the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate,
subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of
other applicable law. However, if the Company anticipates that it may be unable to complete an initial business combination within 15
months, it may, but is not obligated to, extend the period of time to complete a business combination up to six times by an additional
period of one month each time (for a total of up to 21 months) (each such one-month extension of the prescribed time period, an “Extension
Election”).
The Initial Stockholders have
agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within
the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the Initial Public Offering, they
will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete
a Business Combination within the Combination Period. The underwriter has agreed to waive its rights to its deferred underwriting fees
(see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period,
and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption
of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available
for distribution (including Trust Account assets) will be only $10.20 per share held in the Trust Account. In order to protect the amounts
held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party
who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims
under the Company’s indemnity of the underwriter against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against
a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek
to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have
all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses
or other entities with which the Company does business, execute agreements waiving any right, title, interest or claim of any kind in
or to monies held in the Trust Account.
Risks and
Uncertainties
In March 2020,
the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to
spread throughout the United States and the world. As of the date the financial statements were issued, there is considerable uncertainty
around the expected duration of this pandemic. Management continues to evaluate the impact of the COVID-19 pandemic and the Company has
concluded that, while it is reasonably possible that COVID-19 could have a negative effect on the Company’s ability to identify
a target company for a Business Combination, the specific impact is not readily determinable as of the date of the financial statements.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity
and Capital Resources
As of December 31, 2021, the
Company had $325,250 in its operating bank account, $263,937,611 in securities held in the Trust Account to be used for a Business
Combination or to repurchase or redeem its Common Stock in connection therewith and working capital of $603,572.
The Company’s liquidity
needs prior to the consummation of the IPO were satisfied through the payment of $25,000 from the Sponsor to cover certain offering costs
on the Company’s behalf in exchange for issuance of Founder Shares (Note 4) and a promissory note, as amended, from the Sponsor
(see Note 4). Subsequent to the IPO, the Company’s liquidity needs have been satisfied through a portion of the net proceeds from
the Private Placement. Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account
for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
In order to finance transaction costs in connection with a Business Combination, the Company will need to raise additional capital through
loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers,
directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they
deem reasonable in their sole discretion, to meet the Company’s working capital needs. As of December 31, 2021, there were no amounts
outstanding under any Working Capital Loans.
Based on the foregoing, management
believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation
of a Business Combination or one year from the date of this filing.
Note 2 — Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying financial statements
are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission.
Emerging Growth Company
The Company is an emerging growth
company as defined in Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an
emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition
period, which means that when a standard is issued or revised, and it has different application dates for public or private companies,
the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised
standard.
This may make comparison of the
Company’s financial statement with those of another public company that is neither an emerging growth company nor an emerging growth
company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use of
Estimates
The preparation of financial
statements in conformity with U.S. GAAP requires the Company’s
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.
Significant estimates in these financial statements include those related to the fair value of Warrants. Making estimates requires management
to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly
the actual results could differ significantly from those estimates. It is at least reasonably
possible that the estimate of the effects of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Actual results could differ
from those estimates.
Cash and Cash Equivalents
The Company considers all short-term
investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash
equivalents as of December 31, 2021.
Investments Held in Trust Account
At December 31, 2021, substantially
all of the assets held in the Trust Account were held in U.S. Treasury securities. The Company’s investments held in the Trust
Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each
reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in unrealized
gains on marketable securities held in Trust Account in the accompanying statement of operations. The estimated fair values of investments
held in Trust Account are determined using available market information.
Offering Costs Associated with the Initial
Public Offering
Offering costs amounted to $15,030,508, of which $14,621,728 and $408,779 were charged against the carrying value of Class A common
stock and public and private warrants, respectively, based on the relative value of the common shares and public and private Warrants.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed
the Federal Depository Insurance Corporation limit of $250,000. As of December 31, 2021, the Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,”
equals or approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Income
Taxes
The Company complies with the accounting and reporting requirements of FASB
ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets
and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized
tax benefits as of December 31, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income
tax expense. No amounts were accrued for the payment of interest and penalties for the period from February 19, 2021 (date of inception)
through December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals
or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Deferred tax liabilities and assets are determined
based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for
the year in which the differences are expected to reverse. Current income taxes are based on the year’s income taxable for federal
and state income tax reporting purposes. Total tax provision may differ from the statutory tax rates applied to income before provision
for income taxes due principally to expenses charged which are not tax deductible.
The total benefit for income taxes is comprised
of the following:
Schedule of Components of Income Tax Expense (Benefit) | |
| | |
| |
December 31, 2021 |
Current expense | |
$ | | |
Deferred expense | |
| 50,929 | |
Change in valuation allowance | |
| (31,642 | ) |
| |
| | |
Total income tax benefit | |
$ | 19,287 | |
The net deferred tax assets and liabilities in the accompanying
balance sheets included the following components:
Schedule of deferred income tax assets and liabilities | |
| | |
| |
December 31, 2021 |
Deferred tax assets | |
$ | 50,929 | |
Deferred tax liabilities | |
| | |
Valuation allowance for deferred tax assets | |
| (31,287 | ) |
| |
| | |
Net deferred tax assets | |
$ | 19,642 | |
The deferred tax assets as of December 31, 2021 were
comprised of the tax effect of cumulative temporary differences as follows:
| |
December 31, 2021 |
Capitalized expenses before business combination | |
$ | 50,929 | |
Valuation allowance for deferred tax assets | |
| (31,642 | ) |
| |
| | |
Total | |
$ | 19,287 | |
In assessing the realization of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary
differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax
assets, projected future taxable income and tax planning strategies in making this assessment. At the period ended December 31, the valuation
allowance was $ 31,642.
A reconciliation of the statutory federal income tax
rate (benefit) to the Company’s effective tax rate is as follows:
Schedule of effective tax rate | |
| | |
| |
December 31, 2021 |
Statutory federal income tax rate | |
| 21.0 | % |
State taxes, net of federal tax benefit | |
| 0.0 | % |
Valuation allowance | |
| -13.05 | % |
Income tax provision (benefit) | |
| 7.95 | % |
Class A Common stock subject to possible redemption
The Company accounts for its
Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Conditionally redeemable Class A common
stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity.
At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock sold in
the IPO and in connection with the exercise of the underwriter’s over-allotment option feature certain redemption rights that are
considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, on December
31, 2021, 25,875,000 shares of Class A common stock subject to possible redemption is presented as temporary equity.
Immediately upon the closing
of the IPO and the exercise of the underwriter’s over-allotment option, the Company recognized the accretion from the initial book
value to redemption amount value. The change in the carrying value of redeemable shares of Class A common stock resulted in charges against
additional paid-in capital and accumulated deficit.
As of December 31, 2021, the
shares of Class A common stock reflected on the balance sheet are reconciled on the following table:
Schedule of reconciled balance
sheet | |
| | |
Gross proceeds | |
$ | 258,750,000 | |
Less | |
| | |
Fair value of Public Warrants at issuance | |
| (6,727,500 | ) |
Class A shares issuance costs | |
| (14,621,728 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 26,524,228 | |
Class A common stock subject to possible redemption | |
$ | 263,925,000 | |
Net
income (loss) per Common Share
The Company has two classes
of shares, which are referred to as Class A Common Stock and Class B Common Stock (the “Founder Shares”). Earnings and
losses are shared pro rata between the two classes of shares. A total of 12,937,500
Public Warrants (see Note 3) and 12,350,000
Private Placement Warrants (see Note 4) to purchase an aggregate of 25,287,500 shares
of Class A common stock at $11.50 per
share were issued on November 19, 2021. At December 31, 2021, no Public Warrants or Private Placement Warrants have been
exercised. The 25,287,500
shares of Class A common stock for which the outstanding Public Warrants and Private Placement Warrants are exercisable were
excluded from diluted earnings per share for the period ended December 31, 2021 because they are contingently exercisable, and the
contingencies have not yet been met. As a result, diluted net loss per share of common stock is the same as basic net income loss
per share of common stock for the period. The table below presents a reconciliation of the numerator and denominator used to compute
basic and diluted net loss per share for each class of stock.
Schedule of accretion of temporary equity | |
| | |
| |
For the period from February 19, 2021 (inception) through December 31, 2021 |
Net income loss | |
$ | (223,233 | ) |
Accretion for Class A Common Stock to redemption value | |
$ | (26,524,228 | ) |
Net loss including accretion of temporary equity to redemption value | |
$ | (26,747,461 | ) |
Schedule of basic and diluted net loss per share |
|
|
|
|
|
|
|
|
For the period from February 19, 2021 (inception) through December 31, 2021 |
Basic and diluted net loss per share: |
|
Class A Common Stock |
|
Class B Common Stock |
Numerator: |
|
|
|
|
|
|
|
|
Allocation of net loss before accretion income |
|
$ |
(77,647 |
) |
|
$ |
(145,587 |
) |
Accretion for Class A Common Stock to redemption value |
|
$ |
26,524,228 |
|
|
|
|
|
Net income (loss) |
|
|
26,446,582 |
|
|
|
(145,587 |
) |
Denominator: |
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
3,450,000 |
|
|
|
6,468,750 |
|
|
|
|
|
|
|
|
|
|
Basic and dilution net income (loss) per share |
|
$ |
7.67 |
|
|
$ |
(0.02 |
) |
Warrant Instruments
The Company accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable
authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”).
The assessment considers whether the instruments are free standing financial instruments pursuant to ASC
480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification
under ASC 815, including whether the instruments are indexed to the Company’s own common
shares and whether the instrument holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity
classification. This assessment, which requires the use of professional judgment, was conducted
at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded
that the Public Warrants and Private Placement Warrants issued pursuant to the warrant
agreement qualify for equity accounting treatment.
Stock Compensation Expense
In connection with the Company’s
IPO, founder’s shares were sold to certain independent directors by the Sponsor at the price of $ per share.
The Company accounts for stock-based
compensation expense in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”) under which
stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the
requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a
given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized
once the event is deemed probable to occur. Forfeitures are recognized as incurred.
The
fair value of the 80,000 founder shares sold to certain independent directors as of November 9, 2021, was $627,119, or $7.84 per share.
The Company used a Monte Carlo Model Simulation to arrive at the fair value
of the stock compensation. The key assumptions in the option pricing model utilized are assumptions related to expected separation date
of Units, anticipated business combination date, purchase price, share-price volatility, expected term, exercise date, risk-free interest
rate and present value. The expected volatility as of the IPO Closing Date was derived based upon similar SPAC warrants and technology
exchange traded funds which aligns with Company’s stated industry target and present value factor was based on risk-free rate and
terms until the exercise date. The Company’s Founder Shares sold to independent directors (see Note 4) were deemed within the scope
a ASC 718 and are subject to a performance condition, namely the occurrence of a Business Combination. Compensation expense related to
the Founder Shares transferred is recognized only when the performance condition is probable of occurrence, or more specifically when
a Business Combination is consummated. Therefore, no stock-based compensation expense has been recognized during the period from February
19, 2021 (inception) through December 31, 2021.
Recent Accounting Pronouncements
In August 2020, the FASB issued
Accounting Standards Update (“ASU”) No. 2020-06, Debt — debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing
major separation models required under current U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked
contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas.
The Company adopted ASU 2020-06 on February 19, 2021 (inception). Adoption of the ASU did not impact the Company’s financial position,
results of operations or cash flows.
The Company has reviewed other recent accounting
pronouncements and concluded that they are either not applicable to the Company, or no material effect is expected on the financial statement
as a result of future adoption.
Note 3 — Initial Public Offering
Pursuant to the IPO, and including
the underwriter’s exercise of its over-allotment option, the Company sold 25,875,000 Units at a price of $10.00 per Unit resulting
in gross proceeds of $258,750,000 and net proceeds of $243,738,425 after deduction of offering costs. Each Unit consists of one Public
Share and one-half of one Public Warrant. Each Public Warrant entitles the holder to purchase one share of Class A common stock at a
price of $11.50 per share, subject to adjustment (see Note 6).
Note 4 — Related Party Transactions
Founder Shares
On March 5, 2021, the Sponsor
acquired shares of the Company’s common stock. On March 15, 2021, the Company effectuated a recapitalization of the Company,
which included a 64,687.50-for-1 stock split, resulting in an aggregate of 6,468,750 Founder Shares outstanding. On June 21, 2021, the
Company effectuated a recapitalization of the Company, which included a 1.11-for-1 stock split, resulting in an aggregate of 7,187,500
Founder Shares outstanding. On October 26, 2021, the Company effectuated a recapitalization of the Company, which included a 1-for-1.11
reverse stock split, resulting in an aggregate of 6,468,750 Founder Shares outstanding (up to 843,750 of which were subject to forfeiture
if the underwriter’s over-allotment option was not exercised in full). Since the underwriter exercised its over-allotment option
in full, the Sponsor did not forfeit any Founder Shares. The Sponsor subsequently transferred an aggregate of 80,000 Founder Shares
to the members of the Company’s board of directors for the same per-share consideration that it originally paid for such shares,
resulting in the Sponsor holding Founder Shares.
The Founder Shares will automatically
convert into shares of Class A common stock at the time of the Company’s initial Business Combination and are subject to certain
transfer restrictions. Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number
of shares of Class A common stock, subject to adjustment, at any time.
The Initial Stockholders have
agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A)
one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last
sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial
Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction
that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
Private Placement
On November 19, 2021, simultaneously
with the consummation of the IPO and the underwriter’s exercise of its over-allotment option, the Company consummated the issuance
and sale of 12,350,000 Private Placement Warrants in a Private Placement at a price of $1.00 per Private Placement Warrant, generating
gross proceeds of $12,350,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price
of $11.50 per share. A portion of the proceeds from the Private Placement was added to the proceeds from the IPO being held in the Trust
Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private
Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the
Private Placement Warrants and all underlying securities will be worthless.
Related Party Loans
On March 5, 2021, the Sponsor
agreed to loan the Company an aggregate of up to $ to cover expenses related to the IPO pursuant to a promissory note (the “Note”).
On June 18, 2021, the Sponsor amended the Note to increase the principal amount to $. The loan was non-interest bearing and payable
on the earlier of December 31, 2021 or the completion of the IPO. A total of $ under the Note was borrowed from the Sponsor and
repaid in full from the proceeds of the Initial Public Offering not being placed in the Trust Account on November 19, 2021.
In addition, in order to finance
transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing,
the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.
The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s
discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity
at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of December 31, 2021, no Working
Capital Loans were outstanding.
Support Services
Effective November 16, 2021,
the Company entered into an Administrative Support Agreement with an entity affiliated with the Sponsor for office space and
administrative support services at a monthly fee of $15,000.
Since the consummation of the IPO, the Company has paid, and intends to continue paying until the earlier of the consummation of the
Business Combination or the Company’s liquidation, a fee of approximately $15,000
per month. For the period from February 19 (inception) through December 31, 2021, a total of $21,000
was recognized in General and Administrative expenses in the accompanying statement of operations. As of December 31, 2021, $21,000
has been accrued for these services and is included in “Accounts payable and accrued expenses” in the accompanying
balance sheet.
Note 5 — Commitments and Contingencies
Registration Rights
The holders of Founder Shares,
Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration
rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration
rights agreement, dated November 16, 2021. These holders will be entitled to certain demand and “piggyback” registration
rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the
Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter
a 45-day option from the date of the final prospectus relating to the IPO to purchase up to 3,375,000 additional Units to cover over-allotments,
if any, at the IPO price less underwriting fees. On November 19, 2021, the underwriter elected to fully exercise its over-allotment option,
purchasing 3,375,000 of such additional Units.
The underwriter was paid a cash
underwriting discount of $0.20 per Unit sold in the IPO, including the Units issued in connection with the underwriter’s exercise
of its over-allotment option, or $5,175,000 in the aggregate at the closing of the IPO. In addition, the underwriter is entitled to a
deferred underwriting fee of $0.35 per unit, or $9,056,250, from the closing of the IPO and the exercise of the underwriter’s over-allotment
option. The deferred underwriting fees will become payable to the underwriter from the amounts held in the Trust Account solely if the
Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 6 — Stockholders’ Deficit
Common stock
Class A Common Stock—The
Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of December 31, 2021,
there were no (excluding 25,875,000 shares of Class A common stock subject to possible redemption) shares of Class A common stock issued
and outstanding.
Class B Common Stock—The
Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. As of December 31, 2021,
there were 6,468,750 shares of Class B common stock issued and outstanding.
Preferred Stock—The
Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting
and other rights and preferences as may be determined from time to time by the Company’s board of directors. For the period presented,
there were no shares of preferred stock issued or outstanding.
Warrants—As
of December 31, 2021, the Company had 12,937,500 Public Warrants and 12,350,000 Private Placement Warrants outstanding. The Company has
determined that warrants issued in connection with its IPO in November 2021 are subject to treatment as equity. At IPO, the Company utilized
a Monte Carlo simulation model to value the Warrants. Inherent in a Monte Carlo simulation are assumptions related to expected share-price
volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based
on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury
zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of
the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which
the Company anticipates to remain at zero, the fair value of the Public and Private Placement warrants on IPO was $0.52/warrant.
The Public Warrants will become
exercisable 30 days after the completion of a Business Combination. No warrants will be exercisable for cash unless the Company has an
effective and current registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and a
current prospectus relating to such shares of Class A common stock. Notwithstanding the foregoing, if a registration statement covering
the shares of Class A common stock issuable upon exercise of the Public Warrants is not effective within a specified period following
the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and
during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless
basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that
exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public
Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Redemption of warrants when the price per share
of Class A common stock equals or exceeds $18.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in
whole and not in part; |
| | |
| ● | at
a price of $0.01 per warrant; |
| | |
| ● | upon
a minimum of 30 days’ prior written notice of redemption, which we refer to as the
“30-day redemption period”; and |
| | |
| ● | if,
and only if, the last reported sale price of our Class A common stock for any 20 trading
days within a 30-day trading period ending on the third trading day prior to the date on
which we send the notice of redemption to the warrant holders (the “Reference Value”)
equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, rights
issuances, subdivisions, reorganizations, recapitalizations and the like and certain issuances
of Class A common stock and equity-linked securities). |
The Company will not redeem the
warrants as described above unless an effective registration statement under the Securities Act covering the Class A common stock issuable
upon exercise of the warrants is effective and a current prospectus relating to those Class A common stock is available throughout the
30-day redemption period. If and when the warrants become redeemable by us, we may exercise our redemption right even if the Company
are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class
A common stock equals or exceeds $10.00
Once the warrants become exercisable, the Company may redeem the outstanding
warrants:
|
● |
in
whole and not in part |
|
|
|
|
● |
at
$0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise
their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table set forth
in the warrant agreement, subject to certain exceptions; and |
|
|
|
|
● |
if,
and only if, the Reference Value of the Company’s Class A common
stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations,
recapitalizations and the like and certain issuances of Class A common stock and equity-linked securities). |
The “fair market value”
of the Company’s Class A common stock for the above purpose shall mean the volume weighted average price of our Class A common stock during the
10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. The Company will provide
our warrant holders with the final fair market value no later than one business day after the 10 trading day period described above ends.
In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 Class A common stock per
warrant (subject to adjustment). Any redemption of the warrants for Class A common stock will apply to both the Public Warrants and the
Private Placement Warrants.
No fractional Class A common
stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, the Company
will round down to the nearest whole number of the number of Class A common stock to be issued to the holder. Please see the section
entitled “Description of Securities—Warrants—Public Stockholders’ Warrants” for additional information.
If the Company calls the Public
Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on
a “cashless basis,” as described in the warrant agreement.
The Private Placement Warrants
will be identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the
shares of Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable
until after the completion of a Business Combination, subject to certain limited exceptions.
The exercise price and number
of shares of Class A common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event
of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, the warrants will
not be adjusted for issuances of shares of Class A common stock at a price below their respective exercise prices. Additionally, in no
event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within
the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such
funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust
Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if the Company issues
additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of
a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue
price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such
issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance),
(y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available
for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the
volume weighted average trading price of the Company’s Class A common stock during the 10 trading day period starting on the trading
day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20
per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market
Value or (ii) the price at which the Company issues the additional shares of Class A common stock or equity-linked securities.
Note 7 — Fair Value Measurements
The fair value of the Company’s financial assets
and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the
assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement
date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable
inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how
market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for
identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability
occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1
inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical
assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company’s assessment
of the assumptions that market participants would use in pricing the asset or liability.
At December
31, 2021, the assets held in the Trust Account were held in treasury funds. All of the Company’s investments held in the Trust
Account are classified as trading securities.
The following table presents information about the
Company’s liabilities that are measured at fair value on a recurring basis at December 31, 2021 and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value.
Schedule of fair value of recurring
basis | |
| | | |
|
|
| |
| |
|
| |
| |
Quoted Prices in | |
Significant Other | |
Significant Other |
| |
| |
Active Markets | |
Observable Inputs | |
Unobservable Inputs |
| |
Level | |
(Level 1) | |
(Level 2) | |
(Level 3) |
Assets: | |
| |
|
|
| |
| |
|
Cash, and U.S. Treasury Securities | |
| 1 | | |
$ |
263,937,611 |
| |
— | |
— |
Note 8 — Subsequent Events
The Company has evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date these financial statement were available for issuance. Based on this review,
the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.