ITEM
1. BUSINESS
Introduction
NOAC is a Delaware company incorporated on August
10, 2020 as a blank check company for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination, with one or more target businesses.
On November 13, 2020, NOAC consummated its initial
public offering (the “IPO”) of 23,000,000 units (the “Units”), each Unit consisting of one share of common stock
of the Company, par value $0.0001 per share (the “Common Stock”) and one redeemable warrant to purchase one-half of one share
of Common Stock for $11.50 (“Warrant”). The closing included the full exercise of the underwriter’s over-allotment option.
The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $230,000,000.
On November 13, 2020, simultaneously with the
consummation of the IPO, we consummated the private placement (“Private Placement”) with Natural Order Sponsor LLC ( the “Sponsor”)
of 6,800,000 Private Warrants at a price of $1.00 per Private Warrant, generating total proceeds of $6,800,000. The Private Warrants are
identical to the Warrants underlying the Units sold in the IPO except that if held by the Sponsor or its permitted transferees, they (i)
may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption and (iii) subject to certain limited
exceptions including the Common Stock issuable upon exercise of the Private Warrants, will be subject to transfer restrictions until 30
days following the consummation of the Company’s initial business combination. If the Private Warrants are held by holders other
than the sponsor or its affiliates and permitted transferees, the Private Warrants will be redeemable by the Company in all redemption
scenarios and exercisable by holders on the same basis as the Warrants sold in the IPO.
A total of $230,000,000 of the net proceeds from
the sale of Units in the IPO and the private placement on November 13, 2020 were placed in a trust account established for the benefit
of the Company’s public stockholders at JPMorgan Chase Bank, N.A. maintained by Continental Stock Transfer & Trust Company,
acting as trustee. None of the funds held in trust will be released from the trust account, other than interest income to pay any tax
obligations until the earlier of (i) our consummation of our initial business combination, and then only in connection with those shares
of common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (ii) the redemption of
our public shares if we are unable to consummate our initial business combination by November 13, 2022, or (iii) if we seek to amend our
certificate of incorporation to affect the substance or timing of our obligation to redeem all public shares if we cannot complete an
initial business combination by November 13, 2022, and such amendment is duly approved.
General
We are a newly incorporated Delaware blank check
company whose purpose is to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination
with one or more businesses or entities, which we refer to throughout this annual report as our initial business combination. Although
there is no restriction or limitation on what industry our target operates in, it is our intention to pursue prospective targets that
are focused on technologies and products related to sustainable plant-based food and beverages, alternative protein, and ingredients.
More specifically, our target market includes companies that use plant-based, cell-based or precision fermentation technologies to develop
food products that eliminate animals from the food supply chain. We refer to all these technologies herein as “plant-based”
or “alternative.” While we may pursue a target located anywhere in the world, we anticipate targeting companies domiciled
in North America or Europe.
We will target private emerging growth companies
that are developing nutritious plant-based food products that deliver a consumer experience comparable or superior to that provided by
animal-based products. We will seek products that encourage consumers to eat more, not less, of the traditional dishes they enjoy by using
products that promote healthy living, environmental sustainability, and animal welfare; all benefits associated with consuming plant-based
foods. We seek a target company whose paradigm shifting product or services will enable breakthrough penetration into mainstream consumers
seeking delicious and satisfying yet better-for-you alternatives to animal products.
Our Sponsor, Leadership and Competitive Advantages
Natural Order Sponsor LLC (our “Sponsor”)
is led by Mr. Paresh Patel and Mr. Sebastiano Cossia Castiglioni, each of whom have invested for more than 20 years in public and private
emerging growth companies with a focus on leading emerging technology and sustainable and plant-based food product companies. We believe
that our management team has the investment experience, strategic knowledge, relationships, and access to capital and human resources
to source unique opportunities that will offer attractive risk-adjusted returns in a rapidly expanding sector of the global economy. In
particular, we believe our network of relationships with leaders in the plant-based food industry can provide our target company with
a competitive advantage to accelerate its growth or identify attractive acquisitions or strategic alliances.
Paresh Patel, our co-founder, has been our President,
Chief Executive Officer and Director since our inception in August 2020. Paresh has managed his private investment office, Sandstone Investments
since 2014. From 2005 to 2014, Paresh was the founder and Managing Partner of Sandstone Capital, an investment fund managing more than
$1.0 billion and focused on long-term investments in public and private companies in Asia. Sandstone invests in a wide range of industries
with a focus on pharmaceuticals, financial services, and technology. From 2000 to 2004, Paresh was the founder of Sparta Group, a multi-billion
dollar family office. Paresh’s more notable private investments include Bharat Financial (IPO 2010), A123 Systems (IPO 2009), Tejas
Networks (IPO 2014), AU SFB (IPO 2014), Relicore (acquired by Symantec in 2006), Airvana (IPO 2007), Flipkart (acquired by Walmart in
2018), Simulate (formerly NUGGS), VelocityDx, and GrapheneDx. Paresh has served on the board of directors of several public and private
businesses in the US and India. Paresh also served as a director for Harvard Business School India and was an Executive Producer of the
2018 documentary film “The Game Changers” that advocates the health benefits of a plant-based diet for high-performance athletes
as well as for the general population.
Sebastiano Cossia Castiglioni, our co-founder
has been our Chairman of the board since October 2020. He is an entrepreneur, activist, and advisor to businesses, governments, and nonprofits
around the world. For many years, he has been an investor in a wide range of fields, from bioscience to food, from agriculture to technology.
Directly or through his partnerships, Sebastiano is an investor in more than 60 companies in the plant-based food and beverage sector.
In December 2017, he founded a private investment fund, Dismatrix, and has served as its director ever since. In that same year, Sebastiano
joined NRS New Reality Solutions, a convergent innovation platform leveraging bioscience and data science, as a Senior Advisor and an
investor. Since April 2019, he has also been a partner in the Blue Horizon Group, a leading worldwide investor in plant-based companies.
Since October of the same year, he has served as the co-managing partner and director of Dismatrix Group, which focuses on venture capital
and private equity investments across tech, consumer, and food revolutions, including alt-proteins. Sebastiano is also a co-owner and
honorary chairman of Querciabella, a Tuscan organic, biodynamic, and vegan winery that has garnered international acclaim. He recently
founded the gluten-free pasta brand Bontasana, and Skyrunner Foods, a revolutionary baby food company. A longtime animal rights activist,
Sebastiano supports several global nonprofits working to end the exploitation of animals. He serves on the boards of Animal Outlook (since
2018) and the Culture & Animals Foundation (since 2018) as well as on the advisory boards of the Sea Shepherd Conservation Society
(since 2008), Animal Equality (since 2019), the International Anti-Poaching Foundation (since 2020), and Project Coyote (since 2020).
In 2020, Sebastiano founded the Plant-Based Empowerment Foundation, a nonprofit operating in rural Senegal that is dedicated to providing
children and women access to education, healthcare, and nourishing plant-based food. Sebastiano served as advisor to Italian Prime Minister
Matteo Renzi from 2014 to 2016.
Marc Volpe has been our Chief Financial Officer
since September 2020. In October 2020, he was also appointed the Secretary of the Company. From November 2016 to September 2020, Marc
was the Chief Financial Officer of Quantopian, Inc. a financial technology company that operated in the asset management space. From December
2013 to October 2016, Marc was the Chief Financial Officer of Fort Warren Capital Management, LP, where he assisted in the launch of that
firm’s hedge fund in 2014. He also served as the Chief Compliance Officer at Regiment Capital, a multi-billion dollar credit hedge
fund advisor located in Boston, and was a manager in the audit practice at PricewaterhouseCoopers, where he began his career in 1997.
Max H. Bazerman serves as an independent director.
He has been a Jesse Isidor Straus Professor of Business Administration at the Harvard Business School since 2000. His recent books include
Better, Not Perfect (2020), The Power of Experiments (2020, with Michael Luca), The Power of Noticing (2014), Judgment in Managerial Decision
Making (2013, with Don Moore), and Blind Spots (2011, with Ann Tenbrunsel) and has published over 250 papers. Max has been at Harvard
Business School since 2000, and before that was a Professor at the Kellogg Graduate School of Management at Northwestern University (1985-2000),
and an Assistant Professor at the Sloan School of Management at MIT (1983-1985), the School of Management at Boston University (1981-1983),
and the Business School at the University of Texas (1979-1980). Max received an honorary doctorate from the University of London, the
Life Achievement Award from the Aspen Institute’s Business and Society Program, the Distinguished Educator Award from the Academy
of Management, the Academy of Management Career Award for Scholarly Contributions to Management, and the Lifetime Achievement Award from
the Organizational Behavior Division of the Academy of Management. His professional activities include projects with Abbott, Aetna, AIG,
Alcar, Alcoa, Allstate, Ameritech, Amgen, Apax Partners, Asian Development Bank, AstraZeneca, AT&T, Aventis, BASF, Bayer, Becton Dickenson,
Biogen, Boston Scientific, BP, Bristol-Myers Squibb, Business Week, Celtic Insurance, Chevron, Chicago Tribune, City of Chicago, among
others. Max’s consulting, teaching, and lecturing includes work in 30 countries.
Jaspaul Singh serves as an independent director.
He has served as the Chairman and CEO of Interon Laboratories, a pre-clinical biotechnology company focused on novel therapeutics in neurobiology
and immunology, since September 2020. Prior to Interon, from 2017 to 2020, Jaspaul was a private investor. From 2013 to 2017, Jaspaul
was the Founder, Managing Partner, and Portfolio Manager of Fort Warren Capital Management, a Boston-based hedge fund that invests opportunistically
long/short across the capital structure in complex, event-driven, distressed, and special situations. Previously, from 2007 to 2013, Jaspaul
was Senior Investment Analyst at Regiment Capital Advisors, a credit hedge fund that was spun out of Harvard Management Company. While
at Regiment, Jaspaul led investments in the basic industrials, paper/packaging, business services, specialty finance and selected healthcare
and consumer sectors. Prior to Regiment, from 2002 to 2006, Jaspaul was a Senior Analyst at Hammerman Capital Management, a capital structure
arbitrage fund. Jaspaul began his career as an Analyst in the Investment Banking Division of Goldman Sachs. Jaspaul is a member of the
National Board of Advisors of the Sikh Coalition, a civil rights advocacy group. He is also a life member of the Council on Foreign Relations.
Gene Baur serves as an independent director. He
has served as the President of Farm Sanctuary since 2002. Co-founded by Gene in 1986, Farm Sanctuary is an advocate for policies that
support animal welfare, animal protection, and veganism. Since the mid-1980s, he has traveled extensively, campaigning to raise awareness
about the abuses of industrialized factory farming and the system of cheap food production. Gene has published two books, Farm Sanctuary:
Changing Hearts and Minds About Animals and Food (Simon and Schuster, 2008) and Living the Farm Sanctuary Life (Rodale, 2015), which he
co-authored with Forks Over Knives author Gene Stone.
Industry Opportunity
We intend to pursue an initial business combination
with a company that is disrupting the animal-based protein and food industry, providing alternatives to one or more segments of the global
food industry, including fresh and packaged animal-based meats, dairy and seafood. We may also consider targeting companies with products
and services that support or relate to those end use markets.
We believe there are three fundamental drivers
of growth and investment opportunity in our target markets.
Large and dynamic food markets supported by
fundamental socioeconomic trends. Global population growth combined with rising standards of living are driving non-linear consumption
growth in meat, dairy, seafood and alternatives.
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Substantial core food markets with emerging dynamics. Based on various sources, we estimate the combined global meat, seafood, and dairy food industries to be approximately $4.0 trillion in size. According to the United Nations Food and Agriculture Organization (“FAO”), global meat production declined during 2020 due to the global impact of COVID-19, but is poised to grow in aggregate due to rising populations and average incomes in developing countries and emerging economies, which in turn are expected to lead to higher per capita consumption of proteins from meat, dairy, and seafood.
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Large scale and growth prospects for plant-based alternatives. Due to changing dietary patterns, increased recognition of the linkages between diet, health and the environment, and concerns about animal welfare and food safety, plant-based foods are surging in terms of consumption, investment and media interest. The market for alternatives to traditional proteins is significant. According to Euromonitor, consumers purchased $19.5 billion of meat substitutes during 2018 and approximately $20 billion of dairy substitutes in 2019, most of which are plant-based foods. According to the FAIRR Initiative (“FAIRR”), estimated growth rates for global consumption of meat substitutes vary between 6.8% and 9.4% CAGR to 2025. In the United States, plant-based milk substitutes generated $1.8 billion of sales, constituting 13% of the U.S. retail milk market. We believe these large and growing markets are excellent targets for our acquisition search.
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Social awareness and demand for personal and
environmental sustainability. We believe that consumer awareness of the negative health, environmental, and animal-welfare impacts
of animal-based food consumption has resulted in a surge in demand for viable alternatives. While overall demand for “meat”
and “dairy” is expected to accelerate, we believe that the production of food through animals is inherently inefficient, both
in environmental and economic terms. In addition, we believe these challenges are insurmountable given rising population and limited resources.
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Waste and inefficiency. According to the Environmental Research Letters, the production of food through animals implies a waste of 83% to 97% of calories and 69% to 97% of proteins. According to the United States Department of Agriculture and World Resources Institute, it is estimated that producing one unit of animal-based food requires approximately up to 50 times as much water and up to 100 times more land per unit of edible food.
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Environmental impact. We believe that increased awareness of additional economic externalities call into question the continued and increased consumption of animal protein per capita. As reported in the journal Science, data collected from commercial farms in 119 countries indicates that production of animal-based food can emit up to 50 times the amount of greenhouse gases (“GHGs”) compared to plant-based food. Likewise, Nature Sustainability published an analysis of emissions linked to animal-based food production which suggests that a shift to plant-based diets by 2050 could lead to reduction of 332-547 GtCO2 which is equal to 99-163% of the CO2 emissions budget. According to FAIRR, public concern regarding costs to public health systems from diseases linked to the consumption of animal-based foods is generating debate regarding taxation on meat and dairy products (as with tobacco) and the elimination of subsidies to animal agriculture. Other public health costs and risks (including zoonotic diseases and antibiotic-resistant bacteria) add to the debate.
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Food security. Relying upon animal-based food, when endemic inefficiencies are considered, creates critical food security issues in terms of supply and safety. Closing the long-term demand/supply gap for meat, seafood and dairy in the developing world may be impossible without affordable and desirable alternatives.
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Innovation in food science. In response
to large and growing fundamental demand for more sustainable and secure food solutions, we believe there has been a proliferation of new
companies and technologies creating innovative solutions to meet market needs.
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Progress in alternative protein manufacturing. Food science is addressing the challenge of replacing animal-based protein. The cost of non-animal ingredients in some cases is already lower than animal-based ingredients. We believe that alternative eggs and dairy products already have lower production costs and, at higher scale, will be significantly cheaper and more profitable. According to research published by RethinkX, from a manufacturing perspective, with the help of new technology and increasing scale, alternative protein sources are rapidly approaching cost parity and it is estimated that some alternatives will be less expensive than traditional animal-based proteins in less than two years. We believe that if social costs – such as health care or environmental impact – were embedded in the retail price, plant-based ingredients and foods would have further significant cost advantages over animal-based food.
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Innovation and investment. We believe the number of companies in this sector has grown geometrically over the past few years, fueled by substantial private investment. For example, investors and entrepreneurs are investing heavily in precision fermentation, which is already used in various sectors of food ingredient and medicine production. According to the Good Food Institute, $824 million of venture capital was invested in alternative protein companies in 2019, followed by more than $930 million in the first quarter of 2020. Of these amounts, we believe approximately $500 million in venture investments have been targeted specifically at precision fermentation technology in the plant-based food sector.
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Expansion of private companies. We believe there are many private companies developing products and services related to various alternatives to animal-based foods and ingredients: beef, pork, shellfish, fish, chicken, turkey, milk, yogurt, cheese, ice cream, eggs, etc. Business models span the entire value chain including: ingredient production, equipment, branded private labels, frozen, fresh, wholesale distribution, retail. We believe many of these companies have sufficient scale and maturity to be high-quality targets for our business combination.
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Acquisition Strategy
Our acquisition strategy is to identify an untapped
opportunity within our target industry and offer to a public-ready business a facility through which to enter the public sphere and advance
its profile. We believe that our management team and directors’ experiences advising, evaluating and investing in these emerging
growth businesses combined with their network of relationships in our target industries position us to source the highest quality business
combination candidates. Furthermore, our strong track record of practicing and advocating the core values behind plant-based nutrition
creates credibility and trust with the founders of these businesses as they consider the future development and stewardship of their companies.
Our selection process will leverage the relationships of our management team and board with industry captains, leading venture capitalists,
private equity and hedge fund managers, respected peers, and our network of industry advisors. Together with this network of trusted partners,
we intend to capitalize the target business and create purposeful strategic initiatives in order to achieve attractive growth and performance
targets.
Investment Criteria
We are targeting high growth companies with strong
brands and experienced management teams that are ready to enter the public market. We intend to focus on companies that are well positioned
to be sector leaders and command customer awareness on a global basis in replacing mainstream animal-based food and beverages with delicious,
sustainable, and environmentally sustainable alternatives. Consistent with this strategy, we have identified the following criteria for
evaluating potential target businesses. Although we may decide to enter into our initial business combination with a target business that
does not meet the criteria described below, it is our intention to acquire companies with the following characteristics:
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High growth rate and high current run rate in revenues;
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Sector leaders or dominant competitors in their product category;
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Experienced, public-ready management teams. Specifically, we will look for management teams that have a proven track record of value creation for their shareholders. We will seek to partner with a potential target’s management team and expect that the operating and investment abilities of our executive team and board will complement their own capabilities;
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Corporate governance, reporting and control systems that are ready to comply with the requirements of a public listing;
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Identifiable technological, scientific, or brand competitive advantages which can be augmented by access to additional capital as well as our industry relationships and expertise;
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Offering attractive return on investment for our shareholders over the next two to five years;
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Between $800 million and $4 billion in enterprise value.
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We believe that with our relationships, network,
reputation, expertise, and proprietary deal flow, we will be able to identify potential target businesses with appropriate valuations,
that can benefit from new capital for growth and a public listing.
Effecting a Business Combination
General
We are not presently engaged in, and we will not
engage in, any operations for an indefinite period of time. We intend to effectuate our initial business combination using cash from the
proceeds of the IPO and the private placement of the private warrants, our shares, new debt, or a combination of these, as the consideration
to be paid in our initial business combination. We may seek to consummate our initial business combination with a company or business
that may be financially unstable or in its early stages of development or growth (such as a company that has begun operations but is not
yet at the stage of commercial manufacturing and sales), which would subject us to the numerous risks inherent in such companies and businesses,
although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company
with nominal operations.
If our initial business combination is paid for
using shares or debt securities, or not all of the funds released from the trust account are used for payment of the purchase price in
connection with our business combination or used for redemptions of purchases of our common stock, we may apply the cash released to us
from the trust account that is not applied to the purchase price for general corporate purposes, including for maintenance or expansion
of operations of acquired businesses, the payment of principal or interest due on indebtedness incurred in consummating our initial business
combination, to fund the purchase of other companies or for working capital.
We have not identified any acquisition targets.
Subject to the requirement that our initial business combination must be with one or more target businesses or assets having an aggregate
fair market value of at least 80% of the value of the trust account (excluding any taxes payable) at the time of the agreement to enter
into such initial business combination, we have virtually unrestricted flexibility in identifying and selecting one or more prospective
target businesses. Accordingly, there is no current basis for our shareholders to evaluate the possible merits or risks of the target
business with which we may ultimately complete our initial business combination. Although our management will assess the risks inherent
in a particular target business with which we may combine, this assessment may not result in our identifying all risks that a target business
may encounter. Furthermore, some of those risks may be outside of our control, meaning that we can do nothing to control or reduce the
chances that those risks will adversely impact a target business.
We may seek to raise additional funds through
a private offering of debt or equity securities in connection with the consummation of our initial business combination, and we may effectuate
our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. Subject
to compliance with applicable securities laws, we would consummate such financing only simultaneously with the consummation of our business
combination. In the case of an initial business combination funded with assets other than the trust account assets, our tender offer documents
or proxy materials disclosing the business combination would disclose the terms of the financing and, only if required by law or Nasdaq,
we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans
in connection with our initial business combination. At this time, we are not a party to any arrangement or understanding with any third
party with respect to raising any additional funds through the sale of securities or otherwise.
Sources of Target Businesses
We anticipate that target business candidates
will be brought to our attention from various unaffiliated sources, including investment bankers, venture capital funds, private equity
groups, leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses may be brought
to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources also may introduce
us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read this
annual report and know what types of businesses we are targeting. Our officers and directors, as well as their affiliates, also may bring
to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal
inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we expect to receive a number of
proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships
of our officers and directors. While we do not presently anticipate engaging the services of professional firms or other individuals that
specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event
we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the
terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities
to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our
management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction,
in which case any such fee will be paid out of the funds held in the trust account. Although some of our officers and directors may enter
into employment or consulting agreements with the acquired business following our initial business combination, the presence or absence
of any such arrangements will not be used as a criterion in our selection process of an acquisition candidate.
We are not prohibited from pursuing an initial
business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial
business combination with such a company, we, or a committee of independent directors, would obtain an opinion from an independent investment
banking firm or another independent entity that commonly renders valuation opinions on the type of target business we seek to acquire
that such an initial business combination is fair to our unaffiliated stockholders from a financial point of view.
Selection of a Target Business and Structuring of a Business Combination
Subject to the requirement that our initial business
combination must be with one or more target businesses or assets having an aggregate fair market value of at least 80% of the value of
the trust account (excluding any taxes payable) at the time of the agreement to enter into such initial business combination, our management
will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses. In any case, we will
only consummate an initial business combination in which we become the majority shareholder of the target (or control the target through
contractual arrangements in limited circumstances for regulatory compliance purposes as discussed below) or are otherwise not required
to register as an investment company under the Investment Company Act or to the extent permitted by law we may acquire interests in a
variable interest entity, in which we may have less than a majority of the voting rights in such entity, but in which we are the primary
beneficiary. There is no basis for our shareholders to evaluate the possible merits or risks of any target business with which we may
ultimately complete our initial business combination. To the extent we effect our initial business combination with a company or business
that may be financially unstable or in its early stages of development or growth (such as a company that has begun operations but is not
yet at the stage of commercial manufacturing and sales), 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 may not properly ascertain or assess all
significant risk factors.
In evaluating a prospective target business, we
expect to conduct a thorough due diligence review that will encompass, among other things, meetings with incumbent management and employees,
document reviews, interviews of customers and suppliers, inspection of facilities, as well as a review of financial and other information
which will be made available to us.
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 a 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. We will not pay any finders or consulting fees to members of our management team, or
any of their respective affiliates, for services rendered to or in connection with our initial business combination.
Fair Market Value of Target Business or Businesses
The target business or businesses or assets with
which we effect our initial business combination must have a collective fair market value equal to at least 80% of the value of the trust
account (excluding any taxes payable) at the time of the agreement to enter into such initial business combination. If we acquire less
than 100% of one or more target businesses in our initial business combination, the aggregate fair market value of the portion or portions
we acquire must equal at least 80% of the value of the trust account at the time of the agreement to enter into such initial business
combination. However, we will always acquire at least a controlling interest in a target business. The fair market value of a portion
of a target business or assets will likely be calculated by multiplying the fair market value of the entire business by the percentage
of the target we acquire. We may seek to consummate our initial business combination with an initial target business or businesses with
a collective fair market value in excess of the balance in the trust account. In order to consummate such an initial business combination,
we may issue a significant amount of debt, equity or other securities to the sellers of such business and/or seek to raise additional
funds through a private offering of debt, equity or other securities. If we issue securities in order to consummate such an initial business
combination, our stockholders could end up owning a minority of the combined company’s voting securities as there is no requirement
that our stockholders own a certain percentage of our company (or, depending on the structure of the initial business combination, an
ultimate parent company that may be formed) after our business combination. Because we have no specific business combination under consideration,
we have not entered into any such arrangement to issue our debt or equity securities and have no current intention of doing so.
The fair market value of a target business or
businesses or assets will be determined by our board of directors based upon standards generally accepted by the financial community,
such as actual and potential gross margins, the values of comparable businesses, earnings and cash flow, book value, enterprise value
and, where appropriate, upon the advice of appraisers or other professional consultants. Investors will be relying on the business judgment
of our board of directors, which will have significant discretion in choosing the standard used to establish the fair market value of
a particular target business. If our board of directors is not able to independently determine that the target business or assets has
a sufficient fair market value to meet the threshold criterion, we will obtain an opinion from an unaffiliated, independent investment
banking firm or another independent entity that commonly renders valuation opinions on the type of target business we seek to acquire
with respect to the satisfaction of such criterion. Notwithstanding the foregoing, unless we consummate a business combination with an
affiliated entity, we are not required to obtain an opinion from an independent investment banking firm, or another independent entity
that commonly renders valuation opinions on the type of target business we seek to acquire, that the price we are paying is fair to our
stockholders.
Lack of Business Diversification
For an indefinite period of time after consummation
of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business.
Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it
is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business.
By consummating our initial business combination with only a single entity, our lack of diversification may:
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subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and
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cause us to depend on the marketing and sale of a single product or limited number of products or services.
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Limited Ability
to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management
of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our
assessment of the target business’ management may not prove to be correct. The future role of members of our management team, if
any, in the target business cannot presently be stated with any certainty. Consequently, members of our management team may not become
a part of the target’s management team, and the future management may not have the necessary skills, qualifications or abilities
to manage a public company. Further, it is also not certain whether one or more of our directors will remain associated in some capacity
with us following our initial business combination. Moreover, members of our management team may not have significant experience or knowledge
relating to the operations of the particular target business. Our key personnel may not remain in senior management or advisory positions
with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made
at the time of our initial business combination.
Following our initial business combination, we
may seek to recruit additional managers to supplement the incumbent management of the target business. We may not have the ability to
recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance
the incumbent management.
Stockholders
May Not Have the Ability to Approve an Initial Business Combination
In connection with any proposed business combination,
we will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which public
stockholders may seek to convert their public shares, regardless of whether they vote for or against the proposed business combination,
into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable) or (2) provide our public
stockholders with the opportunity to sell their public shares to us by means of a tender offer (and thereby avoid the need for a stockholder
vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable),
in each case subject to the limitations described herein. Notwithstanding the foregoing, our initial stockholders have agreed, pursuant
to written letter agreements with us, not to convert any public shares held by them into their pro rata share of the aggregate amount
then on deposit in the trust account. If we determine to engage in a tender offer, such tender offer will be structured so that each stockholder
may tender any or all of his, her or its public shares rather than some pro rata portion of his, her or its shares. The decision as to
whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in
a tender offer will be made by us based on a variety of factors such as the timing of the transaction and whether the terms of the transaction
would otherwise require us to seek stockholder approval. If we so choose and we are legally permitted to do so, we have the flexibility
to avoid a stockholder vote and allow our stockholders to sell their shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange
Act which regulate issuer tender offers. In that case, we will file tender offer documents with the SEC which will contain substantially
the same financial and other information about the initial business combination as is required under the SEC’s proxy rules. We will
consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, solely
if we seek stockholder approval, a majority of the issued and outstanding shares of common stock voted are voted in favor of the business
combination.
We chose our net tangible asset threshold of $5,000,001
to ensure that we would avoid being subject to Rule 419. However, if we seek to consummate an initial business combination with a target
business that imposes any type of working capital closing condition or requires us to have a minimum amount of funds available from the
trust account upon consummation of such initial business combination, our net tangible asset threshold may limit our ability to consummate
such initial business combination (as we may be required to have a lesser number of shares converted or sold to us) and may force us to
seek third party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate
such initial business combination and we may not be able to locate another suitable target within the applicable time period, if at all.
Public stockholders may therefore have to wait 24 months from our IPO in order to be able to receive a pro rata share of the trust account.
Our initial stockholders and our officers and
directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination, (2) not to convert
any shares of common stock in connection with a stockholder vote to approve a proposed initial business combination and (3) not sell any
shares of common stock in any tender in connection with a proposed initial business combination. As a result, if we sought stockholder
approval of a proposed transaction, we would need only 500,001 of our public shares (or approximately 6.3% of our public shares) to be
voted in favor of the transaction in order to have such transaction approved (assuming that only a quorum was present at the meeting,
that the over-allotment option is not exercised and that the initial stockholders do not purchase any shares in the after-market).
If we hold a meeting to approve a proposed business
combination and a significant number of stockholders vote, or indicate an intention to vote, against such proposed business combination,
our officers, directors, initial stockholders or their affiliates could make such purchases in the open market or in private transactions
in order to influence the vote. Notwithstanding the foregoing, our officers, directors, initial stockholders and their affiliates will
not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed
to stop potential manipulation of a company’s stock.
Conversion/Tender Rights
At any meeting called to approve an initial business
combination, public stockholders may seek to convert their public shares, regardless of whether they vote for or against the proposed
business combination, into their pro rata share of the aggregate amount then on deposit in the trust account, less any taxes then due
but not yet paid. Notwithstanding the foregoing, our initial stockholders have agreed, pursuant to written letter agreements with us,
not to convert any public shares held by them into their pro rata share of the aggregate amount then on deposit in the trust account.
If we hold a meeting to approve an initial business combination, a holder will always have the ability to vote against a proposed business
combination and not seek conversion of his shares.
Alternatively, if we engage in a tender offer,
each public stockholder will be provided the opportunity to sell his public shares to us in such tender offer. The tender offer rules
require us to hold the tender offer open for at least 20 business days. Accordingly, this is the minimum amount of time we would need
to provide holders to determine whether they want to sell their public shares to us in the tender offer or remain an investor in our company.
Our initial stockholders, officers and directors
will not have conversion rights with respect to any shares of common stock owned by them, directly or indirectly, including any shares
purchased by them in the aftermarket.
We may also require public stockholders, whether
they are a record holder or hold their shares in “street name,” to either tender their certificates (if any) to our transfer
agent or to deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal
At Custodian) System, at the holder’s option, at any time at or prior to the vote on the business combination. The proxy solicitation
materials that we will furnish to stockholders in connection with the vote for any proposed business combination will indicate whether
we are requiring stockholders to satisfy such delivery requirements. Accordingly, a stockholder would have from the time our proxy statement
is mailed through the vote on the business combination to deliver his shares if he wishes to seek to exercise his conversion rights. Under
Delaware law and our bylaws, we are required to provide at least 10 days’ advance notice of any stockholder meeting, which would
be the minimum amount of time a stockholder would have to determine whether to exercise conversion rights. As a result, if we require
public stockholders who wish to convert their shares of common stock into the right to receive a pro rata portion of the funds in the
trust account to comply with the foregoing delivery requirements, holders may not have sufficient time to receive the notice and deliver
their shares for conversion. Accordingly, investors may not be able to exercise their conversion rights and may be forced to retain our
securities when they otherwise would not want to. The conversion rights will include the requirement that a beneficial holder must identify
itself in order to validly redeem its shares.
There is a nominal cost associated with this tendering
process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the
tendering broker $45 and it would be up to the broker whether or not to pass this cost on to the converting holder. However, this fee
would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to deliver shares is
a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event
we require stockholders seeking to exercise conversion rights to deliver their shares prior to the consummation of the proposed business
combination and the proposed business combination is not consummated, this may result in an increased cost to stockholders.
If a public stockholder fails to vote in favor
of or against a proposed business combination, whether that stockholder abstains from the vote or simply does not vote, that stockholder
would not be able to have his shares of common stock so redeemed to cash in connection with such business combination.
Any request to convert or tender such shares once
made, may be withdrawn at any time up to the vote on the proposed business combination or expiration of the tender offer. Furthermore,
if a holder of a public share delivered his certificate in connection with an election of their conversion or tender and subsequently
decides prior to the vote on the business combination or the expiration of the tender offer not to elect to exercise such rights, he may
simply request that the transfer agent return the certificate (physically or electronically).
If the initial business combination is not approved
or completed for any reason, then our public stockholders who elected to exercise their conversion or tender rights would not be entitled
to convert their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any shares delivered
by public holders.
Liquidation of Trust Account if No Business
Combination
If we do not complete a business combination within
24 months from the closing of the IPO, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate,
subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law.
Under the Delaware General Corporation Law, stockholders
may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public
shares in the event we do not complete our initial business combination within the required time period may be considered a liquidation
distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the Delaware General
Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during
which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims
brought, and an additional 150-day waiting period before any redemptions are made to stockholders, any liability of stockholders with
respect to a redemption is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to
the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust
account distributed to our public stockholders upon the redemption of 100% of our public shares in the event we do not complete our initial
business combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption
distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations
for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of
a liquidation distribution. It is our intention to redeem our public shares as soon as reasonably possible following the 24th month from
the closing of the IPO, but not more than five business days thereafter, and, therefore, we do not intend to comply with the above procedures.
As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and
any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section
280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based
on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially
brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and
our operations will be limited to seeking to complete an initial business combination, the only likely claims to arise would be from our
vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We will seek to have all third parties (including
any vendors or other entities we engage) and any prospective target businesses enter into valid and enforceable agreements with us waiving
any right, title, interest or claim of any kind they may have in or to any monies held in the trust account.
As a result, the claims that could be made against
us will be limited, thereby lessening the likelihood that any claim would result in any liability extending to the trust. We therefore
believe that any necessary provision for creditors will be reduced and should not have a significant impact on our ability to distribute
the funds in the trust account to our public stockholders. Nevertheless, there is no guarantee that vendors, service providers and prospective
target businesses will execute such agreements. In the event that a potential contracted party was to refuse to execute such a waiver,
we will execute an agreement with that entity only if our management first determines that we would be unable to obtain, on a reasonable
basis, substantially similar services or opportunities from another entity willing to execute such a waiver. Examples of instances where
we may engage a third party that refused to execute a waiver would be the engagement of a third party consultant who cannot sign such
an agreement due to regulatory restrictions, such as our auditors who are unable to sign due to independence requirements, or whose particular
expertise or skills are believed by management to be superior to those of other consultants that would agree to execute a waiver or a
situation in which management does not believe it would be able to find a provider of required services willing to provide the waiver.
There is also no guarantee that, even if they execute such agreements with us, they will not seek recourse against the trust account.
Our insiders have agreed that they will be jointly and severally liable to us if and to the extent any claims by a vendor for services
rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement,
reduce the amount of funds in the trust account to below $10.00 per public share, except as to any claims by a third party who executed
a valid and enforceable agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held
in the trust account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including
liabilities under the Securities Act. Our board of directors has evaluated our insiders’ financial net worth and believes they will
be able to satisfy any indemnification obligations that may arise. However, our insiders may not be able to satisfy their indemnification
obligations, as we have not required our insiders to retain any assets to provide for their indemnification obligations, nor have we taken
any further steps to ensure that they will be able to satisfy any indemnification obligations that arise. Moreover, our insiders will
not be liable to our public stockholders and instead will only have liability to us. As a result, if we liquidate, the per-share distribution
from the trust account could be less than approximately $10.00 due to claims or potential claims of creditors. We will distribute to all
of our public stockholders, in proportion to their respective equity interests, an aggregate sum equal to the amount then held in the
trust account, inclusive of any interest not previously released to us (subject to our obligations under Delaware law to provide for claims
of creditors as described below).
If we are unable to consummate an initial business
combination and are forced to redeem 100% of our outstanding public shares for a portion of the funds held in the trust account, we anticipate
notifying the trustee of the trust account to begin liquidating such assets promptly after such date and anticipate it will take no more
than 10 business days to effectuate the redemption of our public shares. Our insiders have waived their rights to participate in any redemption
with respect to their insider shares. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust
account. If such funds are insufficient, our insiders have agreed to pay the funds necessary to complete such liquidation (currently anticipated
to be no more than approximately $50,000) and have agreed not to seek repayment of such expenses. Each holder of public shares will receive
a full pro rata portion of the amount then in the trust account, plus any pro rata interest earned on the funds held in the trust account
and not previously released to us or necessary to pay our taxes. The proceeds deposited in the trust account could, however, become subject
to claims of our creditors that are in preference to the claims of public stockholders.
Our public stockholders shall be entitled to receive
funds from the trust account only in the event of our failure to complete our initial business combination in the required time period
or if the stockholders seek to have us convert their respective shares of common stock upon a business combination which is actually completed
by us. In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.
If we are forced to file a bankruptcy case or
an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to
applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over
the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per share redemption or conversion
amount received by public stockholders may be less than $10.00.
If, after we distribute the proceeds in the trust
account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not
dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either
a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover
all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our
creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders
from the trust account prior to addressing the claims of creditors. Claims may be brought against us for these reasons.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation
contains certain requirements and restrictions relating to our IPO and will apply to us until the consummation of our initial business
combination. If we hold a stockholder vote to amend any provisions of our amended and restated certificate of incorporation relating to
stockholder’s rights or pre-business combination activity (including the substance or timing within which we have to complete a
business combination), we will provide our public stockholders with the opportunity to redeem their shares of common stock upon approval
of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including
interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, divided
by the number of then outstanding public shares, in connection with any such vote. Our insiders have agreed to waive any conversion rights
with respect to any insider shares and any public shares they may hold in connection with any vote to amend our amended and restated certificate
of incorporation. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
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prior to the consummation of our initial business combination, we shall either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which public stockholders may seek to convert their shares of common stock, regardless of whether they vote for or against the proposed business combination, into a portion of the aggregate amount then on deposit in the trust account, or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, in each case subject to the limitations described herein;
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we will consummate our initial business combination only if public stockholders do not exercise conversion rights in an amount that would cause our net tangible assets to be less than $5,000,001 and a majority of the outstanding shares of common stock voted are voted in favor of the business combination;
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if our initial business combination is not consummated within 24 months of the closing of the IPO, then our existence will terminate and we will distribute all amounts in the trust account to all of our public holders of shares of common stock;
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we may not consummate any other business combination, merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction prior to our initial business combination; and
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prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination.
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Potential Revisions to Agreements with Insiders
Each of our insiders has entered into letter agreements
with us pursuant to which each of them has agreed to do certain things relating to us and our activities prior to a business combination.
We could seek to amend these letter agreements without the approval of stockholders, although we have no intention to do so. In particular:
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Restrictions relating to liquidating the trust account if we failed to consummate a business combination in the time-frames specified above could be amended, but only if we allowed all stockholders to redeem their shares in connection with such amendment;
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Restrictions relating to our insiders being required to vote in favor of a business combination or against any amendments to our organizational documents could be amended to allow our insiders to vote on a transaction as they wished;
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The requirement of members of the management team to remain our officer or director until the closing of a business combination could be amended to allow persons to resign from their positions with us if, for example, the current management team was having difficulty locating a target business and another management team had a potential target business;
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The restrictions on transfer of our securities could be amended to allow transfer to third parties who were not members of our original management team;
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The obligation of our management team to not propose amendments to our organizational documents could be amended to allow them to propose such changes to our stockholders;
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The obligation of insiders to not receive any compensation in connection with a business combination could be modified in order to allow them to receive such compensation;
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The requirement to obtain a valuation for any target business affiliated with our insiders, in the event it was too expensive to do so.
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Except as specified above, stockholders would
not be required to be given the opportunity to redeem their shares in connection with such changes. Such changes could result in:
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Our having an extended period of time to consummate a business combination (although with less in trust as a certain number of our stockholders would certainly redeem their shares in connection with any such extension);
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Our insiders being able to vote against a business combination or in favor of changes to our organizational documents;
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Our operations being controlled by a new management team that our stockholders did not elect to invest with;
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Our insiders receiving compensation in connection with a business combination; and
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Our insiders closing a transaction with one of their affiliates without receiving an independent valuation of such business.
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We will not agree to any such changes unless we
believed that such changes were in the best interests of our stockholders (for example, if we believed such a modification were necessary
to complete a business combination). Each of our officers and directors have fiduciary obligations to us requiring that they act in our
best interests and the best interests of our stockholders.
Management Operating and Investment Experience
We believe that our executive
officers possess the experience, skills and contacts necessary to source, evaluate, and execute an attractive business combination. See
the section titled “Management” for complete information on the experience of our officers and directors. Notwithstanding
the foregoing, our officers and directors are not required to commit their full time to our affairs and will allocate their time to other
businesses. We presently expect each of our employees to devote such amount of time as they reasonably believe is necessary to our business
(which could range from only a few hours a week while we are trying to locate a potential target business to a majority of their time
as we move into serious negotiations with a target business for a business combination). The past successes of our executive officers
and directors do not guarantee that we will successfully consummate an initial business combination.
As more fully discussed in
“Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination opportunity that falls
within the line of business of any entity to which he has pre-existing fiduciary or contractual obligations, he may be required to present
such business combination opportunity to such entity, subject to his or her fiduciary duties under Delaware law, prior to presenting such
business combination opportunity to us. Most of our officers and directors currently have certain pre-existing fiduciary duties or contractual
obligations.
Emerging Growth Company Status and Other Information
We are an emerging growth
company as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act). As such, we are eligible to take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but
not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,
and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any
golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less
active trading market for our securities and the prices of our securities may be more volatile.
Further, Section 102(b)(1) of
the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such an election to opt out is irrevocable. 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 another public company which is neither an emerging
growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because
of the potential differences in accounting standards used.
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 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 shares of common stock that are held by non-affiliates exceeds $700 million as of the prior June 30,
and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period.
Competition
In identifying, evaluating
and selecting a target business for our initial business combination, we may encounter intense competition from other entities having
a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating
businesses seeking strategic acquisitions. Many of these entities are well established and have significant experience identifying and
effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical,
human and other resources than us. Our ability to acquire larger target businesses will be limited by our available financial resources.
This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, the requirement that
we acquire a target business or businesses having a fair market value equal to at least 80% of the value of the trust account (excluding
any taxes payable) at the time of the agreement to enter into the business combination, our obligation to pay cash in connection with
our public stockholders who exercise their redemption rights and the number of our outstanding warrants and the future dilution they potentially
represent, may not be viewed favorably by certain target businesses. Any of these factors may place us at a competitive disadvantage in
successfully negotiating our initial business combination.
Employees
We currently have two executive
officers. These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much
of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they
will devote in any time period will vary based on whether a target business has been selected for our initial business combination and
the stage of the 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.
ITEM
1A. RISK FACTORS
As a smaller reporting company, we are not required
to make disclosures under this Item. 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:
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our ability to select an appropriate target business or businesses;
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our ability to complete our initial business combination;
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our expectations around the performance of a prospective target business or businesses;
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our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
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our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;
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our potential ability to obtain additional financing to complete our initial business combination;
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our pool of prospective target businesses;
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the ability of our officers and directors to generate a number of potential business combination opportunities;
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our public securities’ potential liquidity and trading;
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the lack of a market for our securities;
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the impact of COVID-19 pandemic;
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the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;
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the trust account not being subject to claims of third parties; or
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our financial performance.
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Risks Relating to Restatements of Our Previously
Issued Financial Statements
Certain of our warrants are accounted for
as liabilities and changes in the value of our warrants could have a material effect on our financial results.
On April 12, 2021, the SEC Staff expressed its view
(the “SEC Staff Statement”) that certain terms and conditions common to SPAC warrants may
require the warrants to be classified as liabilities instead of equity on the SPAC’s balance sheet. As a result of the SEC Staff
Statement, we reevaluated the accounting treatment of our 6,800,000 Private Warrants, and determined to classify the Private Warrants
as derivative liabilities measured at fair value, with changes in fair value reported in our statement of operations for each reporting
period.
As a result, included on our balance sheet as
of December 31, 2020 contained elsewhere in this annual report are derivative liabilities related to embedded features contained within
our Private Warrants. ASC 815-40 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with
a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.
As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based
on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains
or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness
in our internal control over financial reporting as of December 31, 2020. If we are unable to maintain an effective system of internal
control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely
affect investor confidence in us and materially and adversely affect our business and operating results.
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also
evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such
evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis.
As described elsewhere in this annual report, our
management and our Audit Committee concluded that, in light of the prior reclassification of certain warrants from equity to liability,
as well as the reclassification of our redeemable Public Shares as temporary equity, it was appropriate to restate our previously issued
financial statements as of, and for the period from August 10, 2020 (date of inception) to December 31, 2020. In connection with
the foregoing development and as a result of the restatements, we identified a material weakness in our internal controls over financial
reporting relating to our accounting for complex financial instruments.
To respond to this material weakness, we have devoted
significant effort and resources to the remediation and improvement of our internal control over financial reporting, see “Note
2—-Restatement of Previously Issued Financial Statements” to the accompanying consolidated financial statements, as well as
Part II, Item 9A: Controls and Procedures included in this annual report.
Efforts to remediate this material weakness may not
be effective or prevent any future material weakness or significant deficiency in our internal control over financial reporting. If our
efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial
results accurately on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss
of investor confidence and cause the market price of our common stock to decline. Ineffective internal controls could also cause investors
to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can give no assurance that the measures we have
taken or plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements
of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial
reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in
the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair
presentation of our financial statements.
Our independent registered public accounting
firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going
concern.”
In connection with the Company’s assessment
of going concern considerations accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, we have determined
that if the Company is unable to complete a business combination by November 13, 2022, then the Company will cease all operations except
for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s
ability to continue as a going concern. The financial statements contained elsewhere in this report do not include any adjustments that
might result from our inability to continue as a going concern.
We may face litigation and other risks as
a result of the material weakness in our internal control over financial reporting.
Our management and our Audit Committee concluded
that it was appropriate to restate our previously issued audited financial statements as of, and for the period from August 10, 2020 (date
of inception) to December 31, 2020. As part of the restatement, we identified a material weakness in our internal controls over financial
reporting.
As a result of such material weakness, the restatement
of our financial statements for the Affected Periods and the change in accounting for complex financial instruments, we face potential
litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims
or other claims arising from the restatement and material weakness in our internal control over financial reporting. As of the date of
this annual report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation
or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect
on our business, results of operations and financial condition or our ability to complete a business combination.
For the complete list of risks relating to our
operations, see the section titled “Risk Factors” contained in our prospectus dated November 12, 2020.