Item
1. Business.
General
Alset
Capital Acquisition Corp. (the “Company”) was incorporated in Delaware on October 20, 2021. The Company was formed for the
purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination
with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or sector for
purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company
is subject to all of the risks associated with early stage and emerging growth companies.
As
of November 30, 2022, the Company has not commenced any operations. All activity for the period from October 20, 2021 (inception) through
November 30, 2022 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which
is described below and the pursuit of a suitable acquisition candidate. The Company will not generate any operating revenues until after
the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest
income from the proceeds derived from the Initial Public Offering. The Company has selected November 30 as its fiscal year end.
On
September 9, 2022, the Company entered into an agreement and plan of merger (the “Merger Agreement”) by and among the Company,
HWH International Inc., a Nevada corporation (“HWH”) and HWH Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary
of the Company (“Merger Sub”). The Company and Merger Sub are sometimes referred to collectively as the “ACAX Parties.”
Pursuant to the Merger Agreement, a business combination between the Company and HWH will be effected through the merger of Merger Sub
with and into HWH, with HWH surviving the merger as a wholly owned subsidiary of the Company (the “Merger”). Upon the closing
of the Merger (the “Closing”), it is anticipated that the Company will change its name to “HWH International Inc.”
The board of directors of the Company has (i) approved and declared advisable the Merger Agreement, the Ancillary Agreements (as defined
in the Merger Agreement) and the transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and
related transactions by the stockholders of the Company.
HWH
is owned and controlled by certain member officers and directors of the Company and its sponsor. The Merger is expected to be consummated
in the first half of 2023, following the receipt of the required approval by the stockholders of the Company and the shareholder of HWH
and the satisfaction of certain other customary closing conditions.
The
total consideration to be paid at Closing (the “Merger Consideration”) by the Company to the HWH shareholders will be $125,000,000,
and will be payable in shares of Class A common stock, par value $0.0001 per share, of the Company (“Company Common Stock”).
The number of shares of the Company Common Stock to be paid to the shareholders of HWH as Merger Consideration will be 12,500,000, with
each share being valued at $10.00. All cash proceeds remaining in the trust will be used to pay transaction costs and as growth capital
for HWH. There can be no assurance that the Merger will be consummated.
The
registration statement for the Company’s Initial Public Offering was declared effective on January 31, 2022. On February 3, 2022,
the Company consummated the Initial Public Offering of 8,625,000 units (“Units” and, with respect to the shares of common
stock included in the Units being offered, the “Public Shares”), generating gross proceeds of $86,250,000, which includes
the full exercise of the underwriters’ option to purchase an additional 1,125,000 Units generating additional gross proceeds to
the Company of $11,250,000, which is described in Note 3 of the Notes to the audited Financial Statements for Fiscal Year ended November 30, 2022.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private sale of 473,750 units (the “Private Placement
Units”) at a price of $10.00 per Private Placement Unit in private placement to Alset Acquisition Sponsor, LLC (the “Sponsor”)
generating gross proceeds to the Company in the amount of $4,737,500.
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 Private Placement Units, although substantially all of the net proceeds are intended to be applied toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal
to at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes
payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company
owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target
business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended
(the “Investment Company Act”). Upon the closing of the Initial Public Offering, management has agreed that an amount equal
to at least $10.10 per Unit sold in the Initial Public Offering, including proceeds from the Private Placement Units, will be held in
a trust account (“Trust Account”), located in the United States and invested only in U.S. government securities, within the
meaning set forth in Section 2(a)(16) of 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 certain 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 held in the Trust Account, as described below.
The
Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem
all or a portion of their Public Shares either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to
redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.10 per Public
Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion
of a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption will be recorded at a
redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Accounting
Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
All
of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s
liquidation, if there is a stockholder vote or tender offer in connection with the Company’s Business Combination and in connection
with certain amendments to the Company’s Certificate of Incorporation. In accordance with the rules of the U.S. Securities and
Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99,
redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside
of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial
carrying value of Class A common stock classified as temporary equity will be the allocated proceeds determined in accordance with ASC
470-20. The Class A common stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, we
have the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that
it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize
changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value
at the end of each reporting period. We have elected to recognize the changes immediately. The accretion or remeasurement will be treated
as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). The Public
Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place. Redemptions
of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to
an agreement relating to the Company’s Business Combination.
The
Company will not redeem Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 (so that it does
not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which
may be contained in the agreement relating to the Business Combination. If the Company seeks stockholder approval of the Business Combination,
the Company will proceed with a Business Combination if a majority of the outstanding shares voted are voted in favor of the Business
Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or
stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company
will, pursuant to its second amended and restated certificate of incorporation (the “Certificate of Incorporation”), conduct
the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission and file tender offer documents with
the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law
or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company
will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer
rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder
Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business
Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective
of whether they vote for or against the proposed transaction.
Notwithstanding
the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of 15% of the Public Shares, without the prior consent of the Company.
The
holders of the Founder Shares have agreed (a) to waive their redemption rights with respect to the Founder Shares and Public Shares held
by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation
(i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination
or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined
below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless
the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If
the Company has not completed a Business Combination within 12 months from the closing of the Initial Public Offering (or 15 months
if we have filed a proxy statement, registration statement or similar filing for an initial Business Combination within 12 months
from the consummation of Initial Public Offering but have not completed the initial Business Combination within such 12-month
period, or up to 21 months if we extend the period of time to consummate a Business Combination, at the election of the Company by
two separate three month extensions, subject to satisfaction of certain conditions, including the deposit of up to $862,500 ($0.10
per unit in either case) for each three month extension, into the trust account, or as extended by the Company’s stockholders
in accordance with our amended and restated certificate of incorporation), 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 pay taxes (less up to $100,000 of interest to
pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish
Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), 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. There will be no
redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the
Company fails to complete a Business Combination within the Combination Period.
The
holders of the Founders Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails
to complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire 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. The underwriters have agreed to waive their rights to
their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination
within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will
be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value
of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
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 third party 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 (i) $10.00 per Public Share or (ii) such
lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00
per Public Share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn
to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account
and except as to any claims under the Company’s indemnity of the underwriters of the 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 Sponsor will not be responsible to the extent of any liability
for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account
due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered
accounting firm), prospective target businesses and 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.
Going
Concern and Management’s Plan
The
Company expects to incur significant costs in pursuit of its acquisition plans and will not generate any operating revenues until after
the completion of its initial business combination, at the earliest. In addition, the Company expects to have negative cash flows from operations as it
pursues an initial business combination target. In connection with the Company’s assessment of going concern considerations in
accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s
Ability to Continue as a Going Concern” the Company does not currently have adequate liquidity to sustain operations, which consist
solely of pursuing a Business Combination.
The
Company may raise additional capital through loans or additional investments from the Sponsor or its stockholders, officers, directors,
or third parties. The Company’s officers and directors and the Sponsor may, but are not obligated to (except as described above),
loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s
working capital needs. Based on the foregoing, the Company believes it will have sufficient cash to meet its needs through the earlier
of consummation of a Business Combination or the deadline to complete a Business Combination pursuant to the Company’s Amended
and Restated Certificate of Incorporation (unless otherwise amended by shareholders).
While
the Company expects to have sufficient access to additional sources of capital if necessary, there is no current commitment on the part
of any financing source to provide additional capital and no assurances can be provided that such additional capital will ultimately
be available. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period
of time within one year after the date that the financial statements are issued. There is no assurance that the Company’s plans
to raise additional capital (to the extent ultimately necessary) or to consummate a Business Combination will be successful or successful
within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As
is customary for a special purpose acquisition company, if the Company is not able to consummate a Business Combination during the Combination
Period, it will cease all operations and redeem the Public Shares. Management plans to continue its efforts to consummate a Business
Combination during the Combination Period.
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the economic
effects of the pandemic 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 balance sheet
does not include any adjustments that might result from the outcome of this uncertainty.
Employees
At
the present time, the Company has no employees. The Company has an agreement with Alset Management Group, Inc., pursuant to which, for
a fee, Alset Management Group, Inc. provides the Company with secretarial and administrative services.
Impact
of Recent Public Health Events
The
COVID-19 pandemic worldwide and resulting epidemic in the United States has resulted in a widespread health crisis that has adversely
affected the economy and financial markets, and the business of any potential target business with which we consummate a business combination
could be materially and adversely affected. We may be unable to complete a business combination if continued concerns relating to COVID-19
restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services
providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search
for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information
which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions
posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination,
or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
Intellectual
Property
We
anticipate filing additional trademark applications as we expand into new areas of business.
Additional
Information
The
Company is subject to the information requirements of the Exchange Act, and, in accordance therewith, files annual, quarterly, and special
reports, proxy statements and other information with the Commission. The Commission maintains an internet website at http://www.sec.gov
that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission.
The periodic reports, proxy statements and other information that the Company files with the Commission are available for inspection
on the Commission’s website free of charge as soon as reasonably practicable after they are electronically filed with or furnished
to the Commission.
The Company maintains a website at https://www.alsetcapitalacquisition.com
where you may also access these materials free of charge. We have included our website address as an inactive textual reference only
and the information contained in, and that can be accessed through, our website is not incorporated into and is not part of this report
on Form 10-K.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This
Annual Report on Form 10-K contains forward-looking statements regarding, among other things, our future operating results and financial
position, our business strategy, and other objectives for our future operations. The words “anticipate,” “believe,”
“intend,” “expect,” “may,” “estimate,” “predict,” “project,”
“potential” and similar expression are intended to identify forward-looking statements, although not all forward-looking
statements contain these identifying words. We have based these forward-looking statements largely on our current expectations and projections
about future events and financial trends that we believe may affect our business, financial condition and results of operations. There
are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking
statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should
not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions
and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact
of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
You should read this Report on Form 10-K
and the documents that we have filed as exhibits to this Report on Form 10-K completely and with the understanding that our actual future
results may be materially different from what we expect. The forward-looking statements contained in this Report on Form 10-K are made
as of the date of this Report on Form 10-K, and we do not assume any obligation to update any forward-looking statements, whether as
a result of new information, future events or otherwise, except as required by applicable law.
Item
1A. Risk Factors.
An
investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other
information in this Report on Form 10-K before making a decision to invest in our common stock. If any of the following risks and uncertainties
develop into actual events, our business, results of operations and financial condition could be adversely affected. In those cases,
the trading price of our common stock could decline and you may lose all or part of your investment. As a “smaller reporting company”, the Company is not required to provide the information required by
this item, but below are the risk factors the Company believes investors should consider before purchasing any of the Company’s
securities.
Risks
Related to Our Company
An
investment in our securities involves a high degree of risk. You should consider carefully the material risks described below. This Report
on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in the forward-looking statements as a result of specific factors, including the risks described below.
Risks
Associated with Our Business
We
are a blank check company with no operating history and, accordingly, you will not have any basis on which to evaluate our ability to
achieve our business objective.
We
are a blank check company with no operating results to date. Therefore, our ability to commence operations is dependent upon obtaining
financing through the public offering of our securities. Since we do not have an operating history, you will have no basis upon which
to evaluate our ability to achieve our business objective, which is to acquire an operating business. We will not generate any revenues
until, at the earliest, after the consummation of a business combination.
Our
sponsor paid an aggregate of $25,000 for the founder shares, or approximately $0.012 per founder share. As a result of this low initial
price, our sponsor, its affiliates and our management team stand to make a substantial profit even if an initial business combination
subsequently declines in value or is unprofitable for our public stockholders.
As
a result of the low acquisition cost of our founder shares, our sponsor, its affiliates and our management team could make a substantial
profit even if we select and consummate an initial business combination with an acquisition target that subsequently declines in value
or is unprofitable for our public stockholders. Thus, such parties may have more of an economic incentive for us to enter into an initial
business combination with a riskier, weaker-performing or financially unstable business, or an entity lack an established record of revenues
or earnings, than would be the case if such parties had paid the full offering price for their founder shares.
If
third parties bring claims against us, the proceeds held in trust could be reduced and the per-share liquidation price received by shareholders
may be less than $10.10.
Our
placing of funds in trust may not protect those funds from third party claims against us. Although we will seek to have all vendors and
service providers we engage and prospective target businesses we negotiate with execute agreements with us waiving any right, title,
interest or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders, they may not
execute such agreements. Furthermore, even if such entities execute such agreements with us, they may seek recourse against the monies
held in the trust account. A court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject
to claims which could take priority over those of our public shareholders. If we liquidate the trust account before the completion of
a business combination, our sponsor has agreed (subject to certain exceptions described elsewhere in this report) that it will be liable
to ensure that the proceeds in the trust account are not reduced 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 and which have not executed a waiver agreement.
However, our sponsor may not be able to meet such obligation. Therefore, the per-share distribution from the trust account in such a
situation may be less than $10.10, plus interest, due to such claims.
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, or if we otherwise
enter compulsory or court supervised liquidation, 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 shareholders.
To the extent any bankruptcy claims deplete the trust account, we may not be able to return to our public shareholders at least $10.10
per share.
Our
shareholders may be held liable for claims by third parties against us to the extent of distributions received by them.
Our
certificate of incorporation provides that we will continue in existence only until 12 months (or 15 months if we have filed a proxy
statement, registration statement or similar filing for an initial business combination within 12 months from the consummation of our Initial Public Offering but have not completed the initial business combination within such 12-month period, or up to 21 months if we extend the period
of time to consummate a business combination) from the consummation of the Initial Public Offering if a business combination has not been consummated
by such time. If we are unable to complete an initial business combination during such time period, it will trigger our automatic winding
up, liquidation and dissolution. As such, our shareholders could potentially be liable for any claims to the extent of distributions
received by them pursuant to such process and any liability of our shareholders may extend beyond the date of such distribution. Accordingly,
we cannot assure you that third parties, or us under the control of an official liquidator, will not seek to recover from our shareholders
amounts owed to them by us.
If
we are unable to consummate a business combination within the required time period, upon notice from us, the trustee of the trust account
will distribute the amount in our trust account to our public shareholders. Concurrently, we shall pay, or reserve for payment, from
funds not held in trust, our liabilities and obligations, although we cannot assure you that there will be sufficient funds for such
purpose. If there are insufficient funds held outside the trust account for such purpose, our sponsor has agreed that it will be liable
to ensure that the proceeds in the trust account are not reduced 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 and which have not executed a waiver agreement.
However, we cannot assure you that the liquidator will not determine that he or she requires additional time to evaluate creditors’
claims (particularly if there is uncertainty over the validity or extent of the claims of any creditors). We also cannot assure you that
a creditor or shareholder will not file a petition with the United States Court which, if successful, may result in our liquidation being
subject to the supervision of that court. Such events might delay distribution of some or all of our assets to our public shareholders.
If
we are forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment
if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall
due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by our shareholders. Furthermore,
our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, thereby
exposing themselves and our company to claims, by paying public shareholders 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. We and our directors and officers who knowingly
and willfully authorized or permitted any distribution to be paid out of our share premium account while we were unable to pay our debts
as they fall due in the ordinary course of business would be guilty of an offense and may be liable to pay a fine and/or subject to imprisonment.
Holders
of warrants will not have redemption rights if we are unable to complete an initial business combination within the required time period.
If
we are unable to complete an initial business combination within the required time period and we redeem the funds held in the trust account,
the warrants will expire and holders will not receive any of such proceeds with respect to the warrants.
We
have no obligation to net cash settle the warrants.
In
no event will we have any obligation to net cash settle the warrants. Accordingly, the warrants may expire worthless.
If
we do not maintain a current and effective prospectus relating to the shares of common stock issuable upon exercise of the redeemable
warrants, holders will only be able to exercise such redeemable warrants on a “cashless basis” which would result in a fewer
number of shares being issued to the holder had such holder exercised the redeemable warrants for cash.
Except
as set forth below, if we do not maintain a current and effective prospectus relating to the shares of common stock issuable upon exercise
of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless
basis,” provided that an exemption from registration is available. As a result, the number of shares of common stock that a holder
will receive upon exercise of its warrants will be fewer than it would have been had such holder exercised its warrant for cash. Further,
if an exemption from registration is not available, holders would not be able to exercise their warrants on a cashless basis and would
only be able to exercise their warrants for cash if a current and effective prospectus relating to the shares of common stock issuable
upon exercise of the warrants is available. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet
these conditions and to maintain a current and effective prospectus relating to the shares of common stock issuable upon exercise of
the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so. If we are unable to do
so, the potential “upside” of the holder’s investment in our company may be reduced or the warrants may expire worthless.
Notwithstanding the foregoing, the warrants included in the placement units may be exercisable for unregistered shares of common stock
for cash even if the prospectus relating to the shares of common stock issuable upon exercise of the warrants is not current and effective.
An
investor will only be able to exercise warrants if the issuance of shares of common stock upon such exercise has been registered or qualified
or is deemed exempt under the securities laws of the state of residence of the holder of the warrants.
No
warrants will be exercisable for cash and we will not be obligated to issue shares of common stock unless the shares of common stock
issuable upon such exercise have been registered or qualified or deemed to be exempt under the securities laws of the state of residence
of the holder of the warrants. At the time that the warrants become exercisable, we expect to continue to be listed on a national securities
exchange, which would provide an exemption from registration in every state. However, we cannot assure you of this fact. If the shares
of common stock issuable upon exercise of the warrants are not qualified or exempt from qualification in the jurisdictions in which the
holders of the warrants reside, the warrants may be deprived of any value, the market for the warrants may be limited and they may expire
worthless if they cannot be sold.
Our
management’s ability to require holders of our redeemable warrants to exercise such redeemable warrants on a cashless basis will
cause holders to receive fewer shares of common stock upon their exercise of the redeemable warrants than they would have received had
they been able to exercise their redeemable warrants for cash.
If
we call our warrants for redemption after the redemption criteria described elsewhere in this report have been satisfied, our management
will have the option to require any holder that wishes to exercise his warrants (including any warrants held by our initial shareholders
or their permitted transferees) to do so on a “cashless basis.” If our management chooses to require holders to exercise
their warrants on a cashless basis, the number of shares of common stock received by a holder upon exercise will be fewer than it would
have been had such holder exercised his warrants for cash. This will have the effect of reducing the potential “upside” of
the holder’s investment in our company.
We
may amend the terms of the rights in a manner that may be adverse to holders with the approval by the holders of at least a majority
of the then outstanding rights.
Our
rights will be issued in registered form under a rights agreement between VStock Transfer LLC, as rights agent, and us. The rights agreement
provides that the terms of the rights may be amended without the consent of any holder to cure any ambiguity or correct any defective
provision. The rights agreement requires the approval by the holders of at least a majority of the then outstanding rights in order to
make any change that adversely affects the interests of the holders of the rights.
The
requirement 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 (less any deferred underwriting commissions and taxes payable on interest earned and less
any interest earned thereon that is released to us for taxes) at the time of the execution of a definitive agreement for our initial
business combination may limit the type and number of companies that we may complete such a business combination with.
Pursuant
to the Nasdaq listing rules, 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 (excluding any deferred underwriting discounts and commissions and taxes payable
on the income earned on the trust account and less any interest earned thereon that is released to us for our taxes) at the time of the
execution of a definitive agreement for our initial business combination. This restriction may limit the type and number of companies
with which we may complete a business combination. If we are unable to locate a target business or businesses that satisfy this fair
market value test, we may be forced to liquidate and you will only be entitled to receive your pro rata portion of the funds in
the trust account.
If
Nasdaq delists our securities from trading on its exchange, we would not be required to satisfy the fair market value requirement described
above and could complete a business combination with a target business having a fair market value substantially below 80% of the balance
in the trust account.
Our
ability to successfully effect a business combination and to be successful thereafter will be totally dependent upon the efforts of our
key personnel, some of whom may join us following a business combination. While we intend to closely scrutinize any individuals we engage
after a business combination, we cannot assure you that our assessment of these individuals will prove to be correct.
Our
ability to successfully effect a business combination is dependent upon the efforts of our key personnel. We believe that our success
depends on the continued service of our key personnel, at least until we have consummated our initial business combination. We cannot
assure you that any of our key personnel will remain with us for the immediate or foreseeable future. In addition, none of our officers
are required to commit any specified amount of time to our affairs and, accordingly, they will have conflicts of interest in allocating
management time among various business activities, including identifying potential business combinations and monitoring the related due
diligence. We do not have employment agreements with, or key-man insurance on the life of, any of our officers. The unexpected loss of
the services of our key personnel could have a detrimental effect on us.
The
role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain
with the target business in senior management or advisory positions following a business combination, it is likely that some or all of
the management of the target business will remain in place or be hired after consummation of the business combination. While we intend
to closely scrutinize any individuals we engage after a business combination, we cannot assure you that our assessment of these individuals
will prove to be correct. These individuals may be unfamiliar with the requirements of operating a public company which could cause us
to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming
and could lead to various regulatory issues which may adversely affect our operations.
We
may not have sufficient funds to satisfy indemnification claims of our directors and officers.
We
have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have
agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against
the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i)
we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify
our officers and directors may discourage shareholders from bringing a lawsuit against our officers or directors for breach of their
fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and
directors, even though such an action, if successful, might otherwise benefit us and our shareholders. Furthermore, a shareholder’s
investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors
pursuant to these indemnification provisions.
Our
key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination.
These agreements may provide for them to receive compensation following a business combination and as a result, may cause them to have
conflicts of interest in determining whether a particular business combination is the most advantageous.
Our
key personnel will be able to remain with the company after the consummation of a business combination only if they are able to negotiate
employment or consulting agreements or other arrangements in connection with the business combination. Such negotiations would take place
simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the
form of cash payments and/or our securities for services they would render to the company after the consummation of the business combination.
The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business.
Our
officers and directors will allocate their time to other businesses thereby potentially limiting the amount of time they devote to our
affairs. This conflict of interest could have a negative impact on our ability to consummate our initial business combination.
Our
officers and directors are not required to commit their full time to our affairs, which could create a conflict of interest when allocating
their time between our operations and their other commitments. We presently expect each of our employees 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
our initial business combination. All of our officers and directors are engaged in several other business endeavors and are not obligated
to devote any specific number of hours to our affairs. If our officers’ and directors’ other business affairs require them
to devote more substantial amounts of time to such affairs, it could limit their ability to devote time to our affairs and could have
a negative impact on our ability to consummate our initial business combination. We cannot assure you these conflicts will be resolved
in our favor.
Our
officers and directors have pre-existing fiduciary and contractual obligations and accordingly, may have conflicts of interest in determining
to which entity a particular business opportunity should be presented.
Our
officers and directors have pre-existing fiduciary and contractual obligations to other companies, including other companies that are
engaged in business activities similar to those intended to be conducted by us. Accordingly, they may participate in transactions and
have obligations that may be in conflict or competition with our consummation of our initial business combination. As a result, a potential
target business may be presented by our management team to another entity prior to its presentation to us and we may not be afforded
the opportunity to engage in a transaction with such target business.
Our
officers’ and directors’ personal and financial interests may influence their motivation in determining whether a particular
target business is appropriate for a business combination.
Our
officers and directors have waived their right to convert (or sell to us in any tender offer) their insider shares or any other shares
of common stock acquired in the Initial Public Offering or thereafter (although none of these insiders have indicated any intention to purchase units), or to receive distributions with respect to their insider shares or placement units upon our liquidation
if we are unable to consummate our initial business combination. Our sponsor, which is affiliated with certain of our officers, has also
waived its right to convert (or sell to us in any tender offer) any shares of common stock acquired in the Initial Public Offering or thereafter (although
it has not indicated any intention to purchase units), or to receive distributions with respect to their
shares upon our liquidation if we are unable to consummate our initial business combination. Accordingly, these securities will be worthless
if we do not consummate our initial business combination. In addition, our officers and directors may loan funds to us after the Initial Public Offering
and may be owed reimbursement for expenses incurred in connection with certain activities on our behalf which would only be repaid if
we complete an initial business combination. The personal and financial interests of our directors and officers may influence their motivation
in timely identifying and selecting a target business and completing a business combination, subject to their fiduciary duties under
United States law. Consequently, our directors’ and officers’ discretion in identifying and selecting a suitable target business
may result in a conflict of interest when determining whether the terms, conditions and timing of a particular business combination are
appropriate and in our shareholders’ best interest. If this were the case, it would be a breach of their fiduciary duties to us
as a matter of United States law and we might have a claim against such individuals. However, we might not ultimately be successful in
any claim we may make against them for such reason.
The
representative may have a conflict of interest if they render services to us in connection with our initial business combination.
We
may elect to engage EF Hutton, division of Benchmark Investments, LLC, formerly known as Kingswood Capital Markets, division of Benchmark
Investments, LLC (who is the representative of the underwriters of the Initial Public Offering) to assist us in connection with our initial business
combination. A portion (3.5%) of the representatives’ discounts and commissions is not payable unless the Company completes its
initial business combination. Therefore, if the representative provides services to us in connection with our initial business combination,
these financial interests may result in the representative having a conflict of interest when providing such services to us.
Nasdaq
may delist our securities from trading on its exchange which could limit investors’ ability to make transactions in our securities
and subject us to additional trading restrictions.
In
connection with our initial business combination, it is likely that Nasdaq will require us to file a new initial listing application
and meet its initial listing requirements as opposed to its more lenient continued listing requirements. We cannot assure you that we
will be able to meet those initial listing requirements at that time.
If
Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:
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a
limited availability of market quotations for our securities; |
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reduced
liquidity with respect to our securities; |
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a
determination that our shares of common stock are “penny stock” which will require brokers trading in our shares of common
stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market
for our shares of common stock; |
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a
limited amount of news and analyst coverage for our company; and |
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a
decreased ability to issue additional securities or obtain additional financing in the future. |
We
may only be able to complete one business combination with the proceeds of the Initial Public Offering, which will cause us to be solely dependent
on a single business which may have a limited number of products or services.
We
may only be able to complete one business combination with the proceeds of the Initial Public Offering. By consummating a business combination with
only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further,
we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other
entities which may have the resources to complete several business combinations in different industries or different areas of a single
industry. Accordingly, the prospects for our success may be:
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solely
dependent upon the performance of a single business, or |
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dependent
upon the development or market acceptance of a single or limited number of products, processes or services. |
This
lack of diversification may 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.
Alternatively,
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 business combinations,
which may make it more difficult for us, and delay our ability, to complete the business combination. With multiple business combinations,
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. If we are unable to adequately address these risks,
it could negatively impact our profitability and results of operations.
If
we seek shareholder approval of our initial business combination, our initial shareholders have agreed to vote in favor of such initial
business combination, regardless of how our public shareholders vote.
Pursuant
to certain letter agreements with us, our initial shareholders and the representative have agreed to vote their shares, including any
shares they may acquire during or after the Initial Public Offering (including in open market and privately negotiated transactions), in favor of our
initial business combination. As a result, in addition to our initial shareholders’ shares, we would need only 468,751, or 6.25%,
of the shares sold in the Initial Public Offering to be voted in favor of an initial business combination (assuming all outstanding shares are voted)
in order to have our initial business combination approved (assuming the over-allotment option is not exercised). Accordingly, if we
seek shareholder approval of our initial business combination, the agreement by our initial shareholders and the representative to vote
in favor of our initial business combination will increase the likelihood that we will receive the requisite shareholder approval for
such initial business combination.
In
connection with any meeting held to approve an initial business combination, we will offer each public shareholder the option to vote
in favor of a proposed business combination and still seek conversion of his, her or its public shares, which may make it more likely
that we will consummate a business combination.
In
connection with any meeting held to approve an initial business combination, we will offer each public shareholder the right to have
his, her or its public shares converted to cash (subject to the limitations described elsewhere in report) regardless of whether such
shareholder votes for or against such proposed business combination. Furthermore, we will consummate our initial business combination
only if we have net tangible assets of at least $5,000,001 upon such consummation and an ordinary resolution under US law, which requires
the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company will be required to approve
the business combination. Accordingly, public shareholders may exercise their conversion rights and we could still consummate a proposed
business combination so long as a majority of shares voted at the meeting are voted in favor of the proposed business combination. This
is different than other similarly structured blank check companies where shareholders are offered the right to convert their shares only
when they vote against a proposed business combination. This is also different than other similarly structured blank check companies
where there is a specific number of shares sold in the offering which must not exercise conversion rights for the company to complete
a business combination. The lack of such a threshold and the ability to seek conversion while voting in favor of a proposed business
combination may make it more likely that we will consummate our initial business combination.
In
connection with any shareholder meeting called to approve a proposed initial business combination, we may require shareholders who wish
to convert their public shares to comply with specific requirements for conversion that may make it more difficult for them to exercise
their conversion rights prior to the deadline for exercising their rights.
In
connection with any shareholder meeting called to approve a proposed initial business combination, each public shareholder will have
the right, regardless of whether it is voting for or against such proposed business combination, to demand that we convert its public
shares into a share of the trust account. Such conversion will be effectuated under US law and our certificate of incorporation as a
redemption of the shares, with the redemption price to be paid being the applicable pro rata portion of the monies held in the
trust account. We may require public shareholders who wish to convert their public shares in connection with a proposed business combination
to either tender their certificates (if any) to our transfer agent or to deliver their shares to the transfer agent electronically using
the Depository Trust Company’s (“DTC”) DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option,
at any time at or prior to the vote taken at the shareholder meeting relating to such business combination. In order to obtain a physical
share certificate, a shareholder’s broker and/or clearing broker, DTC and our transfer agent will need to act to facilitate this
request. It is our understanding that shareholders should generally allot at least two weeks to obtain physical certificates from the
transfer agent. However, because we do not have any control over this process or over the brokers or DTC, it may take significantly longer
than two weeks to obtain a physical share certificate. It is also our understanding that it takes a short time to deliver shares through
the DWAC System. However, this too may not be the case. Accordingly, if it takes longer than we anticipate for shareholders to deliver
their shares, shareholders who wish to convert may be unable to meet the deadline for exercising their conversion rights and thus may
be unable to convert their shares.
Investors
may not have sufficient time to comply with the delivery requirements for conversion.
Pursuant
to our certificate of incorporation, we are required to give a minimum of only ten days’ notice for each general meeting. As a
result, if we require public shareholders who wish to convert their public shares into the right to receive a pro rata portion
of the funds in the trust account to comply with specific delivery requirements for conversion, 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.
If
we require public shareholders who wish to convert their public shares to comply with the delivery requirements for conversion, such
converting shareholders may be unable to sell their securities when they wish to in the event that the proposed business combination
is not approved.
If
we require public shareholders who wish to convert their public shares to comply with specific delivery requirements for conversion described
above and such proposed business combination is not consummated, we will promptly return such certificates to the tendering public shareholders.
Accordingly, investors who attempted to convert their shares in such a circumstance will be unable to sell their securities after the
failed acquisition until we have returned their securities to them. The market price for our shares may decline during this time and
you may not be able to sell your securities when you wish to, even while other shareholders that did not seek conversion may be able
to sell their securities.
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.
In
connection with our initial business combination, we may issue shares to investors in private placement transactions (so-called PIPE
transactions) at a price of $10.00 per share or which approximates the per-share amounts in our trust account at such time. The purpose
of such issuances will be to enable us to provide sufficient liquidity to the post-business combination entity. The price of the shares
we issue may therefore be less, and potentially significantly less, than the market price for our shares at such time.
As
the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may
be more competition for attractive targets. This could increase the cost of our initial business combination and could even result in
our inability to find a target or to consummate an initial business combination.
In
recent years and especially in the last several months, the number of SPACs that have been formed has increased substantially. Many potential
targets for SPACs have already entered into an initial business combination, and there are still many SPACs seeking targets for their
initial business combination, as well as many such companies currently in registration. As a result, at times, fewer attractive targets
may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an initial
business combination.
In
addition, because there are more SPACs seeking to enter into an initial business combination with available targets, the competition
for available targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved
financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical
tensions, or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination.
This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an initial business combination,
and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
Unlike
some other similarly structured special purpose acquisition companies, our initial stockholders will receive additional shares of Class
A common stock if we issue certain shares to consummate an initial business combination.
The
founder shares will automatically convert into shares of Class A common stock upon the consummation of our initial business combination
on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and
subject to further adjustment as provided herein. In the case that additional shares of Class A common stock or equity-linked securities
are issued or deemed issued in connection with our initial public offering, the number of shares of Class A common stock issuable upon
conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class A
common stock outstanding after such deemed issuance (excluding the placement units and underlying securities).
Subsequent
to our completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment
or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our
securities, which could cause you to lose some or all of your investment.
Even
if we conduct due diligence on a target business with which we combine, this diligence might not identify all material issues that may
be present within a particular target business, that it would be possible to uncover all material issues through a customary amount of
due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors,
we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could
result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously
known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash
items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative
market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants
to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining debt financing
to partially finance the initial business combination or thereafter. Accordingly, any shareholders or warrant holders who choose to remain
shareholders or warrant holders following the business combination could suffer a reduction in the value of their securities. Such shareholders
or warrant holders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction
was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully
bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the business
combination contained an actionable material misstatement or material omission.
We
may only be able to complete one business combination, which will cause us to be solely dependent on a single business which may have
a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.
We
may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within
a short period of time. However, we may not be able to effectuate our initial business combination with more than one target business
because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma
financial statements with the SEC that present operating results and the financial condition of several target businesses as if they
had been operated on a combined basis. By completing our initial business combination with only a single entity, our lack of diversification
may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations
or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete
several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success
may depend upon:
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the
performance of a single business, property or asset; or |
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the
development or market acceptance of a single or limited number of products, processes or services. |
This
lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial
adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.
We
may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of
at least a majority of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the
exercise period could be shortened and the number of shares of Class A common stock purchasable upon exercise of a warrant could be decreased,
all without your approval.
Our
warrants will be issued in registered form under a warrant agreement between Vstock Transfer LLC, as warrant agent, and us. The warrant
agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any
defective provision but requires the approval by the holders of at least a majority of the then outstanding public warrants to make any
change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the
public warrants in a manner adverse to a holder if holders of at least a majority of the then outstanding public warrants approve of
such amendment. Although our ability to amend the terms of the public warrants with the consent of at least a majority of the then outstanding
public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of
the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or
decrease the number of shares of Class A common stock purchasable upon exercise of a warrant.
Our
warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of
New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants,
which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
Our
warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating
in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New
York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction,
which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. There is uncertainty as to whether a court would enforce such exclusive
forum provision. Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Notwithstanding
the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by
the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive
forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and
to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the
forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District
Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall
be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection
with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service
of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign
action as agent for such warrant holder.
This
choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for
disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement
inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs
associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition
and results of operations and result in a diversion of the time and resources of our management and board of directors.
We
may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We
have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of
$0.01 per warrant, provided that the reported last sale price of our Class A 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
commencing once the warrants become exercisable and ending on the third trading day prior to the date on which we give proper notice
of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may not exercise
our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification
under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register
or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered
by us in the Initial Public Offering. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price
therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when
you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants
are called for redemption, is likely to be substantially less than the market value of your warrants. None of the private placement warrants
will be redeemable by us so long as they are held by the sponsor or its permitted transferees.
If
we are deemed to be an investment company, we may be required to institute burdensome compliance requirements and our activities may
be restricted, which may make it difficult for us to complete a business combination.
A
company that, among other things, is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business
of investing, reinvesting, owning, trading or holding certain types of securities would be deemed an investment company under the Investment
Company Act of 1940. Since we will invest the proceeds held in the trust account only in United States government treasury bills, notes
or bonds having a maturity of 180 days or less or in money market funds meeting the applicable conditions under Rule 2a-7 promulgated
under the Investment Company Act of 1940 and that invest solely in United States treasuries, we believe that we will not be considered
to be an investment company pursuant to the exemption provided in Rule 3a-1 promulgated under the Investment Company Act of 1940.
If
we are nevertheless deemed to be an investment company under the Investment Company Act of 1940, we may be subject to certain restrictions
that may make it more difficult for us to complete a business combination, including:
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restrictions
on the nature of our investments; and |
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restrictions
on the issuance of securities. |
In
addition, we may have imposed upon us certain burdensome requirements, including:
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registration
as an investment company; |
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adoption
of a specific form of corporate structure; and |
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reporting,
record keeping, voting, proxy, compliance policies and procedures and disclosure requirements and other rules and regulations. |
Compliance
with these additional regulatory burdens would require additional expense that we have not provided for.
A
provision of our warrant agreement may make it more difficult for us to consummate an initial business combination.
Unlike
most blank check companies, if
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we
issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing
of our initial business combination at a Newly Issued Price of less than $9.20 per share; |
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the
aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available
for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions),
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the
Market Value is below $9.20 per share, |
then
the exercise price of the warrants will be adjusted to be equal to 115% of the greater of the Market Value and the Newly Issued Price,
and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market
Value and the Newly Issued Price. This may make it more difficult for us to consummate an initial business combination with a target
business.
Provisions
in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors
might be willing to pay in the future for our Class A common stock and could entrench management.
Our
amended and restated certificate of incorporation will contain provisions that may discourage unsolicited takeover proposals that stockholders
may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors
to designate the terms of and issue new series of preferred shares, which may make the removal of management more difficult and may discourage
transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We
are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions
may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over
prevailing market prices for our securities.
Our
amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought
in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and certain other
actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing
the suit will, subject to certain exceptions, be deemed to have consented to service of process on such stockholder’s counsel,
which may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.
Our
amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought
in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and certain other
actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing
the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which
the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the
Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days
following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery
or (C) for which the Court of Chancery does not have subject matter jurisdiction. Any person or entity purchasing or otherwise acquiring
any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and
restated certificate of incorporation. This choice of forum provision may limit or make more costly a stockholder’s ability to
bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or
stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision
contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional
costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Our
amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent
permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over
all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result,
the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other
claim for which the federal courts have exclusive jurisdiction. In addition, the exclusive forum provision will not apply to actions
brought under the Securities Act, or the rules and regulations thereunder.
We
may effect a business combination with a company located outside of the United States and if we do, we would be subject to a variety
of additional risks that may negatively impact our business operations and financial results.
If
we consummate a business combination with a target business located outside of the United States, we would be subject to any special
considerations or risks associated with companies operating in the target business’ governing jurisdiction, including any of the
following:
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rules
and regulations or currency redemption or corporate withholding taxes on individuals; |
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tariffs
and trade barriers; |
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regulations
related to customs and import/export matters; |
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longer
payment cycles than in the United States; |
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inflation; |
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economic
policies and market conditions; |
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unexpected
changes in regulatory requirements; |
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challenges
in managing and staffing international operations; |
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tax
issues, such as tax law changes and variations in tax laws as compared to the United States; |
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currency
fluctuations; |
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challenges
in collecting accounts receivable; |
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cultural
and language differences; |
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protection
of intellectual property; and |
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employment
regulations. |
We
cannot assure you that we would be able to adequately address these additional risks. If we were unable to do so, our operations might
suffer.
Our
search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially
adversely affected by the novel coronavirus (COVID-19) pandemic.
The
COVID-19 pandemic worldwide and resulting epidemic in the United States has resulted in a widespread health crisis that has adversely
affected the economy and financial markets, and the business of any potential target business with which we consummate a business combination
could be materially and adversely affected. We may be unable to complete a business combination if continued concerns relating to COVID-19
restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services
providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search
for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information
which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions
posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination,
or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
If
we effect a business combination with a company located outside of the United States, the laws applicable to such company will likely
govern all of our material agreements and we may not be able to enforce our legal rights.
If
we effect a business combination with a company located outside of the United States, the laws of the country in which such company operates
will govern almost all of the material agreements relating to its operations. We cannot assure you that the target business will be able
to enforce any of its material agreements or that remedies will be available in this new jurisdiction. The system of laws and the enforcement
of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The inability
to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities
or capital. Additionally, if we acquire a company located outside of the United States, it is likely that substantially all of our assets
would be located outside of the United States and some of our officers and directors might reside outside of the United States. As a
result, it may not be possible for investors in the United States to enforce their legal rights, to effect service of process upon our
directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our
directors and officers under Federal securities laws.
Compliance
with the Sarbanes-Oxley Act of 2002 will require substantial financial and management resources and may increase the time and costs of
completing an acquisition.
Section
404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our system of internal controls and may require us to have
such system audited by an independent registered public accounting firm. If we fail to maintain the adequacy of our internal controls,
we could be subject to regulatory scrutiny, civil or criminal penalties and/or shareholder litigation. Any inability to provide reliable
financial reports could harm our business. A target business may also not be in compliance with the provisions of the Sarbanes-Oxley
Act regarding the adequacy of 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. Furthermore, any failure to implement
required new or improved controls, or difficulties encountered in the implementation of adequate controls over our financial processes
and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal
controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the
trading price of our securities.
We
are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth
companies will make our securities less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth company” for
up to five years. However, if our non-convertible debt issued within a three-year period or revenues exceeds $1 billion, or the market
value of our shares of common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter
of any given fiscal year, or if we have total annual gross revenue of at least $1.07 billion in any given fiscal year, we would cease
to be an emerging growth company as of the following fiscal year. As an emerging growth company, we are not being required to comply
with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, we have reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements, and we are exempt from the requirements of holding a nonbinding
advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Additionally,
as an emerging growth company, we have elected to delay the adoption of new or revised accounting standards that have different effective
dates for public and private companies until those standards apply to private companies. As such, our financial statements may not be
comparable to companies that comply with public company effective dates. We cannot predict if investors will find our shares less attractive
because we may rely on these provisions. If some investors find our shares less attractive as a result, there may be a less active trading
market for our shares and our share price 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. We have 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, we, as an emerging growth company, will not adopt the new or revised standard until the time private companies are
required to adopt the new or revised standard. This may make comparison of our 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 accountant standards used.
If
our management following a business combination is unfamiliar with United States securities laws, they may have to expend time and resources
becoming familiar with such laws which could lead to various regulatory issues.
Following
a business combination, our management will likely resign from their positions as officers of the company and the management of the target
business at the time of the business combination will remain in place. We cannot assure you that management of the target business will
be familiar with United States securities laws. If new management is unfamiliar with our laws, they may have to expend time and resources
becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely
affect our operations.