Introduction
NOAC is a Delaware company incorporated on
August 10, 2020 as a blank check company for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase,
recapitalization, reorganization or other similar business combination, with one or more target businesses.
On
November 13, 2020, NOAC consummated its initial public offering (the “IPO”) of 23,000,000 units (the “Units”),
each Unit consisting of one share of common stock of the Company, par value $0.0001 per share (the “Common Stock”)
and one redeemable warrant to purchase one-half of one share of Common Stock for $11.50 (“Warrant”). The closing included
the full exercise of the underwriter’s over-allotment option. The Units were sold at a price of $10.00 per Unit, generating
gross proceeds to the Company of $230,000,000.
On November 13, 2020, simultaneously with
the consummation of the IPO, we consummated the private placement (“Private Placement”) with Natural Order Sponsor LLC (
the “Sponsor”) of 6,800,000 Private Warrants at a price of $1.00 per Private Warrant, generating total proceeds of $6,800,000.
The Private Warrants are identical to the Warrants underlying the Units sold in the IPO except that if held by the Sponsor or its permitted
transferees, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption and (iii)
subject to certain limited exceptions including the Common Stock issuable upon exercise of the Private Warrants, will be subject to transfer
restrictions until 30 days following the consummation of the Company’s initial business combination. If the Private Warrants are
held by holders other than the sponsor or its affiliates and permitted transferees, the Private Warrants will be redeemable by the Company
in all redemption scenarios and exercisable by holders on the same basis as the Warrants sold in the IPO.
A
total of $230,000,000 of the net proceeds from the sale of Units in the IPO and the private placement on November 13, 2020 were
placed in a trust account established for the benefit of the Company’s public stockholders at JPMorgan Chase Bank, N.A.
maintained by Continental Stock Transfer & Trust Company, acting as trustee. None of the funds held in trust will be
released from the trust account, other than interest income to pay any tax obligations until the earlier of (i) our consummation
of our initial business combination, and then only in connection with those shares of common stock that such stockholder properly
elected to redeem, subject to the limitations described herein, (ii) the redemption of our public shares if we are unable to consummate
our initial business combination by November 13, 2022, or (iii) if we seek to amend our certificate of incorporation to affect
the substance or timing of our obligation to redeem all public shares if we cannot complete an initial business combination by
November 13, 2022, and such amendment is duly approved.
General
We
are a newly incorporated Delaware blank check company whose purpose is to effect a merger, share exchange, asset acquisition,
share purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to throughout
this annual report as our initial business combination. Although there is no restriction or limitation on what industry our target
operates in, it is our intention to pursue prospective targets that are focused on technologies and products related to sustainable
plant-based food and beverages, alternative protein, and ingredients. More specifically, our target market includes companies
that use plant-based, cell-based or precision fermentation technologies to develop food products that eliminate animals from the
food supply chain. We refer to all these technologies herein as “plant-based” or “alternative.” While
we may pursue a target located anywhere in the world, we anticipate targeting companies domiciled in North America or Europe.
We
will target private emerging growth companies that are developing nutritious plant-based food products that deliver a consumer
experience comparable or superior to that provided by animal-based products. We will seek products that encourage consumers to
eat more, not less, of the traditional dishes they enjoy by using products that promote healthy living, environmental sustainability,
and animal welfare; all benefits associated with consuming plant-based foods. We seek a target company whose paradigm shifting
product or services will enable breakthrough penetration into mainstream consumers seeking delicious and satisfying yet better-for-you
alternatives to animal products.
Our
Sponsor, Leadership and Competitive Advantages
Natural
Order Sponsor LLC (our “Sponsor”) is led by Mr. Paresh Patel and Mr. Sebastiano Cossia Castiglioni, each of whom have
invested for more than 20 years in public and private emerging growth companies with a focus on leading emerging technology and
sustainable and plant-based food product companies. We believe that our management team has the investment experience, strategic
knowledge, relationships, and access to capital and human resources to source unique opportunities that will offer attractive
risk-adjusted returns in a rapidly expanding sector of the global economy. In particular, we believe our network of relationships
with leaders in the plant-based food industry can provide our target company with a competitive advantage to accelerate its growth
or identify attractive acquisitions or strategic alliances.
Paresh
Patel, our co-founder, has been our President, Chief Executive Officer and Director since our inception in August 2020. Paresh
has managed his private investment office, Sandstone Investments since 2014. From 2005 to 2014, Paresh was the founder and Managing
Partner of Sandstone Capital, an investment fund managing more than $1.0 billion and focused on long-term investments in public
and private companies in Asia. Sandstone invests in a wide range of industries with a focus on pharmaceuticals, financial services,
and technology. From 2000 to 2004, Paresh was the founder of Sparta Group, a multi-billion dollar family office. Paresh’s
more notable private investments include Bharat Financial (IPO 2010), A123 Systems (IPO 2009), Tejas Networks (IPO 2014), AU SFB
(IPO 2014), Relicore (acquired by Symantec in 2006), Airvana (IPO 2007), Flipkart (acquired by Walmart in 2018), Simulate (formerly
NUGGS), VelocityDx, and GrapheneDx. Paresh has served on the board of directors of several public and private businesses in the
US and India. Paresh also served as a director for Harvard Business School India and was an Executive Producer of the 2018 documentary
film “The Game Changers” that advocates the health benefits of a plant-based diet for high-performance athletes as
well as for the general population.
Sebastiano
Cossia Castiglioni, our co-founder has been our Chairman of the board since October 2020. He is an entrepreneur, activist, and
advisor to businesses, governments, and nonprofits around the world. For many years, he has been an investor in a wide range of
fields, from bioscience to food, from agriculture to technology. Directly or through his partnerships, Sebastiano is an investor
in more than 60 companies in the plant-based food and beverage sector. In December 2017, he founded a private investment fund,
Dismatrix, and has served as its director ever since. In that same year, Sebastiano joined NRS New Reality Solutions, a convergent
innovation platform leveraging bioscience and data science, as a Senior Advisor and an investor. Since April 2019, he has also
been a partner in the Blue Horizon Group, a leading worldwide investor in plant-based companies. Since October of the same year,
he has served as the co-managing partner and director of Dismatrix Group, which focuses on venture capital and private equity
investments across tech, consumer, and food revolutions, including alt-proteins. Sebastiano is also a co-owner and honorary chairman
of Querciabella, a Tuscan organic, biodynamic, and vegan winery that has garnered international acclaim. He recently founded the
gluten-free pasta brand Bontasana, and Skyrunner Foods, a revolutionary baby food company. A longtime animal rights activist,
Sebastiano supports several global nonprofits working to end the exploitation of animals. He serves on the boards of Animal Outlook
(since 2018) and the Culture & Animals Foundation (since 2018) as well as on the advisory boards of the Sea Shepherd Conservation
Society (since 2008), Animal Equality (since 2019), the International Anti-Poaching Foundation (since 2020), and Project Coyote
(since 2020). In 2020, Sebastiano founded the Plant-Based Empowerment Foundation, a nonprofit operating in rural Senegal that
is dedicated to providing children and women access to education, healthcare, and nourishing plant-based food. Sebastiano served
as advisor to Italian Prime Minister Matteo Renzi from 2014 to 2016.
Marc
Volpe has been our Chief Financial Officer since September 2020. In October 2020, he was also appointed the Secretary of the Company.
From November 2016 to September 2020, Marc was the Chief Financial Officer of Quantopian, Inc. a financial technology company
that operated in the asset management space. From December 2013 to October 2016, Marc was the Chief Financial Officer of Fort
Warren Capital Management, LP, where he assisted in the launch of that firm’s hedge fund in 2014. He also served as the
Chief Compliance Officer at Regiment Capital, a multi-billion dollar credit hedge fund advisor located in Boston, and was a manager
in the audit practice at PricewaterhouseCoopers, where he began his career in 1997.
Max
H. Bazerman serves as an independent director. He has been a Jesse Isidor Straus Professor of Business Administration at the Harvard
Business School since 2000. His recent books include Better, Not Perfect (2020), The Power of Experiments (2020, with Michael
Luca), The Power of Noticing (2014), Judgment in Managerial Decision Making (2013, with Don Moore), and Blind Spots (2011, with
Ann Tenbrunsel) and has published over 250 papers. Max has been at Harvard Business School since 2000, and before that was a Professor
at the Kellogg Graduate School of Management at Northwestern University (1985-2000), and an Assistant Professor at the Sloan School
of Management at MIT (1983-1985), the School of Management at Boston University (1981-1983), and the Business School at the University
of Texas (1979-1980). Max received an honorary doctorate from the University of London, the Life Achievement Award from the Aspen
Institute’s Business and Society Program, the Distinguished Educator Award from the Academy of Management, the Academy of
Management Career Award for Scholarly Contributions to Management, and the Lifetime Achievement Award from the Organizational
Behavior Division of the Academy of Management. His professional activities include projects with Abbott, Aetna, AIG, Alcar, Alcoa,
Allstate, Ameritech, Amgen, Apax Partners, Asian Development Bank, AstraZeneca, AT&T, Aventis, BASF, Bayer, Becton Dickenson,
Biogen, Boston Scientific, BP, Bristol-Myers Squibb, Business Week, Celtic Insurance, Chevron, Chicago Tribune, City of Chicago,
among others. Max’s consulting, teaching, and lecturing includes work in 30 countries.
Jaspaul
Singh serves as an independent director. He has served as the Chairman and CEO of Interon Laboratories, a pre-clinical biotechnology
company focused on novel therapeutics in neurobiology and immunology, since September 2020. Prior to Interon, from 2017 to 2020,
Jaspaul was a private investor. From 2013 to 2017, Jaspaul was the Founder, Managing Partner, and Portfolio Manager of Fort Warren
Capital Management, a Boston-based hedge fund that invests opportunistically long/short across the capital structure in complex,
event-driven, distressed, and special situations. Previously, from 2007 to 2013, Jaspaul was Senior Investment Analyst at Regiment
Capital Advisors, a credit hedge fund that was spun out of Harvard Management Company. While at Regiment, Jaspaul led investments
in the basic industrials, paper/packaging, business services, specialty finance and selected healthcare and consumer sectors.
Prior to Regiment, from 2002 to 2006, Jaspaul was a Senior Analyst at Hammerman Capital Management, a capital structure arbitrage
fund. Jaspaul began his career as an Analyst in the Investment Banking Division of Goldman Sachs. Jaspaul is a member of the National
Board of Advisors of the Sikh Coalition, a civil rights advocacy group. He is also a life member of the Council on Foreign Relations.
Gene
Baur serves as an independent director. He has served as the President of Farm Sanctuary since 2002. Co-founded by Gene in 1986,
Farm Sanctuary is an advocate for policies that support animal welfare, animal protection, and veganism. Since the mid-1980s,
he has traveled extensively, campaigning to raise awareness about the abuses of industrialized factory farming and the system
of cheap food production. Gene has published two books, Farm Sanctuary: Changing Hearts and Minds About Animals and Food (Simon
and Schuster, 2008) and Living the Farm Sanctuary Life (Rodale, 2015), which he co-authored with Forks Over Knives author Gene
Stone.
Industry
Opportunity
We
intend to pursue an initial business combination with a company that is disrupting the animal-based protein and food industry,
providing alternatives to one or more segments of the global food industry, including fresh and packaged animal-based meats, dairy
and seafood. We may also consider targeting companies with products and services that support or relate to those end use markets.
We
believe there are three fundamental drivers of growth and investment opportunity in our target markets.
Large
and dynamic food markets supported by fundamental socioeconomic trends. Global population growth combined with rising standards
of living are driving non-linear consumption growth in meat, dairy, seafood and alternatives.
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Substantial
core food markets with emerging dynamics. Based on various sources, we estimate the combined
global meat, seafood, and dairy food industries to be approximately $4.0 trillion in
size. According to the United Nations Food and Agriculture Organization (“FAO”),
global meat production declined during 2020 due to the global impact of COVID-19, but
is poised to grow in aggregate due to rising populations and average incomes in developing
countries and emerging economies, which in turn are expected to lead to higher per capita
consumption of proteins from meat, dairy, and seafood.
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Large
scale and growth prospects for plant-based alternatives. Due to changing dietary patterns,
increased recognition of the linkages between diet, health and the environment, and concerns
about animal welfare and food safety, plant-based foods are surging in terms of consumption,
investment and media interest. The market for alternatives to traditional proteins is
significant. According to Euromonitor, consumers purchased $19.5 billion of meat substitutes
during 2018 and approximately $20 billion of dairy substitutes in 2019, most of which
are plant-based foods. According to the FAIRR Initiative (“FAIRR”), estimated
growth rates for global consumption of meat substitutes vary between 6.8% and 9.4% CAGR
to 2025. In the United States, plant-based milk substitutes generated $1.8 billion of
sales, constituting 13% of the U.S. retail milk market. We believe these large and growing
markets are excellent targets for our acquisition search.
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Social
awareness and demand for personal and environmental sustainability. We believe that consumer awareness of the negative health,
environmental, and animal-welfare impacts of animal-based food consumption has resulted in a surge in demand for viable alternatives.
While overall demand for “meat” and “dairy” is expected to accelerate, we believe that the production
of food through animals is inherently inefficient, both in environmental and economic terms. In addition, we believe these challenges
are insurmountable given rising population and limited resources.
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Waste
and inefficiency. According to the Environmental Research Letters, the production of
food through animals implies a waste of 83% to 97% of calories and 69% to 97% of proteins.
According to the United States Department of Agriculture and World Resources Institute,
it is estimated that producing one unit of animal-based food requires approximately up
to 50 times as much water and up to 100 times more land per unit of edible food.
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Environmental
impact. We believe that increased awareness of additional economic externalities call
into question the continued and increased consumption of animal protein per capita. As
reported in the journal Science, data collected from commercial farms in 119 countries
indicates that production of animal-based food can emit up to 50 times the amount of
greenhouse gases (“GHGs”) compared to plant-based food. Likewise, Nature
Sustainability published an analysis of emissions linked to animal-based food production
which suggests that a shift to plant-based diets by 2050 could lead to reduction of 332-547
GtCO2 which is equal to 99-163% of the CO2 emissions budget. According to FAIRR, public
concern regarding costs to public health systems from diseases linked to the consumption
of animal-based foods is generating debate regarding taxation on meat and dairy products
(as with tobacco) and the elimination of subsidies to animal agriculture. Other public
health costs and risks (including zoonotic diseases and antibiotic-resistant bacteria)
add to the debate.
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Food
security. Relying upon animal-based food, when endemic inefficiencies are considered,
creates critical food security issues in terms of supply and safety. Closing the long-term
demand/supply gap for meat, seafood and dairy in the developing world may be impossible
without affordable and desirable alternatives.
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Innovation
in food science. In response to large and growing fundamental demand for more sustainable and secure food solutions,
we believe there has been a proliferation of new companies and technologies creating innovative solutions to meet market needs.
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Progress
in alternative protein manufacturing. Food science is addressing the challenge of
replacing animal-based protein. The cost of non-animal ingredients in some cases is already
lower than animal-based ingredients. We believe that alternative eggs and dairy products
already have lower production costs and, at higher scale, will be significantly cheaper
and more profitable. According to research published by RethinkX, from a manufacturing
perspective, with the help of new technology and increasing scale, alternative protein
sources are rapidly approaching cost parity and it is estimated that some alternatives
will be less expensive than traditional animal-based proteins in less than two years.
We believe that if social costs – such as health care or environmental impact –
were embedded in the retail price, plant-based ingredients and foods would have further
significant cost advantages over animal-based food.
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Innovation
and investment. We believe the number of companies in this sector has grown
geometrically over the past few years, fueled by substantial private investment. For
example, investors and entrepreneurs are investing heavily in precision fermentation,
which is already used in various sectors of food ingredient and medicine production.
According to the Good Food Institute, $824 million of venture capital was invested in
alternative protein companies in 2019, followed by more than $930 million in the first
quarter of 2020. Of these amounts, we believe approximately $500 million in venture investments
have been targeted specifically at precision fermentation technology in the plant-based
food sector.
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Expansion
of private companies. We believe there are many private companies developing
products and services related to various alternatives to animal-based foods and ingredients:
beef, pork, shellfish, fish, chicken, turkey, milk, yogurt, cheese, ice cream, eggs,
etc. Business models span the entire value chain including: ingredient production, equipment,
branded private labels, frozen, fresh, wholesale distribution, retail. We believe many
of these companies have sufficient scale and maturity to be high-quality targets for
our business combination.
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Acquisition
Strategy
Our
acquisition strategy is to identify an untapped opportunity within our target industry and offer to a public-ready business a
facility through which to enter the public sphere and advance its profile. We believe that our management team and directors’
experiences advising, evaluating and investing in these emerging growth businesses combined with their network of relationships
in our target industries position us to source the highest quality business combination candidates. Furthermore, our strong track
record of practicing and advocating the core values behind plant-based nutrition creates credibility and trust with the founders
of these businesses as they consider the future development and stewardship of their companies. Our selection process will leverage
the relationships of our management team and board with industry captains, leading venture capitalists, private equity and hedge
fund managers, respected peers, and our network of industry advisors. Together with this network of trusted partners, we intend
to capitalize the target business and create purposeful strategic initiatives in order to achieve attractive growth and performance
targets.
Investment
Criteria
We
are targeting high growth companies with strong brands and experienced management teams that are ready to enter the public market.
We intend to focus on companies that are well positioned to be sector leaders and command customer awareness on a global basis
in replacing mainstream animal-based food and beverages with delicious, sustainable, and environmentally sustainable alternatives.
Consistent with this strategy, we have identified the following criteria for evaluating potential target businesses. Although
we may decide to enter into our initial business combination with a target business that does not meet the criteria described
below, it is our intention to acquire companies with the following characteristics:
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High
growth rate and high current run rate in revenues;
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Sector
leaders or dominant competitors in their product category;
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Experienced,
public-ready management teams. Specifically, we will look for management teams that have
a proven track record of value creation for their shareholders. We will seek to partner
with a potential target’s management team and expect that the operating and investment
abilities of our executive team and board will complement their own capabilities;
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Corporate
governance, reporting and control systems that are ready to comply with the requirements
of a public listing;
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Identifiable
technological, scientific, or brand competitive advantages which can be augmented by
access to additional capital as well as our industry relationships and expertise;
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Offering
attractive return on investment for our shareholders over the next two to five years;
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Between
$800 million and $4 billion in enterprise value.
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We
believe that with our relationships, network, reputation, expertise, and proprietary deal flow, we will be able to identify potential
target businesses with appropriate valuations, that can benefit from new capital for growth and a public listing.
Effecting
a Business Combination
General
We
are not presently engaged in, and we will not engage in, any operations for an indefinite period of time. We intend to effectuate
our initial business combination using cash from the proceeds of the IPO and the private placement of the private warrants, our
shares, new debt, or a combination of these, as the consideration to be paid in our initial business combination. We may seek
to consummate our initial business combination with a company or business that may be financially unstable or in its early stages
of development or growth (such as a company that has begun operations but is not yet at the stage of commercial manufacturing
and sales), which would subject us to the numerous risks inherent in such companies and businesses, although we will not be permitted
to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
If
our initial business combination is paid for using shares or debt securities, or not all of the funds released from the trust
account are used for payment of the purchase price in connection with our business combination or used for redemptions of purchases
of our common stock, we may apply the cash released to us from the trust account that is not applied to the purchase price for
general corporate purposes, including for maintenance or expansion of operations of acquired businesses, the payment of principal
or interest due on indebtedness incurred in consummating our initial business combination, to fund the purchase of other companies
or for working capital.
We
have not identified any acquisition targets. Subject to the requirement that our initial business combination must be with one
or more target businesses or assets having an aggregate fair market value of at least 80% of the value of the trust account (excluding
any taxes payable) at the time of the agreement to enter into such initial business combination, we have virtually unrestricted
flexibility in identifying and selecting one or more prospective target businesses. Accordingly, there is no current basis for
our shareholders to evaluate the possible merits or risks of the target business with which we may ultimately complete our initial
business combination. Although our management will assess the risks inherent in a particular target business with which we may
combine, this assessment may not result in our identifying all risks that a target business may encounter. Furthermore, some of
those risks may be outside of our control, meaning that we can do nothing to control or reduce the chances that those risks will
adversely impact a target business.
We
may seek to raise additional funds through a private offering of debt or equity securities in connection with the consummation
of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering
rather than using the amounts held in the trust account. Subject to compliance with applicable securities laws, we would consummate
such financing only simultaneously with the consummation of our business combination. In the case of an initial business combination
funded with assets other than the trust account assets, our tender offer documents or proxy materials disclosing the business
combination would disclose the terms of the financing and, only if required by law or Nasdaq, we would seek stockholder approval
of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with our initial
business combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to
raising any additional funds through the sale of securities or otherwise.
Sources
of Target Businesses
We
anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment
bankers, venture capital funds, private equity groups, leveraged buyout funds, management buyout funds and other members of the
financial community. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited
by us through calls or mailings. These sources also may introduce us to target businesses in which they think we may be interested
on an unsolicited basis, since many of these sources will have read this annual report and know what types of businesses we are
targeting. Our officers and directors, as well as their affiliates, also may bring to our attention target business candidates
that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may
have, as well as attending trade shows or conventions. In addition, we expect to receive a number of proprietary deal flow opportunities
that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors.
While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business
acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s
fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction.
We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that
may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management
determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction,
in which case any such fee will be paid out of the funds held in the trust account. Although some of our officers and directors
may enter into employment or consulting agreements with the acquired business following our initial business combination, the
presence or absence of any such arrangements will not be used as a criterion in our selection process of an acquisition candidate.
We
are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers
or directors. In the event we seek to complete our initial business combination with such a company, we, or a committee of independent
directors, would obtain an opinion from an independent investment banking firm or another independent entity that commonly renders
valuation opinions on the type of target business we seek to acquire that such an initial business combination is fair to our
unaffiliated stockholders from a financial point of view.
Selection
of a Target Business and Structuring of a Business Combination
Subject
to the requirement that our initial business combination must be with one or more target businesses or assets having an aggregate
fair market value of at least 80% of the value of the trust account (excluding any taxes payable) at the time of the agreement
to enter into such initial business combination, our management will have virtually unrestricted flexibility in identifying and
selecting one or more prospective target businesses. In any case, we will only consummate an initial business combination in which
we become the majority shareholder of the target (or control the target through contractual arrangements in limited circumstances
for regulatory compliance purposes as discussed below) or are otherwise not required to register as an investment company under
the Investment Company Act or to the extent permitted by law we may acquire interests in a variable interest entity, in which
we may have less than a majority of the voting rights in such entity, but in which we are the primary beneficiary. There is no
basis for our shareholders to evaluate the possible merits or risks of any target business with which we may ultimately complete
our initial business combination. To the extent we effect our initial business combination with a company or business that may
be financially unstable or in its early stages of development or growth (such as a company that has begun operations but is not
yet at the stage of commercial manufacturing and sales), we may be affected by numerous risks inherent in such company or business.
Although our management will endeavor to evaluate the risks inherent in a particular target business, we may not properly ascertain
or assess all significant risk factors.
In
evaluating a prospective target business, we expect to conduct a thorough due diligence review that will encompass, among other
things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection
of facilities, as well as a review of financial and other information which will be made available to us.
The
time required to select and evaluate a target business and to structure and complete our initial business combination, and the
costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect
to the identification and evaluation of a prospective target business with which a business combination is not ultimately completed
will result in our incurring losses and will reduce the funds we can use to complete another business combination. We will not
pay any finders or consulting fees to members of our management team, or any of their respective affiliates, for services rendered
to or in connection with our initial business combination.
Fair
Market Value of Target Business or Businesses
The
target business or businesses or assets with which we effect our initial business combination must have a collective fair market
value equal to at least 80% of the value of the trust account (excluding any taxes payable) at the time of the agreement to enter
into such initial business combination. If we acquire less than 100% of one or more target businesses in our initial business
combination, the aggregate fair market value of the portion or portions we acquire must equal at least 80% of the value of the
trust account at the time of the agreement to enter into such initial business combination. However, we will always acquire at
least a controlling interest in a target business. The fair market value of a portion of a target business or assets will likely
be calculated by multiplying the fair market value of the entire business by the percentage of the target we acquire. We may seek
to consummate our initial business combination with an initial target business or businesses with a collective fair market value
in excess of the balance in the trust account. In order to consummate such an initial business combination, we may issue a significant
amount of debt, equity or other securities to the sellers of such business and/or seek to raise additional funds through a private
offering of debt, equity or other securities. If we issue securities in order to consummate such an initial business combination,
our stockholders could end up owning a minority of the combined company’s voting securities as there is no requirement that
our stockholders own a certain percentage of our company (or, depending on the structure of the initial business combination,
an ultimate parent company that may be formed) after our business combination. Because we have no specific business combination
under consideration, we have not entered into any such arrangement to issue our debt or equity securities and have no current
intention of doing so.
The
fair market value of a target business or businesses or assets will be determined by our board of directors based upon standards
generally accepted by the financial community, such as actual and potential gross margins, the values of comparable businesses,
earnings and cash flow, book value, enterprise value and, where appropriate, upon the advice of appraisers or other professional
consultants. Investors will be relying on the business judgment of our board of directors, which will have significant discretion
in choosing the standard used to establish the fair market value of a particular target business. If our board of directors is
not able to independently determine that the target business or assets has a sufficient fair market value to meet the threshold
criterion, we will obtain an opinion from an unaffiliated, independent investment banking firm or another independent entity that
commonly renders valuation opinions on the type of target business we seek to acquire with respect to the satisfaction of such
criterion. Notwithstanding the foregoing, unless we consummate a business combination with an affiliated entity, we are not required
to obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation
opinions on the type of target business we seek to acquire, that the price we are paying is fair to our stockholders.
Lack
of Business Diversification
For
an indefinite period of time after consummation of our initial business combination, the prospects for our success may depend
entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations
with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations
and mitigate the risks of being in a single line of business. By consummating our initial business combination with only a single
entity, our lack of diversification may:
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subject
us to negative economic, competitive and regulatory developments, any or all of which
may have a substantial adverse impact on the particular industry in which we operate
after our initial business combination, and
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cause
us to depend on the marketing and sale of a single product or limited number of products
or services.
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Limited
Ability to Evaluate the Target’s Management Team
Although
we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting
our initial business combination with that business, our assessment of the target business’ management may not prove to
be correct. The future role of members of our management team, if any, in the target business cannot presently be stated with
any certainty. Consequently, members of our management team may not become a part of the target’s management team, and the
future management may not have the necessary skills, qualifications or abilities to manage a public company. Further, it is also
not certain whether one or more of our directors will remain associated in some capacity with us following our initial business
combination. Moreover, members of our management team may not have significant experience or knowledge relating to the operations
of the particular target business. Our key personnel may not remain in senior management or advisory positions with the combined
company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time
of our initial business combination.
Following
our initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target
business. We may not have the ability to recruit additional managers, or that additional managers will have the requisite skills,
knowledge or experience necessary to enhance the incumbent management.
Stockholders
May Not Have the Ability to Approve an Initial Business Combination
In
connection with any proposed business combination, we will either (1) seek stockholder approval of our initial business combination
at a meeting called for such purpose at which public stockholders may seek to convert their public shares, regardless of whether
they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit
in the trust account (net of taxes payable) or (2) provide our public stockholders with the opportunity to sell their public shares
to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share
of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described
herein. Notwithstanding the foregoing, our initial stockholders have agreed, pursuant to written letter agreements with us, not
to convert any public shares held by them into their pro rata share of the aggregate amount then on deposit in the trust account.
If we determine to engage in a tender offer, such tender offer will be structured so that each stockholder may tender any or all
of his, her or its public shares rather than some pro rata portion of his, her or its shares. The decision as to whether we will
seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender
offer will be made by us based on a variety of factors such as the timing of the transaction and whether the terms of the transaction
would otherwise require us to seek stockholder approval. If we so choose and we are legally permitted to do so, we have the flexibility
to avoid a stockholder vote and allow our stockholders to sell their shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange
Act which regulate issuer tender offers. In that case, we will file tender offer documents with the SEC which will contain substantially
the same financial and other information about the initial business combination as is required under the SEC’s proxy rules.
We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation
and, solely if we seek stockholder approval, a majority of the issued and outstanding shares of common stock voted are voted in
favor of the business combination.
We
chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419. However, if we seek
to consummate an initial business combination with a target business that imposes any type of working capital closing condition
or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination,
our net tangible asset threshold may limit our ability to consummate such initial business combination (as we may be required
to have a lesser number of shares converted or sold to us) and may force us to seek third party financing which may not be available
on terms acceptable to us or at all. As a result, we may not be able to consummate such initial business combination and we may
not be able to locate another suitable target within the applicable time period, if at all. Public stockholders may therefore
have to wait 24 months from our IPO in order to be able to receive a pro rata share of the trust account.
Our
initial stockholders and our officers and directors have agreed (1) to vote any shares of common stock owned by them in favor
of any proposed business combination, (2) not to convert any shares of common stock in connection with a stockholder vote to approve
a proposed initial business combination and (3) not sell any shares of common stock in any tender in connection with a proposed
initial business combination. As a result, if we sought stockholder approval of a proposed transaction, we would need only 500,001
of our public shares (or approximately 6.3% of our public shares) to be voted in favor of the transaction in order to have such
transaction approved (assuming that only a quorum was present at the meeting, that the over-allotment option is not exercised
and that the initial stockholders do not purchase any shares in the after-market).
If
we hold a meeting to approve a proposed business combination and a significant number of stockholders vote, or indicate an intention
to vote, against such proposed business combination, our officers, directors, initial stockholders or their affiliates could make
such purchases in the open market or in private transactions in order to influence the vote. Notwithstanding the foregoing, our
officers, directors, initial stockholders and their affiliates will not make purchases of common stock if the purchases would
violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s
stock.
Conversion/Tender
Rights
At
any meeting called to approve an initial business combination, public stockholders may seek to convert their public shares, regardless
of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then
on deposit in the trust account, less any taxes then due but not yet paid. Notwithstanding the foregoing, our initial stockholders
have agreed, pursuant to written letter agreements with us, not to convert any public shares held by them into their pro rata
share of the aggregate amount then on deposit in the trust account. If we hold a meeting to approve an initial business combination,
a holder will always have the ability to vote against a proposed business combination and not seek conversion of his shares.
Alternatively,
if we engage in a tender offer, each public stockholder will be provided the opportunity to sell his public shares to us in such
tender offer. The tender offer rules require us to hold the tender offer open for at least 20 business days. Accordingly, this
is the minimum amount of time we would need to provide holders to determine whether they want to sell their public shares to us
in the tender offer or remain an investor in our company.
Our
initial stockholders, officers and directors will not have conversion rights with respect to any shares of common stock owned
by them, directly or indirectly, including any shares purchased by them in the aftermarket.
We
may also require public stockholders, whether they are a record holder or hold their shares in “street name,” to either
tender their certificates (if any) to our transfer agent or to deliver their shares to the transfer agent electronically using
Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, at any time at or
prior to the vote on the business combination. The proxy solicitation materials that we will furnish to stockholders in connection
with the vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy such delivery
requirements. Accordingly, a stockholder would have from the time our proxy statement is mailed through the vote on the business
combination to deliver his shares if he wishes to seek to exercise his conversion rights. Under Delaware law and our bylaws, we
are required to provide at least 10 days’ advance notice of any stockholder meeting, which would be the minimum amount of
time a stockholder would have to determine whether to exercise conversion rights. As a result, if we require public stockholders
who wish to convert their shares of common stock into the right to receive a pro rata portion of the funds in the trust account
to comply with the foregoing delivery requirements, holders may not have sufficient time to receive the notice and deliver their
shares for conversion. Accordingly, investors may not be able to exercise their conversion rights and may be forced to retain
our securities when they otherwise would not want to. The conversion rights will include the requirement that a beneficial holder
must identify itself in order to validly redeem its shares.
There
is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the
DWAC System. The transfer agent will typically charge the tendering broker $45 and it would be up to the broker whether or not
to pass this cost on to the converting holder. However, this fee would be incurred regardless of whether or not we require holders
seeking to exercise conversion rights. The need to deliver shares is a requirement of exercising conversion rights regardless
of the timing of when such delivery must be effectuated. However, in the event we require stockholders seeking to exercise conversion
rights to deliver their shares prior to the consummation of the proposed business combination and the proposed business combination
is not consummated, this may result in an increased cost to stockholders.
If
a public stockholder fails to vote in favor of or against a proposed business combination, whether that stockholder abstains from
the vote or simply does not vote, that stockholder would not be able to have his shares of common stock so redeemed to cash in
connection with such business combination.
Any
request to convert or tender such shares once made, may be withdrawn at any time up to the vote on the proposed business combination
or expiration of the tender offer. Furthermore, if a holder of a public share delivered his certificate in connection with an
election of their conversion or tender and subsequently decides prior to the vote on the business combination or the expiration
of the tender offer not to elect to exercise such rights, he may simply request that the transfer agent return the certificate
(physically or electronically).
If
the initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise
their conversion or tender rights would not be entitled to convert their shares for the applicable pro rata share of the trust
account. In such case, we will promptly return any shares delivered by public holders.
Liquidation
of Trust Account if No Business Combination
If
we do not complete a business combination within 24 months from the closing of the IPO, we will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem
100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above)
to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Under
the Delaware General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the
extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public
stockholders upon the redemption of 100% of our outstanding public shares in the event we do not complete our initial business
combination within the required time period may be considered a liquidation distribution under Delaware law. If the corporation
complies with certain procedures set forth in Section 280 of the Delaware General Corporation Law intended to ensure that it makes
reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought
against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day
waiting period before any redemptions are made to stockholders, any liability of stockholders with respect to a redemption is
limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and
any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore,
if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public
shares in the event we do not complete our initial business combination within the required time period is not considered a liquidation
distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the
Delaware General Corporation Law, the statute of limitations for claims of creditors could then be six years after the unlawful
redemption distribution, instead of three years, as in the case of a liquidation distribution. It is our intention to redeem our
public shares as soon as reasonably possible following the 24th month from the closing of the IPO, but not more than five business
days thereafter, and, therefore, we do not intend to comply with the above procedures. As such, our stockholders could potentially
be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may
extend well beyond the third anniversary of such date.
Because
we will not be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation
Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and
pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a
blank check company, rather than an operating company, and our operations will be limited to seeking to complete an initial business
combination, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective
target businesses.
We
will seek to have all third parties (including any vendors or other entities we engage) and any prospective target businesses
enter into valid and enforceable agreements with us waiving any right, title, interest or claim of any kind they may have in or
to any monies held in the trust account.
As
a result, the claims that could be made against us will be limited, thereby lessening the likelihood that any claim would result
in any liability extending to the trust. We therefore believe that any necessary provision for creditors will be reduced and should
not have a significant impact on our ability to distribute the funds in the trust account to our public stockholders. Nevertheless,
there is no guarantee that vendors, service providers and prospective target businesses will execute such agreements. In the event
that a potential contracted party was to refuse to execute such a waiver, we will execute an agreement with that entity only if
our management first determines that we would be unable to obtain, on a reasonable basis, substantially similar services or opportunities
from another entity willing to execute such a waiver. Examples of instances where we may engage a third party that refused to
execute a waiver would be the engagement of a third party consultant who cannot sign such an agreement due to regulatory restrictions,
such as our auditors who are unable to sign due to independence requirements, or whose particular expertise or skills are believed
by management to be superior to those of other consultants that would agree to execute a waiver or a situation in which management
does not believe it would be able to find a provider of required services willing to provide the waiver. There is also no guarantee
that, even if they execute such agreements with us, they will not seek recourse against the trust account. Our insiders have agreed
that they will be jointly and severally liable to us if and to the extent any claims by a vendor for services rendered or products
sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount
of funds in the trust account to below $10.00 per public share, except as to any claims by a third party who executed a valid
and enforceable agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held
in the trust account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities,
including liabilities under the Securities Act. Our board of directors has evaluated our insiders’ financial net worth and
believes they will be able to satisfy any indemnification obligations that may arise. However, our insiders may not be able to
satisfy their indemnification obligations, as we have not required our insiders to retain any assets to provide for their indemnification
obligations, nor have we taken any further steps to ensure that they will be able to satisfy any indemnification obligations that
arise. Moreover, our insiders will not be liable to our public stockholders and instead will only have liability to us. As a result,
if we liquidate, the per-share distribution from the trust account could be less than approximately $10.00 due to claims or potential
claims of creditors. We will distribute to all of our public stockholders, in proportion to their respective equity interests,
an aggregate sum equal to the amount then held in the trust account, inclusive of any interest not previously released to us (subject
to our obligations under Delaware law to provide for claims of creditors as described below).
If
we are unable to consummate an initial business combination and are forced to redeem 100% of our outstanding public shares for
a portion of the funds held in the trust account, we anticipate notifying the trustee of the trust account to begin liquidating
such assets promptly after such date and anticipate it will take no more than 10 business days to effectuate the redemption of
our public shares. Our insiders have waived their rights to participate in any redemption with respect to their insider shares.
We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are
insufficient, our insiders have agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no
more than approximately $50,000) and have agreed not to seek repayment of such expenses. Each holder of public shares will receive
a full pro rata portion of the amount then in the trust account, plus any pro rata interest earned on the funds held in the trust
account and not previously released to us or necessary to pay our taxes. The proceeds deposited in the trust account could, however,
become subject to claims of our creditors that are in preference to the claims of public stockholders.
Our
public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete our
initial business combination in the required time period or if the stockholders seek to have us convert their respective shares
of common stock upon a business combination which is actually completed by us. In no other circumstances shall a stockholder have
any right or interest of any kind to or in the trust account.
If
we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds
held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject
to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete
the trust account, the per share redemption or conversion amount received by public stockholders may be less than $10.00.
If,
after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary
bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under
applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.”
As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our board of directors
may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself
and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
Claims may be brought against us for these reasons.
Amended
and Restated Certificate of Incorporation
Our
amended and restated certificate of incorporation contains certain requirements and restrictions relating to our IPO and will
apply to us until the consummation of our initial business combination. If we hold a stockholder vote to amend any provisions
of our amended and restated certificate of incorporation relating to stockholder’s rights or pre-business combination activity
(including the substance or timing within which we have to complete a business combination), we will provide our public stockholders
with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the
trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding
public shares, in connection with any such vote. Our insiders have agreed to waive any conversion rights with respect to any insider
shares and any public shares they may hold in connection with any vote to amend our amended and restated certificate of incorporation.
Specifically, our amended and restated certificate of incorporation provides, among other things, that:
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prior
to the consummation of our initial business combination, we shall either (1) seek stockholder
approval of our initial business combination at a meeting called for such purpose at
which public stockholders may seek to convert their shares of common stock, regardless
of whether they vote for or against the proposed business combination, into a portion
of the aggregate amount then on deposit in the trust account, or (2) provide our stockholders
with the opportunity to sell their shares to us by means of a tender offer (and thereby
avoid the need for a stockholder vote) for an amount equal to their pro rata share of
the aggregate amount then on deposit in the trust account, in each case subject to the
limitations described herein;
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we
will consummate our initial business combination only if public stockholders do not exercise
conversion rights in an amount that would cause our net tangible assets to be less than
$5,000,001 and a majority of the outstanding shares of common stock voted are voted in
favor of the business combination;
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if
our initial business combination is not consummated within 24 months of the closing of
the IPO, then our existence will terminate and we will distribute all amounts in the
trust account to all of our public holders of shares of common stock;
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we
may not consummate any other business combination, merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar transaction prior to our initial
business combination; and
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prior
to our initial business combination, we may not issue additional shares of capital stock
that would entitle the holders thereof to (i) receive funds from the trust account or
(ii) vote on any initial business combination.
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Potential
Revisions to Agreements with Insiders
Each
of our insiders has entered into letter agreements with us pursuant to which each of them has agreed to do certain things relating
to us and our activities prior to a business combination. We could seek to amend these letter agreements without the approval
of stockholders, although we have no intention to do so. In particular:
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Restrictions
relating to liquidating the trust account if we failed to consummate a business combination
in the time-frames specified above could be amended, but only if we allowed all stockholders
to redeem their shares in connection with such amendment;
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Restrictions
relating to our insiders being required to vote in favor of a business combination or
against any amendments to our organizational documents could be amended to allow our
insiders to vote on a transaction as they wished;
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The
requirement of members of the management team to remain our officer or director until
the closing of a business combination could be amended to allow persons to resign from
their positions with us if, for example, the current management team was having difficulty
locating a target business and another management team had a potential target business;
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The
restrictions on transfer of our securities could be amended to allow transfer to third
parties who were not members of our original management team;
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The
obligation of our management team to not propose amendments to our organizational documents
could be amended to allow them to propose such changes to our stockholders;
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The
obligation of insiders to not receive any compensation in connection with a business
combination could be modified in order to allow them to receive such compensation;
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The
requirement to obtain a valuation for any target business affiliated with our insiders,
in the event it was too expensive to do so.
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Except
as specified above, stockholders would not be required to be given the opportunity to redeem their shares in connection with such
changes. Such changes could result in:
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Our
having an extended period of time to consummate a business combination (although with
less in trust as a certain number of our stockholders would certainly redeem their shares
in connection with any such extension);
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Our
insiders being able to vote against a business combination or in favor of changes to
our organizational documents;
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Our
operations being controlled by a new management team that our stockholders did not elect
to invest with;
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Our
insiders receiving compensation in connection with a business combination; and
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Our
insiders closing a transaction with one of their affiliates without receiving an independent
valuation of such business.
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We
will not agree to any such changes unless we believed that such changes were in the best interests of our stockholders (for example,
if we believed such a modification were necessary to complete a business combination). Each of our officers and directors have
fiduciary obligations to us requiring that they act in our best interests and the best interests of our stockholders.
Management
Operating and Investment Experience
We
believe that our executive officers possess the experience, skills and contacts necessary to source, evaluate, and execute an
attractive business combination. See the section titled “Management” for complete information on the experience of
our officers and directors. Notwithstanding the foregoing, our officers and directors are not required to commit their full time
to our affairs and will allocate their time to other businesses. We presently expect each of our employees to devote such amount
of time as they reasonably believe is necessary to our business (which could range from only a few hours a week while we are trying
to locate a potential target business to a majority of their time as we move into serious negotiations with a target business
for a business combination). The past successes of our executive officers and directors do not guarantee that we will successfully
consummate an initial business combination.
As
more fully discussed in “Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination
opportunity that falls within the line of business of any entity to which he has pre-existing fiduciary or contractual obligations,
he may be required to present such business combination opportunity to such entity, subject to his or her fiduciary duties under
Delaware law, prior to presenting such business combination opportunity to us. Most of our officers and directors currently have
certain pre-existing fiduciary duties or contractual obligations.
Emerging
Growth Company Status and Other Information
We
are an emerging growth company as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities
Act, as modified by the Jumpstart Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act). As such, we are
eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding
a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our
securities and the prices of our securities may be more volatile.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised
financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement
declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new
or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition
period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable.
The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised,
and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt
the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
financial statement with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth
anniversary of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we
are deemed to be a large accelerated filer, which means the market value of our shares of common stock that are held by non-affiliates
exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible
debt during the prior three year period.
Competition
In
identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition
from other entities having a business objective similar to ours, including other blank check companies, private equity groups
and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established
and have significant experience identifying and effecting business combinations directly or through affiliates. Moreover, many
of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target
businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing
the acquisition of a target business. Furthermore, the requirement that we acquire a target business or businesses having a fair
market value equal to at least 80% of the value of the trust account (excluding any taxes payable) at the time of the agreement
to enter into the business combination, our obligation to pay cash in connection with our public stockholders who exercise their
redemption rights and the number of our outstanding warrants and the future dilution they potentially represent, may not be viewed
favorably by certain target businesses. Any of these factors may place us at a competitive disadvantage in successfully negotiating
our initial business combination.
Employees
We
currently have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters
but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business
combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected
for our initial business combination and the stage of the business combination process we are in. We do not intend to have any
full time employees prior to the consummation of our initial business combination.
As a smaller reporting company, we are not
required to make disclosures under this Item. However, below is a partial list of material risks, uncertainties and other factors that
could have a material effect on the Company and its operations:
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our ability to select an appropriate target
business or businesses;
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our ability to complete our initial business combination;
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our expectations around the performance of a prospective
target business or businesses;
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our success in retaining or recruiting, or changes required
in, our officers, key employees or directors following our initial business combination;
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our officers and directors allocating their time to other
businesses and potentially having conflicts of interest with our business or in approving our
initial business combination;
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our potential ability to obtain additional financing to complete
our initial business combination;
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our pool of prospective target businesses;
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the ability of our officers and directors to generate a number
of potential business combination opportunities;
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our public securities’ potential liquidity and trading;
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the lack of a market for our securities;
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the impact of COVID-19 pandemic;
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the use of proceeds not held in the trust account or available
to us from interest income on the trust account balance;
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the trust account not being subject to claims of third parties;
or
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our financial performance.
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Risks Relating to Restatement of Our Previously
Issued Financial Statements
Certain of our warrants are accounted for
as liabilities and changes in the value of our warrants could have a material effect on our financial results.
On April 12, 2021, the SEC Staff expressed its
view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities instead of equity
on the SPAC’s balance sheet. As a result of the SEC Staff Statement, we reevaluated the accounting treatment of our 6,800,000 Private
Warrants, and determined to classify the Private Warrants as derivative liabilities measured at fair value, with changes in fair value
reported in our statement of operations for each reporting period.
As a result, included on our balance sheet as
of December 31, 2020 contained elsewhere in this annual report are derivative liabilities related to embedded features contained within
our Private Warrants. ASC 815-40 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with
a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.
As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based
on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains
or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
We identified a material weakness in our
internal control over financial reporting, due solely to our reconsideration of the accounting treatment for the Private Warrants in
connection with the SEC Staff Statement. This material weakness could continue to adversely affect our ability to report our results
of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also
evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such
evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis.
As described elsewhere in this annual report,
we identified a material weakness in our internal control over financial reporting related to the classification of our warrants as equity
instead of liabilities. On May 12, 2021, our Audit Committee authorized management to restate our audited financial statements as of,
and for the period from August 10, 2020 (date of inception) to December 31, 2020, and, accordingly, management concluded that the control
deficiency that resulted in the incorrect classification of our Private Warrants constituted a material weakness as of December 31, 2020.
This material weakness resulted in a material misstatement of our warrant liabilities, change in fair value of warrant liabilities, additional
paid-in capital, accumulated deficit and related financial disclosures for the Affected Periods.
We have implemented a remediation plan, described
under Item 9A, Controls and Procedures, to remediate the material weakness surrounding our historical presentation of our Private Warrants
but can give no assurance that the measures we have taken will prevent any future material weaknesses or deficiencies in internal control
over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls and procedures may
not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
We may face litigation and other risks as
a result of the material weakness in our internal control over financial reporting.
Following the issuance of the SEC Statement, our
management and our Audit Committee concluded that it was appropriate to restate our previously issued audited financial statements as
of, and for the period from August 10, 2020 (date of inception) to December 31, 2020. As part of the restatement, we identified a material
weakness in our internal controls over financial reporting.
As a result of such material weakness, the restatement
related to the accounting for the Private Warrants, and other matters raised or that may in the future be raised by the SEC, we face
potential litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual
claims or other claims arising from the Restatement and material weakness in our internal control over financial reporting. As of the
date of this annual report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation
or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect
on our business, results of operations and financial condition or our ability to complete a business combination.
There have been and may in the future be
changes to current accounting practices for SPACs, which could result in further changes to our financial statements and disclosures,
and which could have a material adverse impact.
Recently, there have been changes to the accepted
accounting for SPACs. For example, on April 12, 2021, the staff of the SEC issued the SEC Warrant Accounting Statement, which resulted
in the warrants and other related instruments issued by many SPACs, including us, being classified as liabilities rather equity. Further
changes in the accepted accounting treatment of features related to SPACs may occur in the future. Changes or differing interpretations
in the accepted accounting practices related to SPACs could result in the recognition of additional accounting errors in previously issued
financial statements, further restatements of previously issued audited financial statements, the filing of notices that previously issued
financial statements may not be relied upon, and additional findings of material weaknesses and significant deficiencies in internal
controls over financial reporting, all or any of which could have a material adverse impact on us.
For the complete list of risks relating to our
operations, see the section titled “Risk Factors” contained in our prospectus dated November 12, 2020.