UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number: 001-39698
BETTER WORLD ACQUISITION CORP.
(Exact name of registrant as specified in its
charter)
Delaware | | 85-2448447 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer Identification No.) |
775 Park Avenue New York, New York | | 10021 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including
area code: (212) 450-9700
Securities registered pursuant to Section 12(b)
of the Act:
Title of Each Class: | | Trading Symbol(s) | | Name of Each Exchange on Which Registered: |
Shares of Common Stock, par value $0.0001 per share | | BWAC | | The Nasdaq Stock Market LLC |
Redeemable Warrants, each whole warrant exercisable for one share of Common Stock for $11.50 per share | | BWACW | | The Nasdaq Stock Market LLC |
Units, each consisting of one share of Common Stock and one Redeemable Warrant | | BWACU | | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g)
of the Act: None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
See definition of “large accelerated filer,” “accelerated filer, “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | | ☐ | | Accelerated filer | | ☐ |
Non-accelerated filer | | ☒ | | Smaller reporting company | | ☒ |
Emerging growth company | | ☒ | | | | |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
The aggregate market value of the shares of common
stock outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing
price for the units on June 30, 2021, as reported on the Nasdaq Capital Market was $129,251,180.
As of March 29, 2022, there were 16,105,670
shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding.
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report (as defined below), including, without
limitation, statements under “Item 7. 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 (as defined below) and Section 21E
of the Exchange Act (as defined below). 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:
| ● | our ability to complete our initial business combination; |
| ● | the impact on the funds held in our trust account, our capitalization
and other impacts on us or our management team should we extend the deadline for consummating our initial business combination; |
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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, as a result of which they would then receive expense reimbursements; |
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our potential ability to obtain additional financing to complete our initial business combination; |
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the ability of our officers and directors to generate
a number of potential acquisition opportunities;
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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 acquisition 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 use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or |
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our financial performance. |
The forward-looking statements contained in this
Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. 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) or other assumptions that may cause actual results or performance to be materially different from those
expressed or implied by these forward-looking statements. 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.
Unless otherwise stated in this Report, references
to:
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“board of directors” or “board” are to the board of directors of the Company; |
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“Common Stock” are to the shares of the common stock of the Company, par value $0.0001 per share; |
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“Continental” are to Continental Stock Transfer & Trust Company, trustee of our trust account (as defined below) and warrant agent of our public warrants (as defined below); |
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“DWAC System” are to the Depository
Trust Company’s Deposit/Withdrawal At Custodian System;
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“EBC” or “EarlyBirdCapital” are to EarlyBirdCapital, Inc.; |
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“equity-linked securities” refers to any debt or equity securities issued in a transaction, including but not limited to a private placement of equity or debt, that are convertible, exercisable or exchangeable for shares of common stock; |
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“ESG” refers to Environmental, Social and Governance; |
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“Exchange Act” are to the
Securities Exchange Act of 1934, as amended;
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“GAAP” are to the accounting principles
generally accepted in the United States of America;
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“initial business combination”
are to a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or
more businesses;
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“initial stockholders” are to our stockholders prior to our initial public offering (excluding EarlyBirdCapital); |
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“Investment Company Act” are to
the Investment Company Act of 1940, as amended;
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“IPO” are to the initial public offering that was consummated by the Company on November 17, 2020; |
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“JOBS Act” are to the Jumpstart Our Business Startups Act of 2012; |
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“management” or our “management team” are to our officers and directors; |
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“Marcum LLP” or “Marcum” are to our independent registered public accounting firm; |
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“Nasdaq” are to the Nasdaq Capital
Market;
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“Over-Allotment Option” are to the option granted to our underwriters to purchase up to 1,650,000 additional units; |
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“Over-Allotment Units” are to the up to 1,650,000 additional units eligible to be purchased by our underwriters; |
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“PCAOB” are to the Public Company Accounting Oversight Board (United States); |
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“private placement warrants” are to the warrants issued to our sponsor in a private placement simultaneously with the closing of our initial public offering; |
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“public shares” are to shares of our common stock sold as part of the units in our initial public offering (whether they are purchased in our initial public offering or thereafter in the open market); |
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“public stockholders” are to the holders of our public shares, including our sponsor (as defined below), officers and directors to the extent they purchase public shares, provided that their status as “public stockholders” shall only exist with respect to such public shares; |
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“public warrants” are to our redeemable warrants sold as part of the units in our initial public offering, to the private placement warrants if held by third parties other than our sponsor (or permitted transferees), and to any private placement warrants issued upon conversion of working capital loans that are sold to third parties that are not initial purchasers or executive officers or directors (or permitted transferees), in each case, following the consummation of our initial business combination; |
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“Registration Statement” are to
the Form S-1 filed with the SEC on October 7, 2020 (File No. 333-249374), as amended;
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“Report” are to this Annual Report on Form 10-K for the fiscal year ended December 31, 2021; |
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“Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002; |
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“SEC” are to the U.S. Securities
and Exchange Commission;
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“Securities Act” are to the Securities
Act of 1933, as amended;
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“sponsor” are to BWA Holdings LLC, a company affiliated with our officers and directors; |
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“trust account” are to the trust
account in which an amount of $127,447,860 from the net proceeds of the sale of the units (as defined below) in the initial public offering
and the private placement warrants was placed following the closing of the initial public offering;
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“units” are to the units sold in our initial public offering, which consist of one public share and one redeemable public warrant; |
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“warrants” are to our redeemable warrants sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market); and |
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“we,” “us”, “Company” or “our Company” are to Better World Acquisition Corp. |
PART I
Item 1. Business.
Overview
We are a Delaware blank check
company incorporated on August 5, 2020, formed for the purpose of effecting an initial business combination. Our efforts to identify
a prospective target business are not limited to a particular industry or geographic region although we are focused on target businesses
in the healthy living industries that benefit from strong ESG profiles in North America and Europe.
Initial Public Offering
On November 17, 2020, we consummated
our IPO of 11,000,000 units. Each unit consists of one share of common stock of the Company, par value $0.0001 per share, and one redeemable
warrant of the Company, with each whole warrant entitling the holder thereof to purchase one share of Common Stock for $11.50 per share.
The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $110,000,000.
Simultaneously with the closing
of the IPO, we completed the private sale of an aggregate of 4,800,000 private placement warrants to our sponsor and EarlyBirdCapital
(3,975,000 private placement warrants to our sponsor and 825,000 to EBC) at a purchase price of $1.00 per private placement warrant, generating
gross proceeds of $4,800,000.
In connection with the IPO,
the underwriters were granted a 45-day option from the date of our IPO prospectus to purchase up to 1,650,000 additional units to cover
over-allotments, if any. On November 19, 2020, the underwriters purchased an additional 1,618,600 Over-Allotment Units pursuant to the
partial exercise of the Over-Allotment Option, and cancelled the remainder of the Over-Allotment Option. The Over-Allotment Units were
sold at an offering price of $10.00 per Over-Allotment Unit, generating aggregate additional gross proceeds of $16,186,000 to us. In connection
with the cancellation of the remainder of the Over-Allotment Option, we cancelled an aggregate of 7,850 shares of Common Stock issued
to the sponsor prior to the IPO. Simultaneously with the consummation of the Over-Allotment Option, we completed the private sale of an
additional 485,580 private placement warrants to our sponsor and EBC (402,121 private placement warrants to our sponsor and 83,459 to
EBC), generating gross proceeds to us of $485,580.
A total of $127,447,860, comprised
of $122,162,280 of the proceeds from the IPO and $5,285,580 of the proceeds from the private sales, was initially deposited in a trust
account maintained by Continental, acting as trustee.
We must complete our initial
business combination by May 17, 2022, which is 18 months from the closing of our IPO. If our initial business combination is not
consummated by May 17, 2022, then our existence will terminate, and we will distribute all amounts in the trust account.
However, we intend to
extend the deadline by which we must consummate our initial business combination. Such an extension requires the approval from our
public stockholders to amend our charter, and who will be provided the opportunity to at that time to redeem all or a
portion of their shares (which would likely have a material adverse effect on the funds held in our trust account and may result in
other adverse effects on us, such as our ability to maintain our listing on Nasdaq). Our sponsor may also explore transactions under
which it would sell its interest in us to another management team.
Our Company
We believe our management team,
together with N*GEN, an affiliate of our sponsor, are well suited to identify businesses that benefit from strong ESG profiles and have
the potential to generate attractive risk-adjusted returns for our stockholders.
We are seeking to identify and acquire a business that could benefit
from a strategically experienced owner with extensive investment experience in the healthy consumer and smart cities sectors, and that
presents potential for an attractive risk-adjusted return profile. The global wellness economy was a $4.4 trillion market in 2020,
growing at a compound annual rate of 9.9% through 2025. Personal care, beauty and food products accounted for approximately $1.9 trillion
of that total. Globally, organic foods and beverages are expected to grow at a compound annual growth rate of over 14.7% from 2020 to
2027, reaching nearly $500 billion by 2027. Consumers are seeking healthier, cleaner, more sustainable products and ingredients in
the U.S. and globally. According to a study by NYU Stern and IRI, products marketed as sustainable drove over 50% of packaged goods
market growth across all channels and categories from 2013-2018, despite representing only a 16.6% market share. This growth was over
5.6 times faster than conventional products and accounted for $114 billion in sales in 2018.
In part due to the impacts
of Covid-19, U.S. organic food sales grew 13% to a record high in 2020. Due to the pandemic, changes to how people live, eat, and consume
that were already underway accelerated dramatically. Incumbent businesses are reacting to address shifts in consumer tastes and the changing
landscape. Many of these shifts will continue to change the ways we live and work, reflecting an acceleration of trends in which members
of our management team have been investing for over 10 years.
A smarter city makes the lives
of its inhabitants safer, more convenient, and more comfortable. According to the 2010 Census, U.S. cities are home to nearly 63% of the
population, but comprise under 4% of the total land area of the United States. While this density can lead to the cherished dynamism
of urban areas, it also creates a myriad of issues like pollution, traffic, disease, and food & energy insecurity. Adoption of
green technologies is addressing these problems and forging the city of the future. According to Grand View Research, the global Smart
City market reached almost $1.1 trillion in 2021 and is forecasted to grow at a compound annual rate of 24.2% from 2022 to 2030.
Importantly, economics and
cost are propelling the diffusion of these new Smart City technologies. According to the National Renewable Energy Laboratory (“NREL”),
costs of utility scale lithium-ion battery storage systems fell 72% from 2015 to 2019 with an additional 42% cost reduction through
2030. Solar energy costs fell 89% from 2009 to 2019, leading to a total installed capacity of 760 gigawatts as of 2020. This is enough
to power over 120 million homes.
Our sponsor, BWA Holdings LLC,
is an entity owned by members of our management and is affiliated with N*GEN. Rosemary L. Ripley, our CEO, and Peter S.H. Grubstein, our
CFO, have worked together at N*GEN since 2007. Shay Murphy joined N*GEN in 2015. Founded in 2001, N*GEN has raised over $500 million
in a number of venture capital investment vehicles that it currently manages. Ms. Ripley and Mr. Grubstein are both Managing
Members of N*GEN. Ms. Ripley brings years of private equity, strategy and M&A experience in the consumer products industry. Mr. Grubstein
has deep operating and investing experience in the manufacturing and distribution businesses and in the sustainability sectors. Both individuals
are experienced operating and investment professionals, under whose leadership N*GEN has distinguished itself by being a market innovator
and leader in ESG and impact investing and making numerous direct investments in healthier consumer sectors, energy efficiency, urban
farming and smart cities, and is known in the industry both for its track record of selecting companies utilizing proprietary research
and the value that it adds to its portfolio companies in scaling their growth. As a result, N*GEN has developed deep industry relationships
across its sectors.
We believe the reputation and
expertise of our management team in the healthy living industry make us a desirable partner for potential business combination targets.
The breadth and depth of our investing experience have afforded us with insight on potential candidates in multiple sectors within the
healthy living sector.
As growth equity investors,
we seek to back world class entrepreneurs and invest in innovative B2B and B2C companies offering differentiated, healthier, and
more efficient solutions. We are looking for innovation-driven, growth companies that capitalize on next generation consumer behavior
and challenges that we believe will ultimately become the innovation engines of their industries, including those in the next generation
consumer, health and wellness, and enabling technologies sectors.
We are especially focusing
on sectors being transformed by massive change, which we believe creates enormous opportunities for younger companies to capture market
share by utilizing new business models, routes to market and cleaner ingredients. Specifically, the acquisition opportunities we are pursuing
include companies in the healthy consumer and smart cities sectors that are working to develop new and creative services and solutions
for the next generation consumer. Our management team seeks to collaborate with experienced entrepreneurs and invest in high growth companies
to create a healthier, smarter, and cleaner future.
Historically, N*GEN has sourced
its transactions using proprietary research and targeted sectors growing faster than the overall economy. N*GEN focuses on differentiated
businesses that demonstrate strong, sustainable profitable growth. N*GEN has honed its investment process over the years and leveraged
its extensive network of contacts including advisors, senior professionals in select industries, private equity principals, investment
bankers, other financial sponsors and owners of private businesses.
Covid-19 has further accelerated
changes in how people live and interact with the world, leading people to seek healthier, more connected, and more sustainable lifestyles.
We expect our business combination target to be able to take advantage of the current trends toward increased spending on health and wellness
as well as smarter homes and work environments. On the commercial side, security, mobility and greater municipal autonomy are fueling
growth in local food supply systems, health, infrastructure, communications, and energy security/efficiency programs.
Business Strategy
Our acquisition and value creation
strategy is to identify, acquire and build a company in the healthy living/ESG sector that complements the experience of our management
team, benefiting from our strategic and operational expertise. After the initial business combination, we may pursue additional acquisitions
with a focus on generating attractive risk adjusted returns for our stockholders. We seek to leverage our management team’s network
of potential proprietary and public transaction sources where we believe a combination of our relationships, knowledge and experience
could effect a positive transformation or augmentation of existing businesses to improve their overall value.
We utilize a research-driven process
to generate significant deal flow that we believe is enhanced by the network and industry experience of our management team.
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:
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extensive experience in both investing in and operating across our targeted sectors; |
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experience in sourcing, structuring, acquiring, operating, developing, growing, financing and selling businesses; and |
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experience in executing transactions in the sectors under varying economic and financial market conditions. |
We expect these networks will
continue to provide our management team with a robust flow of acquisition opportunities, and supplement our internally derived deal flow.
In addition, target business candidates may be brought to our attention from various unaffiliated sources, which may include investment
market participants, private equity groups, investment banking firms, consultants, accounting firms and large business enterprises.
Acquisition Criteria
Consistent with this strategy,
we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses.
We have used and will continue to use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter
into our initial business combination with a target business that does not meet these criteria and guidelines. We intend to acquire companies
that we believe:
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have a current enterprise value between $500 million and $3 billion; |
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have market and/or cost leadership positions in their respective sectors and would benefit from our networks and insights; |
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provide innovative products or services, with the potential for revenue, market share and/or distribution improvements; |
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are fundamentally sound companies that offer compelling growth and value; |
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offer the opportunity for our management team to partner with established management teams or business owners to achieve long-term strategic and operational excellence; |
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exhibit unrecognized value or other characteristics, desirable returns on capital, and a need for capital to achieve the company’s growth strategy that offers superior risk/reward potential based on our analysis and due diligence review; and |
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will offer an attractive risk-adjusted return for our stockholders. |
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 meets some but not all of the above criteria
and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to
our initial business combination, which, as discussed in this Report, would be in the form of tender offer documents or proxy solicitation
materials that we would file with the SEC.
Our Acquisition Process
In evaluating a prospective
target business, we conduct thorough due diligence that encompasses, among other things, meetings with incumbent management and employees,
document reviews, inspection of facilities, as well as a review of financial and other information that will be made available to us.
We utilize our operational and capital allocation experience. 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 a company that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, will obtain an
opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions 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 indirectly own founder shares 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 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. Each of our officers and directors presently has, and any of them in the future
may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required
to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination
opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will
honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We do not believe, however, that the
fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business combination.
Initial Business Combination
Our initial business combination
must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in
the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the
time of the agreement to enter into the initial business combination. If our Board of Directors is not able to independently determine
the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm or another
independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria.
Corporate Information
We are an “emerging growth
company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited
to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002,
or the Sarbanes-Oxley Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year
(a) following November 17, 2025, (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 nonaffiliates exceeds
$700 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.
Competitive Strengths
Alternative Path to Becoming Public
We believe our structure as
a public company makes us an attractive business combination partner to prospective target businesses that desires to become a publicly
listed company. A merger with us will offer a target business an alternative process to a public listing rather than the traditional initial
public offering process. We believe that target businesses may favor this alternative, which we believe is less expensive, while offering
greater certainty of execution than the traditional initial public offering. Furthermore, once a proposed business combination is approved
by our stockholders and the transaction is consummated, the target business will have effectively become public, whereas an initial public
offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions that could
prevent the offering from occurring. Once public, we believe the target business would have greater access to capital and additional means
of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. A public
company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting
talented management. With public company corporate governance standards, a target business may become attractive to the public investors.
Strong and Stable Financial Position with
Flexibility.
With funds in the trust account
of $128,790,008 as of December 31, 2021, which is available to use for an initial business combination assuming no redemptions (in connection
with stockholder votes on either, or both, of the proposal to approve our initial business combination or a proposal to amend our charter
to extend the date by which we must consummate our initial business combination), we can offer a target business a variety of options
such as providing the owners of a target business with shares in a public company and a public means to sell such shares, providing capital
for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are
able to consummate our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have
the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business
to fit its needs and desires. However, since we have no specific business combination under consideration, we have not taken any steps
to secure third party financing and there can be no assurance that it will be available to us.
Effecting an Initial Business Combination
We are not presently engaged
in, and we will not engage in, any substantive commercial business until we consummate our initial business combination. We will utilize
cash derived from the proceeds of our IPO and the sale of the private placement warrants, our capital stock, debt or a combination of
these in effecting a business combination which has not yet been identified. A business combination may involve the acquisition of, or
merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for
its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays,
significant expense, loss of voting control and compliance with various federal and state securities laws. In the alternative, we may
seek to consummate a business combination with a company that may be financially unstable or in its early stages of development or growth.
While we may seek to effect simultaneous business combinations with more than one target business, we will probably have the ability,
as a result of our limited resources, to effect only a single business combination.
We originally had up to
12 months from the closing of our IPO, or until November 17, 2021, to consummate an initial business combination. However, by
resolution of our board as requested by our sponsor, we extended the period of time to consummate a business combination two times,
each by an additional three months, for a total of up to 18 months, or until May 17, 2022. Pursuant to the terms of our amended
and restated certificate of incorporation and the trust agreement entered into between us and Continental, in order for the time
available for us to consummate our initial business combination to be extended, our sponsor deposited into the trust account
$1,261,860 (or $0.10 per unit, for an aggregate of $2,523,720), for each three
month extension.
On November 9, 2021, our board
of directors approved the extension of the date by which we have to consummate an initial business combination from November 17, 2021
to February 17, 2022. In connection with the extension, our sponsor deposited into the trust account $0.10 for each of the 12,618,600
shares issued in the IPO, for a total of $1,261,860. We issued to our sponsor a non-interest bearing unsecured promissory note in the
principal amount of $1,261,860. On February 17, 2022, our sponsor deposited an additional $1,261,860 (representing $0.10 per public share)
into our trust account. This second deposit allowed us to extend the date by which we have to complete our initial business combination
from February 17, 2022, to May 17, 2022. In connection with the deposit, we amended the note previously issued to our sponsor to increase
the principal amount from $1,262,860 to $2,523,720. The note is payable by us upon the earlier of the consummation of the initial business
combination or our liquidation on or before May 17, 2022. The note may be repaid in cash or convertible into private placement warrants
at a price of $1.00 per private placement warrant.
Sources of Target Businesses
Our principal means of identifying
potential target businesses is through the extensive contacts and relationships of our sponsor, initial stockholders, officers and directors.
While our officers and directors are not required to commit any specific amount of time in identifying or performing due diligence on
potential target businesses, our officers and directors believe that the relationships they have developed over their careers and their
access to our sponsor’s contacts and resources have generated, and will continue to generate, a number of potential business combination
opportunities that will warrant further investigation. Target business candidates may be brought to our attention from various unaffiliated
sources, including investment bankers, venture capital funds, private equity funds, leveraged buyout funds, management buyout funds and
other members of the financial community. Target businesses may be brought to our attention by such unaffiliated sources as a result of
being solicited by us through calls or mailings. These sources may also introduce us to target businesses they think we may be interested
in on an unsolicited basis, since many of these sources will have read this Report and know what types of businesses we are targeting.
Our officers and directors
must present to us all target business opportunities that have a fair market value of at least 80% of the assets held in the trust account
at the time of the agreement to enter into the initial business combination, subject to any pre-existing fiduciary or contractual
obligations. We may engage the services of professional firms or other individuals that specialize in business acquisitions, 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. In no event, however, will our sponsor, initial stockholders, officers, directors or their respective
affiliates be paid any compensation prior to, or for any services they render in order to effectuate, the consummation of an initial business
combination (regardless of the type of transaction that it is) other than the $10,000 per month administrative fee, the payment of consulting,
success or finder fees in connection with the consummation of our initial business combination and reimbursement of any out-of-pocket expenses.
Our audit committee reviews and approves all reimbursements and payments made to our sponsor, officers, directors or our or their respective
affiliates, with any interested director abstaining from such review and approval.
We have no present intention
to enter into a business combination with a target business that is affiliated with any of our officers, directors or sponsor. However,
we are not restricted from entering into any such transactions and may do so if (i) such transaction is approved by a majority of
our disinterested independent directors and (ii) we obtain an opinion from an independent investment banking firm, or another independent
entity that commonly renders valuation opinions, that the business combination is fair to our unaffiliated stockholders from a financial
point of view.
Selection of a Target Business and Structuring
of an Initial Business Combination
Subject to our management team’s
pre-existing fiduciary obligations and the limitations that a target business have a fair market value of at least 80% of the balance
in the trust account at the time of the execution of a definitive agreement for our initial business combination, as described below in
more detail, and that we must acquire a controlling interest in the target business, our management will have virtually unrestricted flexibility
in identifying and selecting a prospective target business. We have not established any specific attributes or criteria (financial or
otherwise) for prospective target businesses. In evaluating a prospective target business, our management may consider a variety of factors,
including one or more of the following:
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financial condition and results of operation; |
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brand recognition and potential; |
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experience and skill of management and availability of additional personnel; |
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stage of development of the products, processes or services; |
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existing distribution and potential for expansion; |
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degree of current or potential market acceptance of the products, processes or services; |
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proprietary aspects of products and the extent of intellectual property or other protection for products or formulas; |
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impact of regulation on the business; |
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regulatory environment of the industry; |
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costs associated with effecting the business combination; |
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industry leadership, sustainability of market share and attractiveness of market industries in which a target business participates; and |
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macro competitive dynamics in the industry within which the company competes. |
These criteria are not intended
to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on
the above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent with
our business objective. In evaluating a prospective target business, we conduct an extensive due diligence review which encompasses, among
other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information which
is made available to us. This due diligence review is conducted either by our management or by unaffiliated third parties we may engage,
although we have no current intention to engage any such third parties.
The time and costs required
to select and evaluate a target business and to structure and complete the business combination cannot presently be ascertained 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 a loss to us and reduce the amount of capital available to otherwise
complete a business combination.
Fair Market Value of Target Business
Nasdaq listing rules require
that the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance
of the funds in the trust account at the time of the execution of a definitive agreement for our initial business combination. Notwithstanding
the foregoing, if we are not then listed on Nasdaq for whatever reason, we would no longer be required to meet the foregoing 80% fair
market value test.
We currently anticipate structuring
a business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure
our initial business combination where we merge directly with the target business or a newly formed subsidiary or where we acquire less
than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders
or for other reasons, but we will only complete such business combination if the post-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. Even if the post-transaction company owns or
acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a
minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination
transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the
outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result
of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own
less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests
or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business
or businesses that is owned or acquired is what will be valued for purposes of the 80% of trust account balance test.
The fair market value of the
target will be determined by our Board of Directors based upon one or more standards generally accepted by the financial community (such
as actual and potential sales, earnings, cash flow and/or book value). The proxy solicitation materials or tender offer documents used
by us in connection with any proposed transaction will provide public stockholders with our analysis of the fair market value of the target
business, as well as the basis for our determinations. If our Board of Directors is not able to independently determine that the target
business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another
independent entity that commonly renders valuation opinions, with respect to the satisfaction of such criteria. We will not be required
to obtain an opinion from an investment banking firm as to the fair market value if our board of directors independently determines that
the target business complies with the 80% threshold.
Lack of Business Diversification
We may seek to effect a business
combination with more than one target business, although we expect to complete our business combination with just one business. Therefore,
at least initially, the prospects for our success may be entirely dependent upon the future performance of a single business operation.
Unlike other entities which may have the resources to complete several business combinations of entities operating in multiple industries
or multiple areas of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from
the possible spreading of risks or offsetting of losses. By consummating a business combination with only a single entity, our lack of
diversification may:
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subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to a business combination, and |
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result in our dependency upon the performance of a single operating business or the development or market acceptance of a single or limited number of products, processes or services. |
If we determine to simultaneously
acquire several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our
purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us,
and delay our ability, to complete the business combination. With multiple acquisitions, we could also face additional risks, including
additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers)
and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies
in a single operating business.
Limited Ability to Evaluate the Target Business’
Management
Although we intend to scrutinize
the management of a prospective target business when evaluating the desirability of effecting a business combination, we cannot assure
you that our assessment of the target business’ management will prove to be correct. In addition, we cannot assure you that the
future management will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role
of our officers and directors, if any, in the target business following a business combination cannot presently be stated with any certainty.
While it is possible that some of our key personnel will remain associated in senior management or advisory positions with us following
a business combination, it is unlikely that they will devote their full-time efforts to our affairs subsequent to a business combination.
Moreover, they would only be able to remain with us after the consummation of a business combination if they are able to negotiate employment
or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation
of the business combination and could provide for them to receive compensation in the form of cash payments and/or our securities for
services they would render to us after the consummation of the business combination. While the personal and financial interests of our
key personnel may influence their motivation in identifying and selecting a target business, their ability to remain with us after the
consummation of a business combination will not be the determining factor in our decision as to whether or not we will proceed with any
potential business combination. Additionally, we cannot assure you that our officers and directors will have significant experience or
knowledge relating to the operations of the particular target business.
Following a business combination,
we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we
will have the ability to recruit additional managers, or that any such additional managers we do recruit 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 stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination
or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable),
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
(net of taxes payable), in each case subject to the limitations described herein. The decision as to whether we will seek stockholder
approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us,
solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the
transaction would otherwise require us to seek stockholder approval. If we determine to engage in a tender offer, such tender offer will
be structured so that each stockholder may tender all of his, her or its shares rather than some pro rata portion of his, her or its shares.
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. Whether we seek stockholder approval or engage
in a tender offer, we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 immediately
prior to or upon consummation of such business combination and, if we seek stockholder approval, a majority of the outstanding shares
of common stock voted are voted in favor of the business combination. We have no specified maximum percentage threshold for conversions
in our amended and restated certificate of incorporation and even those public stockholders who vote in favor of our initial business
combination have the right to convert their public shares. As a result, this may make it easier for us to consummate our initial business
combination.
We chose our net tangible asset
threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act of 1933, as
amended. 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, we may need to have more than $5,000,001 in net tangible assets immediately prior to or upon consummation and this
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 up to 18 months, or until May 17, 2022, from the closing of our IPO
in order to be able to receive a pro rata share of the trust account. We intend to extend the deadline by which we must consummate
our initial business combination. Such an extension requires the approval of our public stockholders to amend our charter, and who will
be provided the opportunity to at that time to redeem all or a portion of their shares (which would likely to have a material adverse
effect on the funds held in our trust account and may result in other adverse effects on us, such as our ability to maintain our listing
on Nasdaq).
Our sponsor, initial stockholders,
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.
None of our officers, directors,
sponsor, initial stockholders or their affiliates has indicated any intention to purchase units or shares of common stock in our IPO or
from persons in the open market or in private transactions. However, 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 or that they wish
to convert their shares, our officers, directors, sponsor, initial stockholders or their affiliates could make such purchases in the open
market or in private transactions in order to influence the vote and reduce the number of conversions. Notwithstanding the foregoing,
our officers, directors, sponsor, initial stockholders and their affiliates will not make purchases of shares 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 Rights
At any meeting called to approve
an initial business combination, public stockholders may seek to convert their shares, regardless of whether they vote for or against
the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust
account as of two business days prior to the consummation of the initial business combination, less any taxes then due but not yet paid.
Alternatively, we may provide our public stockholders with the opportunity to sell their shares of our common stock to us through 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, less any taxes then due but not yet paid.
Our sponsor, initial stockholders
and our officers and directors do not have conversion rights with respect to any shares of common stock owned by them, directly or indirectly,
whether acquired prior to our IPO or purchased by them in our IPO or in the aftermarket. Additionally, the holders of the representative
shares do not have conversion rights with respect to the representative shares.
We may require public stockholders,
whether they are a record holder or hold their shares in “street name,” to either (i) tender their certificates to our
transfer agent or (ii) deliver their shares to the transfer agent electronically using DWAC System, at the holder’s option,
in each case prior to a date set forth in the proxy materials sent in connection with the proposal to approve the business combination.
There is a nominal cost associated
with the above-referenced delivery process and the act of certificating the shares or delivering them through the DWAC System. The
transfer agent will typically charge the tendering broker a nominal amount and it would be up to the broker whether or not to pass this
cost on to the 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 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.
Any proxy solicitation materials
we furnish to stockholders in connection with a vote for any proposed business combination will indicate whether we are requiring stockholders
to satisfy such certification and delivery requirements. Accordingly, a stockholder would have from the time the stockholder received
our proxy statement up until the vote on the proposal to approve the business combination to deliver his shares if he wishes to seek to
exercise his conversion rights. This time period varies depending on the specific facts of each transaction. However, as the delivery
process can be accomplished by the stockholder, whether or not he is a record holder or his shares are held in “street name,”
in a matter of hours by simply contacting the transfer agent or his broker and requesting delivery of his shares through the DWAC System,
we believe this time period is sufficient for an average investor. However, we cannot assure you of this fact.
Any request to convert such
shares once made, may be withdrawn at any time up to the vote on the proposed business combination or the expiration of the tender offer.
Furthermore, if a holder of public shares delivered his certificate in connection with an election of their conversion and subsequently
decides prior to the applicable date 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 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 if No Initial Business Combination
Our amended and restated certificate
of incorporation provides that we have only up to 18 months from the closing of our IPO, or until May 17, 2022, to complete an initial
business combination. If we have not completed an initial business combination by such date, 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, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust
account, including any interest not previously released to us but net of taxes payable, 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in 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.
Our sponsor, initial stockholders,
officers and directors have agreed that they will not propose any amendment to our amended and restated certificate of incorporation that
would affect our public stockholders’ ability to convert or sell their shares to us in connection with a business combination as
described herein or affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business
combination within up to 18 months from the closing of our IPO, or until May 17, 2022, unless we provide our public stockholders with
the opportunity to convert their shares of common stock upon such approval at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account, including interest not previously released to us but net of franchise and income taxes payable,
divided by the number of then outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment,
whether proposed by our sponsor, initial stockholders, executive officers, directors or any other person.
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 liquidating distributions are made to stockholders,
any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata
share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third
anniversary of the dissolution. It is our intention to redeem our public shares as soon as reasonably possible following the 18 month
period from the closing of our IPO, or by May 17, 2022, and, therefore, we do not intend to comply with those procedures. As such, our
stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability
of our stockholders may extend well beyond the third anniversary of such date.
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.
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 ten years. However, because we are a blank check company, rather than
an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims
to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We are required to seek to
have all third parties (including any vendors or other entities we engage after our IPO) and any prospective target businesses enter into
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, Marcum LLP
and the underwriters of our IPO, will not execute agreements with us waiving such claims to the monies held in the trust account. Furthermore,
there is no guarantee that other vendors, service providers and prospective target businesses will execute such agreements. Nor is there
any guarantee that, even if they execute such agreements with us, they will not seek recourse against the trust account. Our sponsor has
agreed that it will be liable to ensure that the proceeds in the trust account are not reduced below $10.10 per share by the claims of
target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products
sold to us, but we cannot assure you that it will be able to satisfy its indemnification obligations if it is required to do so. We have
not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient
funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore,
we believe it is unlikely that our sponsor will be able to satisfy its indemnification obligations if it is required to do so. Additionally,
the agreement our sponsor entered into specifically provides for two exceptions to the indemnity it has given: it will have no liability
(1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an 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, or (2) as to any claims
for indemnification by the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. As a result,
if we liquidate, the per-share distribution from the trust account could be less than $10.10 due to claims or potential claims of
creditors.
We anticipate notifying the
trustee of the trust account to begin liquidating such assets promptly after the 18 month period from the closing of our IPO and
anticipate it will take no more than 10 business days to effectuate such distribution. The holders of the founder shares have waived their
rights to participate in any liquidation distribution from the trust account with respect to such shares. There will be no distribution
from the trust account with respect to our warrants, which will expire worthless. We will pay the costs of any subsequent liquidation
from our remaining assets outside of the trust account. If such funds are insufficient, our sponsor has contractually agreed to advance
us the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $15,000) and has contractually
agreed not to seek repayment for such expenses.
If we are unable to complete
an initial business combination and expend all of the net proceeds of our IPO, other than the proceeds deposited in the trust account,
and without taking into account interest, if any, earned on the trust account, the per-share redemption price would be approximately
$10.30. As discussed above, the proceeds deposited in the trust account could 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 a business combination within the required
time period, if the stockholders seek to have us convert or purchase their respective shares upon a business combination which is actually
completed by us or upon certain amendments to our amended and restated certificate of incorporation prior to consummating an initial business
combination. 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, we cannot assure you we will
be able to return to our public stockholders at least $10.30 per share.
If we are forced to file a
bankruptcy case or an involuntary bankruptcy case is filed against us which 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. Furthermore, because
we intend to distribute the proceeds held in the trust account to our public stockholders promptly after 18 months from the closing
of our IPO, this may be viewed or interpreted as giving preference to our public stockholders over any potential creditors with respect
to access to or distributions from our assets. Furthermore, our board may be viewed as having breached their fiduciary duties to our creditors
and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders
from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for
these reasons.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate
of incorporation contains certain requirements and restrictions relating to our IPO that will apply to us until the consummation of our
initial business combination. These provisions cannot be amended without the approval of a majority of our stockholders. If we seek to
amend any provisions of our amended and restated certificate of incorporation that would affect our public stockholders’ ability
to convert or sell their shares to us in connection with a business combination as described herein or affect the substance or timing
of our obligation to redeem 100% of our public shares if we do not complete a business combination within 18 months from the closing of
our IPO, or by May 17, 2022, we will provide dissenting public stockholders with the opportunity to convert their public shares in connection
with any such vote. This conversion right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor,
any executive officer, director or director nominee, or any other person. Our sponsor, officers and directors have agreed to waive any
conversion rights with respect to any founder 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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we shall either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), 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 (net of taxes payable), in each case subject to the limitations described herein; |
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we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 immediately prior to or upon consummation of such business combination and, if we seek stockholder approval, 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 18 months from the closing of our IPO, or by May 17, 2022, then we will redeem all of the outstanding public shares and thereafter liquidate and dissolve our company; |
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upon the consummation of our IPO, approximately $127.4 million was placed into the trust account; |
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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 stock that participates in any manner in the proceeds of the trust account, or that votes as a class with the common stock sold in our IPO on an initial business combination. |
Competition
In identifying, evaluating
and selecting a target business, we may encounter intense competition from other entities having a business objective similar to ours.
Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or
through affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources
will be relatively limited when contrasted with those of many of these competitors. While we believe there may be numerous potential target
businesses that we could acquire with the net proceeds of our IPO, our ability to compete in acquiring certain sizable target businesses
may be limited by our available financial resources.
The following also may not
be viewed favorably by certain target businesses:
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our obligation to seek stockholder approval of a business combination or engage in a tender offer may delay the completion of a transaction; |
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our obligation to convert or repurchase shares of common stock held by our public stockholders may reduce the resources available to us for a business combination; and |
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our outstanding warrants, and the potential future dilution they represent. |
Any of these factors may place
us at a competitive disadvantage in successfully negotiating a business combination. Our management believes, however, that our status
as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately
held entities having a similar business objective as ours in acquiring a target business with significant growth potential on favorable
terms.
If we succeed in effecting
a business combination, there will be, in all likelihood, intense competition from competitors of the target business. We cannot assure
you that, subsequent to a business combination, we will have the resources or ability to compete effectively.
Employees
We have three executive officers.
These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they
deem necessary to our affairs. The amount of time they will devote in any time period will vary based on whether a target business has
been selected for the business combination and the stage of the business combination process we are in. Accordingly, once a suitable target
business to acquire has been located, management may spend more time investigating such target business and negotiating and processing
the business combination (and consequently spend more time on our affairs) than had been spent prior to locating a suitable target business.
We presently expect our executive officers to devote such amount of time as they reasonably believe is necessary to our business. We do
not intend to have any full-time employees prior to the consummation of a business combination.
Periodic Reporting and Audited Financial Statements
Our units, 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. In accordance with the requirements of the Exchange Act, our annual report will contain financial statements
audited and reported on by our independent registered public accountants.
We will provide stockholders
with audited financial statements of the prospective target business as part of any proxy solicitation materials or tender offer documents
sent to stockholders to assist them in assessing the target business. These financial statements will need to be prepared in accordance
with or reconciled to United States generally accepted accounting principles or international financial reporting standards as promulgated
by the International Accounting Standards Board. We cannot assure you that any particular target business identified by us as a potential
acquisition candidate will have the necessary financial statements. To the extent that this requirement cannot be met, we may not be able
to acquire the proposed target business.
We are required to
evaluate our internal control procedures for the fiscal year ending December 31, 2021, 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 company 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.
Item 1A. Risk Factors.
As a smaller reporting company,
we are not required to include risk factors in this Report. 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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we are a blank check company with no revenue or basis to evaluate our ability to select a suitable business target; |
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we may not be able to select an appropriate target business or businesses and complete our initial business combination in the prescribed time frame; |
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our expectations around the performance of a prospective target business or businesses may not be realized; |
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we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination; |
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our officers and directors may have difficulties allocating their time between us and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination; |
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we may not be able to obtain additional financing to complete our initial business combination or reduce the number of shareholders requesting redemption; |
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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; |
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you may not be given the opportunity to choose the initial business target or to vote on the initial business combination; |
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trust account funds may not be protected against third party claims or bankruptcy; |
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we may encounter a material weakness in our internal controls over financial reporting; |
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our financial results may fluctuate and vary based on the accounting treatment of certain of our warrants as a liability; |
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an active market for our public securities’ may not develop and you will have limited liquidity and trading; |
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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; |
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our financial performance following a business combination with an entity may be negatively affected by their lack an established record of revenue, cash flows and experienced management; |
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there may be more competition to find an attractive target for an initial business combination, which could increase the costs associated with completing our initial business combination and may result in our inability to find a suitable target; |
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changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination; |
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our private placement warrants are accounted for as derivative liabilities and are recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock or may make it more difficult for us to consummate an initial business combination; |
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a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination; |
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changes in laws or regulations or how such laws or regulations are interpreted or applied, or a failure to comply with any laws or regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations; |
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the value of the founder shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our common stock at such time is substantially less than $10.00 per share; |
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resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business; |
| ● | if we are unable to 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; |
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| ● | if the funds held outside of our trust
account are insufficient to allow us to operate until at least May 17, 2022, our ability to fund our search for a target business or
businesses or complete an initial business combination may be adversely affected; |
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| ● | 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, since we will cease all operations
except for the purpose of liquidating if we are unable to complete an initial business combination by May 17, 2022; |
| ● | if we extend the deadline by which we must consummate our
initial business combination, our public stockholders will be provided the opportunity to redeem all or a portion of their shares, which
would likely have a material adverse effect on the funds held in our trust account and may result in other adverse effects on us, such
as our ability to maintain our listing on Nasdaq; and |
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| ● | our ability to identify a target and consummate an initial business
combination may be adversely affected by economic uncertainty and volatility in the financial markets, including as a result of military
conflict in Ukraine. |
For the complete list of risks
relating to our operations, see the section titled “Risk Factors” contained in our Registration Statement and in our Amendment
No. 1 to the Annual Report on Form 10-K/A filed with the SEC on December 14, 2021.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our executive offices are located
at 775 Park Avenue, New York, New York 10021, and our telephone number is (212) 450-9700. We pay $10,000 per-month to NGEN
MGT II, LLC, an affiliate of our executive officers. We consider our current office space, combined with the other office space otherwise
available to our executive officers, adequate for our current operations.
Item 3. Legal Proceedings.
To the knowledge of our management
team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such
or against any of our property.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
(a) Market Information
Our units, common stock and
warrants are each traded on the Nasdaq Capital Market under the symbols “BWACU,” “BWAC” and “BWACW,”
respectively. Our units commenced public trading on November 13, 2020, and our common stock and warrants commenced public trading separately
on December 28, 2020.
(b) Holders
On March 29, 2022,
there were two holders of record of our units, twenty-one holders of record of shares of our common stock and three holders of record
of our warrants.
(c) Dividends
We have not paid any cash dividends
on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment
of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition
subsequent to completion of our initial business combination. The payment of any cash dividends subsequent to our initial business combination
will be within the discretion of our Board of Directors at such time. In addition, our Board of Directors is not currently contemplating
and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with
our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection
therewith.
(d) Securities Authorized for Issuance Under Equity Compensation Plans.
None.
(e) Recent Sales of Unregistered Securities
None.
(f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6. [Reserved.]
Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our audited financial statements and related notes included herein.
Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many
factors, including those set forth elsewhere in this Report.
Overview
We are a blank check company formed under the
laws of the State of Delaware on August 5, 2020 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase,
recapitalization, reorganization or similar business combination with one or more businesses or entities. We intend to effectuate our
initial business combination using cash from the proceeds of the initial public offering and the sale of the private placement warrants,
our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs
in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful.
Results of Operations
We have neither engaged in any operations nor
generated any revenues to date. Our only activities through December 31, 2021 were organizational activities, those necessary to prepare
for the initial public offering, described below, and to identify a target company for an initial business combination. We do not expect
to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in
the form of interest income on marketable securities held in the trust account. We incur expenses as a result of being a public company
(for legal, financial reporting, accounting and auditing compliance), as well as for due diligence and transaction expenses.
For the year ended December 31,
2021, we had net income of $2,100,223 which consists of the change in fair value of warrant liabilities of $3,912,915, change in fair
value of convertible promissory note – related party of $303,460 and interest earned on marketable securities held in the trust
account of $64,088, and unrealized gain on marketable securities held in the trust account of $1,371, offset by operational costs related
to potential business combinations that were pursued of $2,181,611.
For the period from August 5, 2020 (inception) through December 31,
2020, we had a net loss of $4,187,718, which consisted of formation and operating costs of $121,087, change in fair value of warrant liabilities
of $4,069,896, and transaction costs incurred in connection with the initial public offering of $11,564 offset by interest income on marketable
securities held in the trust account of $11,521 and an unrealized gain on marketable securities held in the trust account of $3,308.
Liquidity and Capital Resources
On November 17, 2020, we consummated the initial
public offering of 11,000,000 units, at $10.00 per unit, generating gross proceeds of $110,000,000. Simultaneously with the closing of
the initial public offering, we consummated the sale of 4,800,000 private placement warrants at a price of $1.00 per private placement
warrant in a private placement to our sponsor and EarlyBirdCapital, Inc., generating gross proceeds of $4,800,000.
On November 19, 2020, in connection with the underwriters’
partial exercise of their over-allotment option, we consummated the sale of an additional 1,618,600 units at a price of $10.00 per unit,
generating total gross proceeds of $16,186,000. In addition, we also consummated the sale of an additional 485,580 private placement warrants
at $1.00 per private placement warrant, generating total gross proceeds of $485,580.
Following the initial public offering, the partial
exercise of the over-allotment option, and the sale of the private placement warrants, $111,100,000 was placed in the trust account on
November 18, 2020 and $16,347,860 was placed in the trust account on November 20, 2020, respectively, for a total of $127,447,860. We
incurred $2,880,354 in the initial public offering related costs, including $2,523,720 of underwriting fees and $356,634 of other costs.
For the year ended December 31, 2021, cash used in operating activities
was $744,981. Net income of $2,100,223 was affected by the change in fair value of warrant liabilities of $3,912,915, change in fair value
of convertible promissory note – related party of $303,460, interest earned on marketable securities held in the trust account of
$64,088, and an unrealized gain on marketable securities held in our trust account of $1,371. Changes in operating assets and liabilities
provided $1,436,630 of cash for operating activities.
For the period from August 5, 2020 (inception)
through December 31, 2020, cash used in operating activities was $147,816. Net loss of $4,187,718 was affected by interest earned on marketable
securities held in the trust account of $11,521, changes in fair value of warrant liabilities of $4,069,896, transaction costs incurred
in connection with the initial public offering of $11,564 and unrealized gain on marketable securities held in the trust account of $3,308.
Changes in operating assets and liabilities used $26,729 of cash for operating activities.
As of December 31, 2021, we had primarily marketable securities held
in the trust account of $128,790,008 (including $80,288 of interest income and unrealized gains, net of unrealized losses) consisting
of securities held in a money market fund that invests in U.S. Treasury securities with a maturity of 180 days or less. Interest income
on the balance in the trust account may be used by us to pay taxes. Through December 31, 2021, we did not withdraw any interest earned
on the trust account to pay our taxes.
We intend to use substantially all of the funds
held in the trust account, to acquire a target business and to pay our expenses relating thereto upon consummation of our initial business
combination for assisting us in connection with our initial business combination. To the extent that our capital stock is used in whole
or in part as consideration to effect an initial business combination, the remaining funds held in the trust account will be used as working
capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing
or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing
or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the
completion of our initial business combination if the funds available to us outside of the trust account were insufficient to cover such
expenses.
As of December 31, 2021, we had cash of $278,197
held outside the trust account. We intend to use the funds held outside the trust account for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations
of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the
target business to acquire and structuring, negotiating and consummating the initial business combination.
In order to fund working capital deficiencies
or finance transaction costs in connection with an initial business combination, the Insiders, or certain of our officers and directors
or their affiliates 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. The units
would be identical to the private placement warrants.
We expect that we will need to raise
additional capital through loans or additional investments from our sponsor, stockholders, officers, directors, or third parties. Our
officers, directors and sponsor may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they
deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing.
If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions
raise substantial doubt about our ability to continue as a going concern.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of December 31, 2021. We do not participate in transactions that create relationships
with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established
for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We have agreed, commencing on November 12, 2020
through the earlier of our consummation of an initial business combination and our liquidation, to pay an affiliate of our management
a total of $10,000 per month for office space, utilities and secretarial support. For the year ended December 31, 2021, we incurred $120,000
in fees for these services. At December 31, 2021 and 2020, fees of $0 and $20,000 are included in accounts payable and accrued expenses
in the accompanying balance sheets, respectively.
We granted the underwriters a 45-day option from
the date of the initial public offering to purchase up to 1,650,000 additional units to cover over-allotments, if any, at the initial
public offering price less the underwriting discounts and commissions. On November 19, 2020, the underwriters partially exercised their
over-allotment option to purchase an additional 1,618,600 units at $10.00 per unit and forfeited the remaining over-allotment option.
We have engaged EarlyBirdCapital as an advisor
in connection with an initial business combination to assist us in holding meetings with its stockholders to discuss the potential initial
business combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing
our securities in connection with an initial business combination, assist us in obtaining stockholder approval for the initial business
combination and assist us with our press releases and public filings in connection with the initial business combination. We will pay
EarlyBirdCapital a cash fee for such services upon the consummation of an initial business combination in an amount equal to 3.5% of the
gross proceeds of the initial public offering, or $4,416,510 (exclusive of any applicable finders’ fees which might become payable);
provided that up to 30% of the fee may be allocated at our sole discretion to other FINRA members that assist us in identifying and consummating
an initial business combination.
Additionally, we will pay EarlyBirdCapital a cash
fee equal to 1.0% of the total consideration payable in an initial business combination if EarlyBirdCapital introduces us to the target
business with which we complete an initial business combination.
We have engaged various law firms to provide legal due diligence services
and business combination services related to a potential target company. All fees and expenses related to the various engagements will
be deferred and are to be paid fully upon the closing of any initial business combination. The law firms will not be entitled to any fees
or expense reimbursement if we do not consummate an initial business combination within our deadline. Deferred fees of $1,009,868 related
to these legal services have been accrued as of December 31, 2021.
Critical Accounting Policies
The preparation of financial statements and related
disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
We have identified the following critical accounting policies:
Warrant Liabilities
We account for the private placement warrants
in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the private placement warrants do not meet the criteria
for equity treatment and must be recorded as liabilities. Accordingly, we classify the private placement warrants as liabilities at their
fair value and adjusts the private placement warrants to fair value at each reporting period. This liability is subject to re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The private placement
warrants for periods where no observable traded price was available were valued by using a binomial lattice simulation model.
Convertible Promissory Note
We account for our convertible promissory
note under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be at the inception of a financial
instrument to account for the instrument under the fair value option under ASC 825. We have made such election for our convertible promissory
note. Using fair value option, the convertible promissory note is required to be recorded at its initial fair value on the date of issuance,
and each balance sheet date thereafter. Changes in the estimated fair value of the note are recognized as non-cash change in the fair
value of the convertible promissory note in the statements of operations. The fair value of the option to convert the convertible promissory
note into private placement warrants was valued by utilizing a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible
conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities
from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally
redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times,
common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be
outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption
is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheets.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Accretion associated with the
redeemable shares of common stock is excluded from net income (loss) per common share because the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion
and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting
for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share
calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within
those fiscal years, with early adoption permitted. The impact of the adoption of ASU 2020-06 is being assessed by us; however no significant
impact on the financial statements is anticipated.
Management does not believe that any other recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Factors That May Adversely Affect Our Results
of Operations
Our results of operation and
our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty
and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things,
volatility in the financial markets or economic conditions, increase of oil price and interest rate, inflation, supply chain disruption,
decline in consumer confidence and spending, the on-going effects of the COVID-19 pandemic, including resurgences and the emergence of
new variants, and geopolitical instability, such as the military conflict in Ukraine. We cannot at this time fully predict one or more
of the above events, their duration or magnitude of, or the extent to, which they may negatively impact our business and our ability to
complete an initial business combination.
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.
Through December 31, 2021,
our efforts have been limited to organizational activities, activities relating to our initial public offering and since the initial public
offering, the search for a target business with which to consummate an initial business combination. We have engaged in limited operations
and have not generated any revenues. We have not engaged in any hedging activities since our inception on August 5, 2020. We do not expect
to engage in any hedging activities with respect to the market risk to which we are exposed.
The net proceeds of the initial
public offering and the sale of the private placement warrants held in the trust account have been invested in U.S. government treasury
bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there
will be no associated material exposure to interest rate risk.
Item 8. Financial Statements and Supplementary
Data.
This information appears following
Item 15 of this Report and is included herein by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed
with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed,
summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures are also
designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive
officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15 under the Exchange
Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls
and procedures as of December 31, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due
solely to the material weakness in our internal control over financial reporting related to our accounting for complex financial instruments.
As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance
with GAAP. Accordingly, management believes that the financial statements included in this Report present fairly in all material
respects our financial position, results of operations and cash flows for the period presented.
Management has identified a material weakness
in our internal controls related to the accounting for complex financial instruments. While we have processes to identify and appropriately
apply applicable accounting requirements, we plan to continue to enhance our system of evaluating and implementing the accounting standards
that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we
consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can
offer no assurance that these initiatives will ultimately have the intended effects.
Management’s Annual Report on Internal
Controls over Financial Reporting
As required by SEC rules and regulations implementing
Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control
over financial reporting includes those policies and procedures that:
| (1) | pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of our company, |
| (2) | provide
reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance
with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors,
and |
| (3) | provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could
have a material effect on the consolidated financial statements. |
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal
control over financial reporting as of December 31, 2021. In making these assessments, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments
and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December
31, 2021.
Management has implemented remediation steps to
improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities
and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification
of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with
the requisite experience and training to supplement existing accounting professionals.
This Report does not include an attestation report
of our internal controls from our independent registered public accounting firm due to our status as an emerging growth company under
the JOBS Act.
Changes in Internal Control over Financial
Reporting
There were no changes in our internal control
over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. Other Information
None.
Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and
Corporate Governance.
Directors and Executive Officers
As of the date of this Report,
our directors and officers are as follows:
Name |
|
Age |
|
|
Title |
Rosemary L. Ripley |
|
|
67 |
|
|
Chairman of the Board of Directors, President and Chief Executive Officer |
Peter S.H. Grubstein |
|
|
66 |
|
|
Chief Financial Officer, Treasurer and Director |
Shay Murphy |
|
|
38 |
|
|
Vice President and Secretary |
Brad Oberwager |
|
|
52 |
|
|
Director |
Kristopher Wood |
|
|
50 |
|
|
Director |
Jennifer Prosek |
|
|
52 |
|
|
Director |
The experience of our directors
and executive officers is as follows:
Rosemary L. Ripley has
served as our Chairman of the Board of Directors and Chief Executive Officer since August 2020. She has been a Managing Member and
control shareholder of N*GEN since 2007. Ms. Ripley leads the firm’s focus on consumer companies with differentiated products
and services in food and beverage, and personal and household care. She works actively on and with the boards of several portfolio companies
including Zevia, Revolution Foods and Enzymedica. She also serves on the board of Heineken, N.V. Over her career in the consumer industry,
Ms. Ripley has orchestrated transactions worth approximately $40 billion for a wide variety of companies, both large and small.
Many of these transactions were with counter parties that are some of the largest multinational CPG companies in the world. Responsible
for Corporate Business Development worldwide at Altria Group (previously Philip Morris Companies) from 1990 to 2005, Ms. Ripley helped
accelerate growth at Altria’s operating companies, Kraft Foods and Miller Brewing Company, through expansionary growth plans and
transformative acquisitions. Among the transformative transactions she led were the acquisition of Nabisco Foods, a $19 billion transaction,
the initial public offering and spinout of Kraft Foods, raising $8.7 billion, and the $5.5 billion merger of Miller Brewing
Company with South African Breweries. In addition to these transactions, Ms. Ripley has led numerous other transactions raising billions
of dollars for a wide range of companies in the consumer industry. Prior to joining Philip Morris, she ran the Retail and Consumer Group
in Investment Banking at two different boutique firms on Wall Street. Ms. Ripley also co-founded Circle Financial Group, a multi-family investment
advisory firm, specializing in the investment needs of ultra-high net worth women, which has been re-branded as Circle Wealth
Management. She graduated cum laude from Yale University and received an MBA from the Yale School of Management. Ms. Ripley is the wife
of Peter S.H. Grubstein, our Chief Financial Officer and a director. We believe Ms. Ripley is well-qualified to serve as a member
of our board of directors due to her experience as a business leader in a variety of industries and her contacts and relationships.
Peter S.H. Grubstein has
served as our Chief Financial Officer, Treasurer and Director since August 2020. He is the founder and Managing Member of N*GEN,
a venture capital and growth equity investment firm investing in healthy and sustainable living. Mr. Grubstein founded N*GEN in 2001
and has since been investing in sustainable businesses with innovative solutions to impact the world’s biggest problems. Mr. Grubstein
has 40 years of experience as an entrepreneur, operating executive, and venture capital investor and has grown N*GEN from one of
the earliest to invest in sustainable technologies, to a firm with three funds, raising over $500 million. At N*GEN, he invests in
healthy living, which includes consumer-facing brands and services that span various sectors, from personal care to energy efficiency
products and innovative agricultural solutions, all with the goal of changing consumer behavior to improve consumer and environmental
health. Prior to founding N*GEN, Mr. Grubstein made diverse private investments, ranging from leveraged buyouts and leveraged recapitalizations
to early venture investments in materials science enterprises. Earlier in his career, he was CEO of American Tanning, a manufacturing
business owned by his family, from 1982 to 1983. Subsequently at KD/P Equities. J.B. Poindexter & Co. and Grubstein Holdings, LTD.,
he worked on investments such as Carolina Steel Corporation and focused on supply chain and logistics efficiencies to drive profitability,
including selecting acquisitions to improve overall operations for businesses that reach a certain scale. Mr. Grubstein is currently
a member of the Board of Directors of Enzymedica, a provider of digestive enzyme supplements. Mr. Grubstein is a graduate of Yale
University. Mr. Grubstein is the husband of Rosemary L. Ripley, our Chairman and Chief Executive Officer. We believe Mr. Grubstein is
well-qualified to serve as a member of our board of directors due to his experience as a business leader in a variety of industries
and his contacts and relationships.
Shay Murphy has
served as our Vice President and Secretary since August 2020. Mr. Murphy has been with N*GEN for nearly seven years since he
began as an associate after graduating from business school in 2015 and is currently a partner. He leads N*GEN’s focus on smart
cities and sustainable food systems and also supports the healthy consumer investment strategy. His duties include current portfolio management,
new deal pipeline and diligence, financial modeling, and fundraising. Mr. Murphy is current a member of the Board of Directors of
Encycle Corporation. From 2012 to 2013, Mr. Murphy worked at DG Energy Partners, a solar energy financial advisory start-up where
he sourced and evaluated prospective new commercial-scale solar projects and developed a project finance and feasibility model that
was sold and disseminated to DG Energy Partners’ financial and EPC clients. In 2006, Mr. Murphy began his career at Citigroup
Global Markets in the fixed income capital markets division where his primary role was providing debt restructuring and refinancing solutions
for sponsor-backed companies, corporates, and sovereign nations. Until he left in 2011, Mr. Murphy was involved in the restructuring
or refinancing of over $200 billion of debt, including the $38 billion debt exchange for GMAC in December 2008. Mr. Murphy
holds an MBA from NYU Stern School of Business and a B.A. in Philosophy from Columbia University where he played varsity football.
Brad Oberwager
has served as a member of our board of directors since November 2020. Mr. Oberwager has spent his career in technology and consumer
focused companies. He is an experienced board member and has served on multiple boards. Currently, he is member of the board of directors
of Asure Software (NASDQ: ASUR) and chairs its compensation committee. Mr. Oberwager is also on the boards of TEGSCO (aka AutoReturn),
an information services company, Linden Lab (owner of Second Life), a developer of digital entertainment, Jyve Corporation, a talent marketplace,
where he is Chairman, and Sundia Corporation, a food company, where he is also Chairman. He also owned Bare Snacks, a food company acquired
by PepsiCo in 2018. From July 2017 to June 2018, he was Vice-chair of YPO International, a global organization of 25,000 CEOs. He
is licensed with the Nationwide Multistate Licensing System & Registry. Mr. Oberwager received his BS from Georgetown University
and his MBA from the Wharton School. We believe Mr. Oberwager is well-qualified to serve as a member of our board of directors
due to his experience in technology and consumer focused industries and his contacts and relationships.
Kristopher Wood
has served as a member of our board of directors since November 2020. Mr. Wood is a private investor in numerous private start-ups and
in smaller established businesses where he often assumes an operating role in repositioning the business for dynamic growth and enhanced
profitability. He has served as the President of Wellness Coaches USA, LLC, a leading provider of health and wellness program to government
agencies and large employers, since November 2021. Previously, Mr. Wood served as the President of Impact Health, Inc., a provider of
rapidly deployed, turn-key, COVID-19 testing programs at scale, from March 2020 to September 2021. Mr. Wood led the development
of Impact Health’s COVID-19 programs and oversaw its operations and strategy. From 2012 to April 2018, Mr. Wood served as the
Chief Investment Officer for Lurie Holdings, Inc., a family office, where he worked on the turnaround, sale and integration of a number
of Lurie investments, including Joint Juice, which later acquired Premier Nutrition. He served as Executive Chairman of the combined company
from September 2012 to August 2013 where he was active in integrating the two companies and led the subsequent sale of Premier Nutrition
to Post Holdings. From 2011 to 2012, Mr. Wood was Head of Strategy for NewPage Corporation, a large freesheet paper manufacturer.
From 2009 to 2011, he was Head of Strategy for Worldcolor, a large printing company. Earlier in his career, Mr. Wood was a member
of the investment team at several middle market private equity companies including MidOcean Partners where he sourced investments and
took active leadership roles and a member of the Global Finance Group of Deutsche Bank Securities. Mr. Wood was a director of Viamet
Pharmaceuticals and was also a member of the Finance Committee of the Lurie Children’s Hospital of Chicago. He graduated cum
laude with a B.S. in economics from The Wharton School of the University of Pennsylvania. We believe Mr. Wood is well-qualified to
serve as a member of our board of directors due to his experience as a business leader in a variety of industries and his contacts and
relationships.
Jennifer Prosek
has served as a member of our board of directors since November 2020. Ms. Prosek is the Founder and CEO of Prosek Partners, an international
public relations and financial communications consultancy. She is a published author and frequent speaker. Ms. Prosek is on the board
of directors of the Arthur W. Page Society and BritishAmerican Business and sits on the advisory boards of Signal AI & iConnections.
She received her MBA from Columbia University and a B.A. in English literature from Miami University. We believe Ms. Prosek is well-qualified to
serve as a member of our board of directors due to her 25 years of experience as a leader in the public relations industry as well as
her contacts and relationships.
Advisors
Paul Price has
served as an advisor to our board of directors since November 2020. Mr. Price has served as the Chairman of the Irish Association of Investment
Management since March 2021 and as a member of the Board of Quidtium LLC since January 2020. He has served as the Chief Executive Officer
of Morgan Stanley Investment Management (Ireland) Limited since October 2018. From October 2013 to April 2018, Mr. Price served as Head
of International Distribution at Morgan Stanley Investment Management in London. From 2006 to 2010, he served as Global Head of the Institutional
Business at Pioneer Global Asset Management. From 2000 to 2005, he served as head of MFS Investment Management’s non-U.S. institutional
business. Mr. Price also served as an associate director on the Fixed Income team at Lombard Odier from 1997 to 1999 and held various
roles, both as a senior dealer in the treasury division and within the asset management business while at the Bank of Ireland from 1986
to 1996. Mr. Price received a bachelor of commerce degree from the University College Dublin and a master’s degree in investment
and treasury from Dublin City University.
Robert Chiste has
served as an advisor to our board of directors since November 2020. Since July 2012, Mr. Chiste has served as the Chief Executive
Officer of Encycle, an energy management firm. Since 2009, he has also served as principal of Sorfina Capital, an investment firm that
focuses on early stage clean energy and traditional energy services. From 2003 to 2009, Mr. Chiste was the Chief Executive Officer
of Comverge, Inc., a provider of technology services used by utilities. Mr. Chiste earned his B.A. in Mathematics from the College
of New Jersey and his J.D. and M.B.A. from Rutgers University.
Our advisors (i) provide their
business insights when we assess potential business combination targets and (ii) upon our request, provide their business insights as
we work to create additional value in the businesses that we invest. In this regard, they fulfill some of the same functions as our board
members. However, they have no written advisory, employment or advisory agreement with us. Additionally, our advisors have no other employment
or compensation arrangements with us. Moreover, our advisors are not under any fiduciary obligations to us nor do they perform board or
committee functions, nor do they have any voting or decision making capacity on our behalf. They are not required to devote any specific
amount of time to our efforts or subject to the fiduciary requirements to which our board members are subject. Accordingly, if any of
our advisors becomes aware of a business combination opportunity which is suitable for any of the entities to which he has fiduciary or
contractual obligations (including other blank check companies), he will honor his fiduciary or contractual obligations to present such
business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. We may modify or expand
our roster of advisors as we source potential business combination targets.
Number and Terms of Office of Officers and
Directors
Our board consists of five
directors and 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 Jennifer Prosek, will expire at our first annual meeting
of stockholders. The term of office of the second class of directors, consisting of Brad Oberwager and Kristopher Wood, will expire at
the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Rosemary L. Ripley and Peter
S. H. Grubstein, will expire at the third annual meeting of stockholders.
Our officers are appointed
by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of
directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our
officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Presidents, Vice Presidents, Secretary,
Assistant Secretaries, Treasurer, and such other offices as may be determined by the board of directors.
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, 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,
and Nasdaq rules require that the compensation committee of a listed company be comprised solely of independent directors. Each committee
operates under a charter that has been approved by our board and has the composition and responsibilities described below. We have filed
a copy of our audit and compensation committee charters as exhibits to the registration statement for our IPO. You can review these documents
by accessing our public filings at the SEC’s web site at www.sec.gov.
Audit Committee
We have established an audit
committee of the board of directors, which consists of Brad Oberwager, Kristopher Wood and Jennifer Prosek, each of whom is an independent
director under Nasdaq’s listing standards. The audit committee’s duties, which are specified in our Audit Committee Charter,
include, but are not limited to:
|
● |
reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K; |
|
● |
discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; |
|
● |
discussing with management major risk assessment and risk management policies; |
|
● |
monitoring the independence of the independent auditor; |
|
● |
verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; |
|
● |
reviewing and approving all related-party transactions; |
|
● |
inquiring and discussing with management our compliance with applicable laws and regulations; |
|
● |
pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; |
|
● |
appointing or replacing the independent auditor; |
|
● |
determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
|
● |
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and |
|
● |
approving reimbursement of expenses incurred by our management team in identifying potential target businesses. |
Financial Experts on Audit Committee
The audit committee will at
all times be composed exclusively of “independent directors” who are “financially literate” as defined under Nasdaq’s
listing standards. Nasdaq’s standards define “financially literate” as being able to read and understand fundamental
financial statements, including a company’s balance sheet, income statement and cash flow statement.
In addition, we must certify
to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting,
requisite professional certification in accounting, or other comparable experience or background that results in the individual’s
financial sophistication. The board of directors has determined that Kristopher Wood qualifies as an “audit committee financial
expert,” as defined under rules and regulations of the SEC and has accounting or related financial management expertise.
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 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 Brad Oberwager, Kristopher Wood and Jennifer Prosek.
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, the 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
We have established a compensation
committee of the board of directors, which consists of Brad Oberwager, Kristopher Wood and Jennifer Prosek, each of whom is an independent
director under Nasdaq’s listing standards. The compensation committee’s duties, which are specified in our Compensation Committee
Charter, include, but are not limited to:
|
● |
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 the compensation of all of our other executive officers; |
|
● |
reviewing our executive compensation policies and plans; |
|
● |
implementing and administering our incentive compensation equity-based remuneration plans; |
|
● |
assisting management in complying with our proxy statement and annual report disclosure requirements; |
|
● |
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
|
● |
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. |
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 as an exhibit to this Report. You
can review the Code of Ethics 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.
Compliance with Section 16(a) of the Exchange
Act
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 on our review of such forms furnished to us and written representations
from certain reporting persons, we believe that during the year ended December 31, 2021, all reports applicable to our executive officers,
directors and greater than 10% beneficial owners were filed in a timely manner in accordance with Section 16(a) of the Exchange Act.
Item 11. Executive Compensation.
Other than the monthly payment
of $10,000 to NGEN MGT II, LLC, an affiliate of our executive officers, for office space, administrative and support services, 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 shareholders, to the extent then known, in the tender offer
materials or proxy solicitation materials furnished to our shareholders 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.
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 29, 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 16,105,670 shares of our common stock, issued and outstanding as of March
29, 2022. Voting power represents the voting power of shares of common stock owned beneficially by such person. The table
below does not include the 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.
Name and Address of Beneficial Owner (1) | |
Number of Shares Beneficially Owned | | |
Approximate Percentage of Outstanding Common Stock | |
BWA Holdings LLC (our sponsor)(2)(3) | |
| 3,154,650 | | |
| 19.59 | % |
Rosemary L. Ripley (3) | |
| 3,154,650 | | |
| 19.59 | % |
Peter S.H. Grubstein (3) | |
| 3,154,650 | | |
| 19.59 | % |
Shay Murphy* | |
| — | | |
| — | |
Brad Oberwager* | |
| — | | |
| — | |
Kristopher Wood* | |
| — | | |
| — | |
Jennifer Prosek* | |
| — | | |
| — | |
All directors and executive officers as a group (6 individuals)(2) | |
| 3,154,650 | | |
| 19.59 | % |
| |
| | | |
| | |
Other 5% Stockholders | |
| | | |
| | |
Mizuho Financial Group, Inc.(4) | |
| 885,932 | | |
| 5.50 | % |
Karpus Investment Management (5) | |
| 934,675 | | |
| 5.80 | % |
(1) |
Unless otherwise indicated, the business address of each of the individuals and BWA Holdings LLC is c/o Better World Acquisition Corp., 775 Park Avenue, New York, New York 10021. The business address of EarlyBirdCapital is 366 Madison Avenue, New York, New York 10017. |
(2) |
Represents securities held by BWA Holdings LLC, our sponsor, of which Rosemary L. Ripley and Peter S.H. Grubstein are managing members. Accordingly, all securities held by our sponsor may ultimately be deemed to be beneficially held by Ms. Ripley and Mr. Grubstein. |
(3) |
Does not include any securities held by BWA Holdings LLC, of which each person is a member. Each such person disclaims beneficial ownership of the reported shares other than to the extent of his ultimate pecuniary interest therein. |
(4) |
According to a Schedule 13G filed on February 14, 2022, by Mizuho Financial Group, Inc., Mizuho Financial Group, Inc., Mizuho Bank, Ltd. and Mizuho Americas LLC may be deemed to be indirect beneficial owners of the securities directly held by Mizuho Securities USA LLC which is their wholly-owned subsidiary. The business address for each of these reporting persons is 1–5–5, Otemachi, Chiyoda–ku, Tokyo 100–8176, Japan. |
(5) |
According to a Schedule 13G filed on February 14, 2022, by Karpus Management, Inc., d/b/a Karpus Investment Management. The address of the business office of each of these reporting persons is 183 Sully’s Trail, Pittsford, New York 14534. |
Securities Authorized for Issuance under Equity
Compensation Plans
None.
Changes in Control
None.
Item 13. Certain Relationships and Related
Transactions, and Director Independence
On August 5, 2020, our sponsor
paid $25,000 to cover certain of our offering costs in consideration for 3,593,750 shares of common stock (the “Founder Shares”).
On November 9, 2020, our sponsor returned to us for cancellation, at no cost, an aggregate of 718,750 Founder Shares, resulting in an
aggregate of 2,875,000 Founder Shares outstanding and held by our sponsor. On November 12, 2020, we effected a stock dividend of 0.1 shares
for each share of common stock outstanding, resulting in an aggregate of 3,162,500 Founder Shares outstanding and held by our sponsor.
The Founder Shares included, after giving retroactive effect to the share surrender and stock dividend, an aggregate of up to 412,500
shares subject to forfeiture to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that our
sponsor would collectively own 20% of our issued and outstanding shares after the IPO (assuming our sponsor did not purchase any Public
Shares in the IPO). In connection with the underwriters’ partial exercise of the over-allotment option and the forfeiture of the
remaining over-allotment option, 7,850 Founder Shares were forfeited and 404,650 Founder Shares are no longer subject to forfeiture resulting
in an aggregate of 3,154,650 Founder Shares outstanding on November 19, 2020.
Since November 2020, we have
paid an affiliate of our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support.
Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Other than the foregoing,
no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a
loan, will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection
with any services rendered in order to effectuate, the consummation of an initial business combination (regardless of the type of transaction
that it is). 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. We do not have
a policy that prohibits our sponsor, executive officers or directors, or any of their respective affiliates, from negotiating for the
reimbursement of out-of-pocket expenses by a target business. 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.
Prior to the closing of our
IPO, our sponsor loaned us $107,638.50 under an unsecured promissory note, which were used for a portion of the expenses of our IPO. The
loans were fully repaid upon the closing of our IPO.
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 on a non-interest bearing basis as may be required. If we complete
an initial business combination, we would repay such loaned amounts. In the event that the 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. The 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.
On November 9, 2021, our board
of directors approved the extension of the date by which we have to consummate an initial business combination from November 17, 2021,
to February 17, 2022. In connection with the extension, our sponsor deposited into the trust account $0.10 for each of the 12,618,600
shares issued in the IPO, for a total of $1,261,860. We issued our sponsor a non-interest bearing unsecured promissory note in the principal
amount of $1,261,860. On February 17, 2022, our sponsor deposited an additional $1,261,860 (representing $0.10 per public share) into
our trust account. This second deposit allowed us to extend the date by which we have to complete our initial business combination from
February 17, 2022, to May 17, 2022. In connection with the deposit, we amended the note previously issued to our sponsor to increase the
principal amount from $1,262,860 to $2,523,720. The note is payable by us upon the earlier of the consummation of the initial business
combination or our liquidation on or before May 17, 2022. The note may be repaid in cash or convertible into private placement warrants
at a price of $1.00 per private placement warrant.
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.
We have entered into a registration
and shareholder rights agreement with respect to the private placement warrants, the warrants issuable upon conversion of working capital
loans (if any) and the shares of common stock issuable upon exercise of the foregoing and upon conversion of the founder shares.
Director Independence
Currently, Brad Oberwager,
Kristopher Wood and Jennifer Prosek would each be considered an “independent director” under the Nasdaq listing rules, which
is defined generally as a person other than an officer or employee of a company or its subsidiaries or any other individual having a relationship,
which, in the opinion of our board of directors would interfere with the director’s exercise of independent judgment in carrying
out the responsibilities of a director.
Our independent directors
will have regularly scheduled meetings at which only independent directors are present.
Any affiliated transactions
will be on terms no less favorable to us than could be obtained from independent parties. Our board of directors will review and approve
all affiliated transactions with any interested director abstaining from such review and approval.
Item 14. Principal Accountant Fees and
Services.
The following is a summary
of fees paid or to be paid to Marcum, for services rendered.
Audit Fees. Audit fees consist of fees billed
for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Marcum
in connection with regulatory filings. The aggregate fees billed by Marcum for professional services rendered for the audit of our annual
financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings
with the SEC for the year ended December 31, 2021 and for the period from August 5, 2020 (inception) through December 31, 2020 totaled
$97,466 and $67,745, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee
meetings.
Audit-Related Fees. Audit-related fees
consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial
statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute
or regulation and consultations concerning financial accounting and reporting standards. We did not pay Marcum any audit-related fees
for the year ended December 31, 2021 and for the period from August 5, 2020 (inception) through December 31, 2020.
Tax Fees. We did not pay Marcum for tax
planning and tax advice for the year ended December 31, 2021 and for the period from August 5, 2020 (inception) through December 31, 2020.
All Other Fees. We did not pay Marcum for
any other services for the year ended December 31, 2021 and for the period from August 5, 2020 (inception) through December 31, 2020.
Pre-Approval Policy
Our audit committee was formed upon the consummation
of our initial public offering. 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).
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) The following documents are filed as part of this Report:
(1) Financial Statements
(2) Financial Statements Schedules
None
(3) Exhibits
We hereby file as part of this Report the exhibits
listed in the attached Exhibit Index. Copies of such exhibits can be obtained on the SEC website at www.sec.gov.
Item 16. Form 10-K Summary
Not applicable.
BETTER WORLD ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Better World Acquisition Corp.
Opinion on the Financial Statements
We have audited
the accompanying balance sheets of Better World Acquisition Corp. (the “Company”) as of December 31, 2021 and 2020 and the
related statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2021 and for the
period from August 5, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the year ended December 31, 2021 and for the
period from August 5, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United
States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements,
the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working capital
as of December 31, 2021 are not sufficient to complete its planned activities. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/
Marcum LLP
Marcum LLP
We have served as the Company’s auditor
since 2020.
Melville, NY
March 31, 2022
BETTER WORLD ACQUISITION CORP.
BALANCE SHEETS
| |
December 31, 2021 | | |
December 31, 2020 | |
| |
| | |
| |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash | |
$ | 278,197 | | |
$ | 1,023,178 | |
Prepaid expenses and other current assets | |
| 30,805 | | |
| 125,435 | |
Total Current Assets | |
| 309,002 | | |
| 1,148,613 | |
| |
| | | |
| | |
Cash and marketable securities held in Trust Account | |
| 128,790,008 | | |
| 127,462,689 | |
TOTAL ASSETS | |
$ | 129,099,010 | | |
$ | 128,611,302 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Current liabilities - Accounts payable and accrued expenses | |
$ | 1,440,668 | | |
$ | 98,668 | |
Convertible promissory note – related party, at fair value | |
| 958,400 | | |
| — | |
Warrant liabilities | |
| 2,641,204 | | |
| 6,554,119 | |
Total Liabilities | |
| 5,040,272 | | |
| 6,652,787 | |
| |
| | | |
| | |
Commitments | |
| | | |
| | |
| |
| | | |
| | |
Common stock subject to possible redemption, $0.0001 par value; 12,618,600 shares at $10.20 per share redemption value as of December 31, 2021 and 2020, respectively | |
| 128,709,720 | | |
| 127,447,860 | |
| |
| | | |
| | |
Stockholders’ Deficit | |
| | | |
| | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | |
| — | | |
| — | |
Common stock, $0.0001 par value; 50,000,000 shares authorized; 3,487,070 shares issued and outstanding (excluding 12,618,600 shares subject to possible redemption) at December 31, 2021 and 2020, respectively | |
| 348 | | |
| 348 | |
Accumulated deficit | |
| (4,651,330 | ) | |
| (5,489,693 | ) |
Total Stockholders’ Deficit | |
| (4,650,982 | ) | |
| (5,489,345 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
$ | 129,099,010 | | |
$ | 128,611,302 | |
The accompanying notes are an integral
part of the financial statements.
BETTER WORLD ACQUISITION CORP.
STATEMENTS OF OPERATIONS
| |
Year Ended December 31, 2021 | | |
For the Period from August 5, 2020 (Inception) Through December 31, 2020 | |
| |
| | |
| |
Formation and operational costs | |
$ | 2,181,611 | | |
$ | 121,087 | |
Loss from operations | |
| (2,181,611 | ) | |
| (121,087 | ) |
| |
| | | |
| | |
Other income (expenses): | |
| | | |
| | |
Interest earned on marketable securities held in Trust Account | |
| 64,088 | | |
| 11,521 | |
Unrealized gain on marketable securities held in Trust Account | |
| 1,371 | | |
| 3,308 | |
Change in fair value of Private Warrants liabilities | |
| 3,912,915 | | |
| (4,069,896 | ) |
Change in fair value of convertible promissory note – related party | |
| 303,460 | | |
| — | |
Transaction costs incurred in connection with Initial Public Offering | |
| — | | |
| (11,564 | ) |
Total other income (expenses), net | |
$ | 4,281,834 | | |
$ | (4,066,631 | ) |
| |
| | | |
| | |
Income (Loss) before provision for income taxes | |
| 2,100,223 | | |
| (4,187,718 | ) |
Net income (loss) | |
$ | 2,100,223 | | |
$ | (4,187,718 | ) |
| |
| | | |
| | |
Basic and diluted weighted average shares outstanding, redeemable common stock | |
| 12,618,600 | | |
| 3,729,603 | |
| |
| | | |
| | |
Basic and diluted net income (loss) per share, redeemable common stock | |
$ | 0.13 | | |
$ | (0.60 | ) |
Basic and diluted weighted average shares outstanding, non-redeemable common stock | |
| 3,487,070 | | |
| 3,197,253 | |
| |
| | | |
| | |
Basic and diluted net income (loss) per share, non-redeemable common stock | |
| 0.13 | | |
$ | (0.60 | ) |
The accompanying notes are an integral part
of the financial statements.
BETTER WORLD ACQUISITION CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’
DEFICIT
FOR THE YEAR
ENDED DECEMBER 31, 2021 AND FOR THE PERIOD FROM
AUGUST 5, 2020 THROUGH DECEMBER 31, 2020
| |
Common Stock | | |
Additional Paid | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
in Capital | | |
Deficit | | |
Deficit | |
Balance – August 5, 2020 (inception) | |
| — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock to the Sponsor | |
| 3,117,170 | | |
| 316 | | |
| 24,684 | | |
| — | | |
| 25,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Representative Shares | |
| 377,750 | | |
| 33 | | |
| 2,633 | | |
| — | | |
| 2,666 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Accretion for common stock to redemption amount | |
| — | | |
| — | | |
| (2,828,675 | ) | |
| (1,301,975 | ) | |
| (4,130,650 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Contribution in excess of fair value on sale of Private Warrants | |
| — | | |
| — | | |
| 2,801,357 | | |
| — | | |
| 2,801,357 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Forfeiture of Founder Shares | |
| (7,850 | ) | |
| (1 | ) | |
| 1 | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| — | | |
| — | | |
| — | | |
| (4,187,718 | ) | |
| (4,187,718 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance – December 31, 2020 | |
| 3,487,070 | | |
$ | 348 | | |
$ | — | | |
$ | (5,489,693 | ) | |
$ | (5,489,345 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Accretion for common stock to redemption amount | |
| | | |
| | | |
| | | |
| (1,261,860 | ) | |
| (1,261,860 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| 2,100,223 | | |
| 2,100,223 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance – December 31, 2021 | |
| 3,487,070 | | |
$ | 348 | | |
$ | — | | |
$ | (4,651,330 | ) | |
$ | (4,650,982 | ) |
The accompanying notes are an integral part
of the financial statements.
BETTER WORLD ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
| |
Year Ended December 31, 2021 | | |
For the Period from August 5, 2020 (Inception) Through December 31, 2020 | |
Cash Flows from Operating Activities: | |
| | |
| |
Net income (loss) | |
$ | 2,100,223 | | |
$ | (4,187,718 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Interest earned on marketable securities held in Trust Account | |
| (64,088 | ) | |
| (11,521 | ) |
Unrealized gain on marketable securities held in Trust Account | |
| (1,371 | ) | |
| (3,308 | ) |
Transaction costs incurred in connection with IPO | |
| — | | |
| 11,564 | |
Change in fair value of convertible promissory note – related party | |
| (303,460 | ) | |
| — | |
Change in fair value of warrant liabilities | |
| (3,912,915 | ) | |
| 4,069,896 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses and other current assets | |
| 94,630 | | |
| (125,397 | ) |
Accounts payable and accrued expenses | |
| 1,342,000 | | |
| 98,668 | |
Net cash used in operating activities | |
$ | (744,981 | ) | |
$ | (147,816 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Investment of cash into Trust Account | |
$ | (1,261,860 | ) | |
$ | (127,447,860 | ) |
Net cash used in investing activities | |
$ | (1,261,860 | ) | |
$ | (127,447,860 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from promissory note – related party | |
$ | — | | |
$ | 107,639 | |
Proceeds from sale of Units, net of underwriting discounts paid | |
| — | | |
| 123,662,280 | |
Proceeds from sale of Private Placements Warrants | |
| — | | |
| 5,285,580 | |
Proceeds from convertible promissory note – related party | |
| 1,261,860 | | |
| — | |
Repayment of promissory note – related party | |
| — | | |
| (107,639 | ) |
Payment of offering costs | |
| — | | |
| (329,006 | ) |
Net cash provided by financing activities | |
$ | 1,261,860 | | |
$ | 128,618,854 | |
| |
| | | |
| | |
Net Change in Cash | |
$ | (744,981 | ) | |
$ | 1,023,178 | |
Cash – Beginning of period | |
| 1,023,178 | | |
| — | |
Cash – End of period | |
$ | 278,197 | | |
$ | 1,023,178 | |
| |
| | | |
| | |
Non-Cash investing and financing activities: | |
| | | |
| | |
Accretion for common stock subject to redemption amount | |
$ | 1,261,860 | | |
$ | 4,130,650 | |
Offering costs paid by the Sponsor in exchange for issuance of founder shares | |
$ | — | | |
$ | 25,000 | |
Issuance of Representative Shares | |
$ | — | | |
$ | 2,666 | |
The accompanying notes are an integral part
of the financial statements.
NOTE 1 — DESCRIPTION OF ORGANIZATION
AND BUSINESS OPERATIONS
Better World Acquisition
Corp. (the “Company”) was incorporated in Delaware on August 5, 2020. 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”).
Although the Company
is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company is focused on target
businesses in the healthy living industries that benefit from strong Environmental, Social and Governance (“ESG”) profiles.
The Company is an early stage and emerging growth company and, as such, the Company is subject to all the risks associated with early
stage and emerging growth companies.
As of December 31, 2021, the Company had not commenced
any operations. All activity through December 31, 2021 relates to the Company’s formation, the initial public offering (“Initial
Public Offering”), which is described below, and identifying a target company for a Business Combination. The Company will not generate
any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income
in the form of interest income from the marketable securities held in the Trust Account (as defined below).
The registration
statement for the Company’s Initial Public Offering was declared effective on November 12, 2020. On November 17, 2020, the Company
consummated the Initial Public Offering of 11,000,000 units (the “Units” and, with respect to the shares of common stock included
in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $110,000,000, which is described
in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 4,800,000 warrants (the “Private Warrants”)
at a price of $1.00 per Private Warrant in a private placement to BWA Holdings LLC (the “Sponsor”) and EarlyBirdCapital, Inc.
(“EarlyBirdCapital”), generating gross proceeds of $4,800,000, which is described in Note 4.
Following the closing
of the Initial Public Offering on November 17, 2020, an amount of $111,100,000 ($10.10 per Unit) from the net proceeds of the sale of
the Units in the Initial Public Offering and the sale of the Private Warrants was placed in a trust account (the “Trust Account”)
located in the United States and 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 185 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 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
funds in the Trust Account, as described below.
On November 17,
2020, the underwriters notified the Company of their intention to partially exercise their over-allotment option on November 19, 2020.
As such, on November 19, 2020, the Company consummated the sale of an additional 1,618,600 Units, at $10.00 per Unit, generating gross
proceeds of $16,186,000, and the sale of an additional 485,580 Private Warrants, at $1.00 per Private Warrant, generating gross proceeds
of $485,580. A total of $16,347,860 of the net proceeds was deposited into the Trust Account on November 20, 2020, bringing the aggregate
proceeds held in the Trust Account to $127,447,860. On November 9, 2021, in connection with the first extension of the date by which the
Company has to consummate a Business Combination, a total of $1,261,860 was deposited into the Trust Account.
Transaction costs
amounted to $2,880,354 consisting of $2,523,720 of underwriting fees, net of reimbursement and $356,634 of other offering costs.
The Company’s
management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale
of the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward completing a Business
Combination. The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held
in the Trust Account (excluding taxes payable on income earned on the Trust Account) at the time of the agreement to enter into a Business
Combination. The Company will only complete a Business Combination if the post Business Combination 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 that the Company will be able
to complete a Business Combination successfully.
The Company will provide
its 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, solely in its discretion. The public stockholders will be
entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.20 per Public Share as of December
31, 2021, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its
tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s
warrants.
The Company will proceed
with a Business Combination if the Company has net tangible assets of at least $5,000,001 immediately prior to or upon such consummation
of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business
Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other
legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate
of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”)
and file tender offer documents with the SEC containing substantially the same information as would be included in a proxy statement prior
to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides
to obtain stockholder approval for business or legal 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), Representative Shares (as defined in Note
8) and any Public Shares purchased during or after the Initial Public Offering (a) in favor of approving a Business Combination and (b)
not to redeem any shares in connection with a stockholder vote to approve a Business Combination or sell any shares to the Company in
a tender offer in connection with a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares,
irrespective of whether they vote for or against the proposed Business Combination.
The Sponsor has agreed (a)
to waive its redemption rights with respect to the Founder Shares and Public Shares held by it in connection with the completion of a
Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect a
public stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination or 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 Public Shares in conjunction with
any such amendment.
On November 9, 2021, the
Company’s board of directors approved the first extension of the date by which the Company has to consummate a Business Combination
(the “Combination Period”) from November 17, 2021 to February 17, 2022. In connection with the extension, the Sponsor deposited
into the Trust Account $0.10 for each of the 12,618,600 shares issued in the Initial Public Offering, for a total of $1,261,860. The Company
issued the Sponsor a non-interest bearing unsecured promissory note in the principal amount of $1,261,860 which is payable by the Company
upon the earlier of the consummation of the Business Combination or the liquidation of the Company on or before February 17, 2022 (unless
such date is extended by the Company’s board of directors to May 17, 2022). The Note may be repaid in cash or convertible into Private
Warrants at a price of $1.00 per Private Warrant. On February 16, 2022, the Company’s board of directors approved the second extension
of the date by which the Company has to consummate a Business Combination from February 17, 2022 to May 17, 2022. In connection with the
second extension, the Sponsor deposited into the Trust Account an additional $1,261,860 ($0.10 per Public Share) on February 17, 2022,
and the Company amended and restated the promissory note in its entirety solely to increase the principal amount thereunder from $1,261,860
to $2,523,720.
If the Company is unable
to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of
winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held
in the Trust Account and not previously released to the Company to pay taxes, 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.
The Sponsor has agreed to
waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination
Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to
liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period.
In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be
less than the amount of funds initially deposited into the Trust Account (initially $10.10 per share, subsequently increased by $0.10
per share in connection with each extension).
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 to below $10.10 per Public Share, except as to any claims by a third party
who executed a valid and enforceable agreement with the Company 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 the Company’s indemnity of the underwriters of Initial
Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Insiders 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 Insiders
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 with the Company waiving any right, title, interest or claim of any kind in or to monies held in the
Trust Account.
Risks and Uncertainties
Management continues to evaluate
the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect
on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily
determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Liquidity and Going Concern
As of December
31, 2021, the Company had $278,197 in its operating bank accounts outside the Trust Account, $128,790,008 of marketable securities held
in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith. As of
December 31, 2021, $80,288 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s
tax obligations.
Until the consummation
of a Business Combination, the Company will use 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.
The Company expects
it will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors,
or third parties. The Company’s officers, directors and the 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. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital,
it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing
operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the
issuance date of the financial statements.
In connection with
the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting
Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to complete
a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have
been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 17, 2022.
NOTE 2 — SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial
statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that 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 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 statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use of Estimates
The preparation of the financial
statements in conformity with 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.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in
these financial statements is the determination of the fair value of the warrant liabilities as well as the fair value of the convertible
promissory note. Such estimates may be subject to change as more current information becomes available and accordingly the actual results
could differ significantly 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 and 2020.
Cash and Marketable Securities Held in Trust
Account
At December 31, 2021 and
2020, substantially all of the assets held in the Trust Account were held in a money market fund that invests in U.S. Treasury securities.
All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented
on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments
held in the Trust Account are included in the interest earned on marketable securities held in the Trust Account in the accompanying statements
of operations. The estimated fair values of investments held in the Trust Account are determined by using available market information.
Common Stock Subject to Possible Redemption
The Company accounts for
its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability
instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights
that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the
Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity.
The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and
subject to occurrence of uncertain future events. Accordingly, as of December 31, 2021 and December 31, 2020, respectively, common stock
subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section
of the Company’s balance sheets.
The Company recognizes changes
in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges
against additional paid in capital and accumulated deficit.
On December 31, 2021 the
common stock reflected in the balance sheets is reconciled in the following table:
Gross proceeds | |
$ | 126,186,000 | |
Less: | |
| | |
Common stock issuance costs | |
$ | (2,868,790 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
$ | 5,392,510 | |
| |
| | |
Common stock subject to possible redemption | |
$ | 128,709,720 | |
Warrant Liabilities
The Company accounts for the Private Warrants
in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Private Warrants do not meet the criteria for equity
treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private Warrants as liabilities at their fair value
and adjusts the Private Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet
date until exercised, and any change in fair value is recognized in our statements of operations. The Private Warrants for periods where
no observable traded price was available were valued by using a binomial lattice simulation model.
Convertible Promissory Note –
Related Party
The Company accounts
for its convertible promissory note under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can
be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company has
made such election for its convertible promissory note. Using fair value option, the convertible promissory note is required to be recorded
at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the
note are recognized as non-cash change in the fair value of the convertible promissory note in the statements of operations. The fair
value of the option to convert the convertible promissory note into Private Warrants was valued by utilizing a binomial lattice model
incorporating the Cox-Ross-Rubenstein methodology.
Income Taxes
The Company follows
the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment
date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as
income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of 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.
Net Income (Loss) Per Common Share
The Company complies with
accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common share is
computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Accretion associated
with the redeemable shares of common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
The calculation of diluted
income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii)
the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable
to purchase 17,904,180 shares of common stock in the aggregate. As of December 31, 2021 and 2020, the Company did not have any dilutive
securities or other contracts that could, potentially, be exercised or converted into common stock and then participate in the earnings
of the Company. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the
periods presented.
Reconciliation of Net Income (Loss) per
Common Share
The Company’s net income
(loss) is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only
participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted income (loss)
per common share is calculated as follows:
| |
Year Ended December 31, 2021 | | |
For the Period Ended August 5, 2020 (Inception) Through December 31, 2020 | |
| |
Redeemable | | |
Non-redeemable | | |
Redeemable | | |
Non-redeemable | |
| |
common stock | | |
common
stock | | |
common stock | | |
common stock | |
Basic and diluted net income (loss) per common share | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income (loss), as adjusted | |
$ | 1,645,500 | | |
$ | 454,723 | | |
$ | (2,254,778 | ) | |
$ | (1,932,940 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 12,618,600 | | |
| 3,487,070 | | |
| 3,729,603 | | |
| 3,197,253 | |
Basic and diluted net income (loss) per common share | |
$ | 0.13 | | |
$ | 0.13 | | |
$ | (0.60 | ) | |
$ | (0.60 | ) |
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at
times, may exceed the Federal Deposit Insurance Corporation maximum coverage of $250,000. The Company has not experienced losses on this
account.
Fair Value of Financial Instruments
The fair value
of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,”
approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature, except for
warrant liabilities (see Note 10).
Fair Value Measurements
Fair value is defined
as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market
participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
In some circumstances,
the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the
fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant
to the fair value measurement.
Recent Accounting Standards
In August 2020, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which
simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes
certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies
the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years, with early adoption permitted. The impact of the adoption of ASU 2020-06 is being
assessed by the Company; however no significant impact on the financial statements is anticipated.
Management does
not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on the Company’s financial statements.
NOTE 3 — PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company sold 11,000,000 Units at a price of $10.00 per Unit. Each Unit consists of one share of common stock and one redeemable
warrant (“Public Warrant”). In connection with the underwriters’ partial exercise of the over-allotment option on November
19, 2020, the Company sold an additional 1,618,600 Units, at a purchase price of $10.00 per Unit. Each Public Warrant entitles the holder
to purchase one share of common stock at an exercise price of $11.50 per share (see Note 8).
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing
of the Initial Public Offering, the Sponsor and EarlyBirdCapital purchased an aggregate of 4,800,000 Private Warrants at a price of $1.00
per Private Warrant for an aggregate purchase price of $4,800,000. The Sponsor purchased 3,975,000 Private Warrants and EarlyBirdCapital
purchased 825,000 Private Warrants. In connection with the underwriters’ partial exercise of the over-allotment option on November
19, 2020, the Sponsor and EarlyBirdCapital purchased an additional 485,580 Private Warrants, at a purchase price of $1.00 per Private
Warrant, for an aggregate purchase price of $485,580. Each Private Warrant entitles the holder to purchase one share of common stock at
a price of $11.50 per full share, subject to adjustment (see Note 8). The proceeds from the Private Warrants were added to the proceeds
from the Initial Public Offering 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 Warrants will be used to fund the redemption of the Public Shares (subject to the requirements
of applicable law).
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On August 5, 2020,
the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration for 3,593,750 shares of common stock (the “Founder
Shares”). On November 9, 2020, the Sponsor returned to the Company for cancellation, at no cost, an aggregate of 718,750 Founder
Shares, resulting in an aggregate of 2,875,000 Founder Shares outstanding and held by the Sponsor. On November 12, 2020, the Company effected
a stock dividend of 0.1 shares for each share of common stock outstanding, resulting in an aggregate of 3,162,500 Founder Shares outstanding
and held by the Sponsor. The Founder Shares included, after giving retroactive effect to the share surrender and stock dividend, an aggregate
of up to 412,500 shares subject to forfeiture to the extent that the underwriters’ over-allotment was not exercised in full or in
part, so that the Sponsor would collectively own 20% of the Company’s issued and outstanding shares after the Initial Public Offering
(assuming the Sponsor did not purchase any Public Shares in the Initial Public Offering). In connection with the underwriters’ partial
exercise of the over-allotment option and the forfeiture of the remaining over-allotment option, 7,850 Founder Shares were forfeited and
404,650 Founder Shares are no longer subject to forfeiture resulting in an aggregate of 3,154,650 Founder Shares outstanding as of December
31, 2021.
The Sponsor has agreed, subject
to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until (1) with respect to 50% of the Founder
Shares, the earlier of one year after the completion of a Business Combination and the date on which the closing price of the common stock
equals or exceeds $12.50 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 after a Business Combination and (2) with respect to the remaining 50%
of the Founder Shares, one year after the completion of a Business Combination, or earlier, in either case, if, subsequent to a Business
Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s
stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Due from the Sponsor
At the closing of the Initial
Public Offering on November 17, 2020, an aggregate amount of $25,038 was due to the Company. Such amount was paid by the Sponsor to the
Company and was included in the prepaid expenses and other current assets on the balance sheet at December 31, 2020. No balance remains
outstanding as of December 31, 2021.
Administrative Services Agreement
The Company has agreed, commencing
on November 12, 2020 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay an
affiliate of the Company’s management a total of $10,000 per month for office space, utilities and secretarial support. For the
year ended December 31, 2021, the Company incurred $120,000 in fees for these services. For the period from August 5, 2020 (inception)
through December 31, 2020, the Company incurred $20,000 in fees for these services. At December 31, 2021 and 2020, fees of $0 and $20,000
are included in accounts payable and accrued expenses in the accompanying balance sheets, respectively.
Promissory Note — Related
Party
On August 5, 2020, the Company
issued an unsecured promissory note to the Sponsor (the “IPO Promissory Note”), pursuant to which the Company could borrow
up to an aggregate principal amount of $300,000. This IPO Promissory Note was non-interest bearing and payable on the earlier of (i) March
31, 2021, (ii) the consummation of the Initial Public Offering or (iii) the date on which the Company determined not to proceed with the
Initial Public Offering. The outstanding balance under this IPO Promissory Note was repaid subsequent to the Initial Public Offering.
As of December 31, 2021 and 2020, no balance is outstanding under this IPO Promissory Note. Borrowings under this IPO Promissory Note
are no longer available.
Related Party Loans
In addition, in order to
finance transaction costs in connection with a Business Combination, the Sponsor or certain of the Company’s officers and directors
or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Each
loan would be evidenced by promissory note. The notes may be repaid upon completion of a Business Combination, without interest, or, at
the lender’s discretion, up to $1,500,000 of notes may be converted upon completion of a Business Combination into warrants at a
price of $1.00 per warrant. Such warrants would be identical to the Private Warrants. 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.
Related Party Extension Loans
As discussed in Note 1, the
Company may extend the period of time to consummate a Business Combination up to two times, each by an additional three months (up to
May 17, 2022 to complete a Business Combination). In order to extend the time available for the Company to consummate a Business Combination,
the Sponsor or its affiliates or designees must deposit into the Trust Account $1,261,860 ($0.10 per Public Share ), on or prior to the
date of the applicable deadline, for each three month extension. Any such payments would be made in the form of a non-interest bearing,
unsecured promissory note. Such notes would either be paid upon consummation of a Business Combination, or, at the relevant insider’s
discretion, converted upon consummation of a Business Combination into additional Private Warrants at a price of $1.00 per Private Warrant.
The Sponsor and its affiliates or designees are not obligated to fund the Trust Account to extend the time for the Company to complete
a Business Combination.
Convertible Promissory Note – Related
Party
On November 9, 2021, the
Company issued a promissory note in the principal amount of $1,261,860 (the “Extension Payment”) to the Sponsor in connection
with the Extension (as defined above). The Note bears no interest and is due and payable upon the earlier to occur of (i) the date on
which the Company’s Business Combination is consummated and (ii) the liquidation of the Company on or before May 17, 2022 or such
later liquidation date as may be approved by the Company’s stockholders. At the election of the Sponsor, all or a portion of the
unpaid principal amount of the Note may be converted into warrants of the Company, each warrant exercisable for one share of common stock
of the Company upon the consummation of its Business Combination, equal to: (x) the portion of the principal amount of the Note being
converted, divided by (y) $1.00, rounded up to the nearest whole number of warrants. As of December 31, 2021, there was a $1,261,860 balance
outstanding under the Convertible Promissory Note. The Convertible Promissory Note was valued using the fair value method. The fair value
of the note as of December 31, 2021, was $958,400, which resulted in a change in fair value of the convertible promissory note of $303,460
recorded in the statements of operations for the year ended December 31, 2021 (see Note 10). On February 17, 2022, the Company amended
and restated the Convertible Promissory Note in its entirety solely to increase the principal amount thereunder from $1,261,860 to $2,523,720.
NOTE 6 — COMMITMENTS
Registration Rights
Pursuant to a registration
rights agreement entered into on November 12, 2020, the holders of the Founder Shares and Representative Shares (as defined in Notes 5
and 8, respectively), as well as the holders of the Private Warrants (and underlying securities) and any warrants issued in payment of
Working Capital Loans made to Company (and underlying securities) will be entitled to registration rights. The holders of a majority of
these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the
Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares
of common stock are to be released from escrow. The holders of a majority of the Representative Shares, Private Warrants and warrants
issued in payment of working capital loans made to the Company (or underlying securities) can elect to exercise these registration rights
at any time after the Company consummates a Business Combination. Notwithstanding anything to the contrary, EarlyBirdCapital may only
make a demand on one occasion and only during the five-year period beginning on the effective date of the registration statement of which
this prospectus forms a part. In addition, the holders have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to consummation of a Business Combination; provided, however, that EarlyBirdCapital may participate in a “piggy-back”
registration only during the seven-year period beginning on the effective date of the registration statement of which this prospectus
forms a part. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from
delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any
such registration statements.
Underwriting Agreement
The Company granted the underwriters
a 45-day option from the date of the Initial Public Offering to purchase up to 1,650,000 additional Units to cover over-allotments, if
any, at the Initial Public Offering price less the underwriting discounts and commissions. On November 19, 2020, the underwriters partially
exercised their over-allotment option to purchase an additional 1,618,600 Units at $10.00 per Unit and forfeited the remaining over-allotment
option.
Business Combination Marketing Agreement
The Company has engaged EarlyBirdCapital
as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the
potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested
in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholder approval
for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination.
The Company will pay EarlyBirdCapital a cash fee for such services upon the consummation of a Business Combination in an amount equal
to 3.5% of the gross proceeds of the Initial Public Offering, or $4,416,510, (exclusive of any applicable finders’ fees which might
become payable); provided that up to 30% of the fee may be allocated at the Company’s sole discretion to other FINRA members that
assist the Company in identifying and consummating a Business Combination.
Additionally, the Company
will pay EarlyBirdCapital a cash fee equal to 1.0% of the total consideration payable in a Business Combination if EarlyBirdCapital introduces
the Company to the target business with which the Company completes a Business Combination.
Legal Fee Agreements
The Company has engaged various law firms to provide
legal due diligence services and business combination services related to a potential target company. All fees and expenses related to
the various engagements will be deferred and are to be paid fully upon the closing of any Business Combination of the Company. The law
firms will not be entitled to any fees or expense reimbursement if the Company does not consummate a Business Combination within its deadline.
Deferred fees of $1,009,868 related to these legal services have been accrued as of December 31, 2021.
NOTE 7 — STOCKHOLDERS’
EQUITY
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.
At December 31, 2021 and 2020, there were no shares of preferred stock issued or outstanding.
Common Stock
— The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. At December 31, 2021
and 2020, there were 3,487,070 shares of common stock issued and outstanding, excluding 12,618,600 shares of common stock subject to possible
redemption which are presented as temporary equity.
NOTE 8 — WARRANTS
The Public Warrants will
become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the
Initial Public Offering. No warrants will be exercisable for cash unless the Company has an effective and current registration statement
covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common
stock. Notwithstanding the foregoing, if a registration statement covering the shares of 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.
The Company may redeem the
Public Warrants (excluding the Private Warrants and any warrants underlying units issued upon conversion of the Working Capital Loans):
| ● | in whole and not in part; |
| | |
| ● | at a price of $0.01 per warrant; |
| | |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| | |
| ● | if, and only if, the last reported sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
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 exercise price and number of shares of common stock
issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization,
reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of common
stock at a price below its exercise price. 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 (x) the Company
issues additional 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 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 Sponsor or its affiliates, without
taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, 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 its common stock during the 20 trading day period starting on the trading day prior to the day on which the Company
consummates its 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) Market Value or (ii) the price at which the
Company issue the additional shares of common stock or equity-linked securities.
The Private Warrants are
identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the shares
of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or saleable until after the completion
of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable for cash or on
a cashless basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private
Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Representative Shares
On August 5, 2020, the Company
issued to EarlyBirdCapital 377,750 shares of common stock (the “Representative Shares”). On November 9, 2020, EarlyBirdCapital
returned to the Company for cancellation, at no cost, an aggregate of 75,550 Representative Shares, resulting in an aggregate of 302,200
Representative Shares outstanding and held by EarlyBirdCapital. On November 12, 2020, the Company effected a stock dividend of 0.1 shares
for each share of common stock outstanding, resulting in EarlyBirdCapital holding an aggregate of 332,420 Representative Shares. The Company
accounted for the Representative Shares as an offering cost of the Initial Public Offering, with a corresponding credit to stockholders’
equity. The Company estimated the fair value of Representative Shares to be $2,666 based upon the price of the Founder Shares issued to
the Sponsor. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion
of a Business Combination. In addition, the holders have agreed (i) to waive their redemption rights with respect to such shares in connection
with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with
respect to such shares if the Company fails to complete a Business Combination within the Combination Period.
The Representative Shares
have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective
date of the registration statement related to the Initial Public Offering pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct Rules.
Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold during the Initial Public Offering, or sold, transferred, assigned,
pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic
disposition of the securities by any person for a period of 180 days immediately following the effective date of the Initial Public Offering,
except to any underwriter and selected dealer participating in the Initial Public Offering and their bona fide officers or partners, provided
that all securities so transferred remain subject to the lockup restriction above for the remainder of the time period.
NOTE 9 — INCOME TAX
The Company’s net deferred tax assets at
December 31, 2021 and 2020 is as follows:
| |
December 31, | | |
December 31, | |
| |
2021 | | |
2020 | |
Deferred tax asset | |
| | |
| |
Net operating loss carryforward | |
$ | 52,219 | | |
$ | 25,402 | |
Startup/organization expenses | |
| 416,002 | | |
| — | |
Unrealized gain on marketable securities | |
| (1,515 | ) | |
| (3,088 | ) |
Total deferred tax asset | |
| 466,706 | | |
| 22,314 | |
Valuation Allowance | |
| (466,706 | ) | |
| (22,314 | ) |
Deferred tax asset. net | |
$ | — | | |
$ | — | |
The income tax provision
for the year ended December 31, 2021 and for the period from August 5, 2020 through December 31, 2020 consists of the following:
| |
Year Ended December 31, | | |
For the Period from August 5, 2020 Through December 31, | |
| |
2021 | | |
2020 | |
Federal | |
| | |
| |
Deferred | |
$ | (444,392 | ) | |
$ | (22,314 | ) |
| |
| | | |
| | |
State and Local | |
| | | |
| | |
Current | |
| — | | |
| — | |
Deferred expense | |
| — | | |
| — | |
| |
| | | |
| | |
Change in valuation allowance | |
| 444,392 | | |
| 22,314 | |
| |
| | | |
| | |
Income tax provision | |
$ | — | | |
$ | — | |
As of December 31, 2021 and
2020, the Company had a U.S. federal net operating loss carryover of $248,660 and $120,962, respectively, available to offset future taxable
income.
In assessing the realization
of the deferred tax assets, management considers whether it is more likely than not that some portion of 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 liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration
of all of the information available, management believes that significant uncertainty exists with respect to future realization of the
deferred tax assets and has therefore established a full valuation allowance. For the period from August 5, 2020 (inception) through December
31, 2020, the change in the valuation allowance was $22,314. For the year ended December 31, 2021, the change in the valuation allowance
was $444,392.
A reconciliation of the federal income tax rate
to the Company’s effective tax rate for the year ended December 31, 2021 and for the period from August 5, 2020 (inception) through
December 31, 2020 is as follows:
| |
Year Ended December 31, 2021 | | |
Period from August 5, 2020 (Inception) Through December 31, 2020 | |
| |
| | |
| |
Statutory federal income tax rate | |
| 21.0 | % | |
| 21.0 | % |
Change in fair value of warrant liabilities | |
| -39.1 | % | |
| -20.4 | % |
Change in fair value of convertible promissory note | |
| -3.0 | % | |
| — | % |
Transaction costs incurred in connection with Initial Public Offering | |
| — | % | |
| -0.1 | % |
Change in Valuation allowance | |
| 21.1 | % | |
| -0.5 | % |
Income tax provision | |
| — | % | |
| — | % |
The Company files income
tax returns in the U.S. federal and New York jurisdiction and is subject to examination by the various taxing authorities.
On March 27, 2020, the CARES
Act was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period
which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increasing the limitation
under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing
of interest (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section
168(k), (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred
in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income
taxes and (iv) enhancing the recoverability of alternative minimum tax credits. Given the Company’s full valuation allowance position
and capitalization of all costs, the CARES Act did not have an impact on the financial statements.
NOTE 10 — FAIR VALUE MEASUREMENTS
The Company follows the guidance
in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial
assets and liabilities that are re-measured and reported at fair value at least annually.
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 our assessment
of the assumptions that market participants would use in pricing the asset or liability.
|
The following table presents
information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2021 and 2020, and indicates
the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description | |
Level | | |
December 31, 2021 | | |
December 31, 2020 | |
Assets: | |
| | |
| | |
| |
Marketable securities held in Trust Account | |
| 1 | | |
$ | 128,790,008 | | |
$ | 127,462,689 | |
| |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | |
Warrant liabilities – Private Warrants | |
| 3 | | |
$ | 2,641,204 | | |
$ | 6,554,119 | |
Convertible promissory note – related party | |
| 3 | | |
$ | 958,400 | | |
$ | — | |
Warrant Liabilities
The Private Warrants
were accounted for as a liability in accordance with ASC 815-40 and are presented within warrant liability on the balance sheets. The
warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change
in fair value of warrant liability in the statements of operations.
The Private Warrants
were valued using a binomial lattice model. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive
of one share of common stock and one Public Warrant) and (ii) the sale of Private Warrants, first to the warrants based on their fair
values as determined at initial measurement, with the remaining proceeds allocated to common stock subject to possible redemption. The
Private Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
The following are
the inputs used by the Company in establishing the fair value of its Private Warrants at December 31, 2021 and 2020.
Input | |
December 31, 2020 | | |
December 31, 2021 | |
Risk-free interest rate | |
| 0.40 | % | |
| 1.15 | % |
Trading days per year | |
| 252 | | |
| 252 | |
Expected volatility | |
| 17.9 | % | |
| 9.6 | % |
Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
Stock Price | |
$ | 10.15 | | |
$ | 10.17 | |
On December 31,
2021 and 2020, the Private Warrants were determined to be $0.50 per warrant and $1.24 per warrant, respectively, for an aggregate value
of $2.64 million and $6.55 million, respectively.
The following table
presents the changes in the fair value of the warrant liabilities:
| |
Private Placement | |
Fair value as of December 31, 2020 | |
$ | 6,554,119 | |
Change in valuation inputs or other assumptions | |
| (3,912,915 | ) |
Fair value as of December 31, 2021 | |
$ | 2,641,204 | |
Convertible
Promissory Note – Related Party
The fair value
of the option to convert the convertible promissory note into Private Warrants was valued by utilizing a binomial lattice model incorporating
the Cox-Ross-Rubenstein methodology.
The estimated
fair value of the convertible promissory note was based on the following significant inputs:
| |
| |
| |
December 31, 2021 | |
Risk-free interest rate | |
| 1.29 | % |
Time to Expiration (in years) | |
$ | 5.38 | |
Expected volatility | |
| 9.6 | % |
Exercise price | |
$ | 11.50 | |
Dividend yield | |
| 0.00 | % |
Stock Price | |
$ | 10.17 | |
Probability of transaction | |
| 75.00 | % |
The following
table presents the changes in the fair value of the Level 3 convertible promissory note:
Fair value as of January 1, 2021 | |
$ | — | |
Proceeds received through Convertible Promissory Note | |
| 1,261,860 | |
Change in fair value | |
| (303,460 | ) |
Fair value as of December 31, 2021 | |
$ | 958,400 | |
There were no
transfers in or out of Level 3 from other levels in the fair value hierarchy during the year ended December 31, 2021 for the convertible
promissory note.
NOTE 11 — SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon
this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or
disclosure in the financial statements.
Trust Extension
On February 16, 2022, the
Company issued a press release announcing that its Sponsor has requested that the Company extend the date by which the Company has to
consummate a Business Combination from February 17, 2022 to May 17, 2022 (the “Extension”). The Extension is the second of
two three-month extensions permitted under the Company’s governing documents. In connection with the Extension, the Sponsor has
notified the Company that it intends to deposit an aggregate of $1,261,860 (representing $0.10 per public share) into the Company’s
Trust Account on or before February 17, 2022. The Extension provides the Company with additional time to complete its Business
Combination.
On November 16, 2021, the
Company had previously issued a promissory note (the “Note”) in the principal amount of $1,261,860 to the Company’s
Sponsor. On February 17, 2022, the Company amended and restated the Note (the “Amended Note”) in its entirety solely to increase
the principal amount thereunder from $1,262,860 to $2,523,720. On February 18, 2022, the Company issued a press release announcing that
the Sponsor had deposited an additional $1,262,860 (representing $0.10 per public share) into the Company’s Trust Account for its
public stockholders. This deposit enables the Company to extend the date by which the Company has to complete its Business Combination
from February 17, 2022 to May 17, 2022.
EXHIBIT INDEX
Exhibit No. |
|
Description |
1.1 |
|
Underwriting Agreement, dated November 12, 2020, by and between the Company and EBC, as representative of the several underwriters. (1) |
1.2 |
|
Business Combination Marketing Agreement, dated November 12, 2020, by and between the Company and EBC. (1) |
3.1 |
|
Amended and Restated Certificate of Incorporation. (1) |
3.2 |
|
Bylaws. (2) |
4.1 |
|
Specimen Unit Certificate (2) |
4.2 |
|
Specimen Common Stock Certificate (2) |
4.3 |
|
Specimen Warrant Certificate (2) |
4.4 |
|
Warrant Agreement, dated November 12, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent. (1) |
4.5 |
|
Description of Registered Securities (4) |
10.1 |
|
Letter Agreement, dated November 12, 2020, by and among the Company, its officers, its directors and the Sponsor. (1) |
10.2 |
|
Investment Management Trust Agreement, dated November 12, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as trustee. (1) |
10.3 |
|
Registration Rights Agreement, dated November 12, 2020, by and among the Company, the Sponsor and EBC. (1) |
10.4 |
|
Administrative Services Agreement, dated November 12, 2020, by and between the Company and NGEN MGT II, LLC. (1) |
10.5 |
|
Private Placement Warrant Purchase Agreement, dated November 12, 2020, by and between the Company and the Sponsor. (1) |
10.6 |
|
Private Placement Warrant Purchase Agreement, dated November 12, 2020, by and between the Company and EBC. (1) |
10.7 |
|
Stock Escrow Agreement, dated November 12, 2020, by and between the Company and CST. (1) |
10.8 |
|
Form of Indemnification Agreement (2) |
10.9 |
|
Amended and Restated Promissory Note dated February 17, 2022. (3) |
14.1* |
|
Code of Ethics. |
31.1* |
|
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1** |
|
Certification of the Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2** |
|
Certification
of the Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
99.1* |
|
Audit
Committee Charter. |
99.2* |
|
Compensation
Committee Charter. |
101.INS* |
|
Inline
XBRL Instance Document. |
101.SCH* |
|
Inline
XBRL Taxonomy Extension Schema Document. |
101.CAL* |
|
Inline
XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition
Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase
Document. |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104.* |
|
Cover
Page Interactive Data File (Embedded as Inline XBRL document and contained in Exhibit 101). |
| (1) | Incorporated
by reference to the Company’s Form 8-K, filed with the SEC on November 18, 2020. |
| (2) | Incorporated
by reference to the Company’s Form S-1, filed with the SEC on October 7, 2020, as amended. |
| (3) | Incorporated
by reference to the Company’s Form 8-K, filed with the SEC on February 18, 2022. |
| (4) | Incorporated
by reference to the Company’s Form 10-K, filed with the SEC on June 11, 2021. |
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
March 31, 2022 |
Better World Acquisition Corp. |
|
|
|
|
By: |
/s/ Rosemary L. Ripley |
|
Name: |
Rosemary L. Ripley |
|
Title: |
Chief Executive Officer
(Principal Executive Officer) |
Pursuant to the requirements
of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Name |
|
Position |
|
Date |
|
|
|
/s/ Rosemary L. Ripley |
|
Chief Executive Officer, Chairman of the Board and President |
|
March 31, 2022 |
Rosemary L. Ripley |
|
(Principal Executive Officer) |
|
|
|
|
|
/s/ Peter S.H. Grubstein |
|
Chief Financial Officer and Director |
|
March 31, 2022 |
Peter S.H. Grubstein |
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
/s/ Brad Oberwager |
|
Director |
|
March 31, 2022 |
Brad Oberwager |
|
|
|
|
|
|
|
/s/ Kristopher Wood |
|
Director |
|
March 31, 2022 |
Kristopher Wood |
|
|
|
|
|
|
|
/s/ Jennifer Prosek |
|
Director |
|
March 31, 2022 |
Jennifer Prosek |
|
|
|
|
34
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