ITEM 1. BUSINESS
General
Health Sciences Acquisitions Corporation 2 (“we,”
“us,” or “our”) is a blank check company incorporated on May 25, 2020 as a Cayman Islands exempted company.
We were incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization
or similar business combination with one or more businesses, which we refer to throughout this annual report as our initial business combination.
Although there is no restriction or limitation on what industry our target operates in, it is our intention to pursue prospective targets
that are focused on healthcare innovation. We anticipate targeting companies domiciled in North America or Europe that are developing
assets in the biopharma and medical technology sectors, which aligns with our management team’s experience in healthcare investing
and drug development.
Our Sponsor and Competitive Advantages
HSAC 2 Holdings, LLC, our sponsor (the “sponsor”),
is an affiliate of RTW Investments, LP, or RTW, a New York based financial firm managing approximately $8.7 billion of regulatory
assets under management, as of December 31, 2020. RTW was formed in 2009 by Roderick Wong, MD, and has garnered a reputation as a
leading capital provider to healthcare industry entrepreneurs and academic investigators due to its investment expertise, deep industry
relationships, benevolent activism, and long-standing track record.
Our management team is led by Dr. Roderick
Wong and Dr. Naveen Yalamanchi, Chief Investment Officer and Portfolio Manager of RTW, respectively. Drs. Wong and Yalamanchi have
more than 31 years of combined experience in healthcare investing. Dr. Wong’s specialization lies within the biopharma
area, and Dr. Yalamanchi’s focus lies within the medical technology sector, including, but not limited to, device and diagnostic
companies.
We believe that our company’s philosophical
alignment with RTW, and our ability to leverage the rigorous and comprehensive scientific and financial analysis that RTW is known for,
provides us with a strong competitive advantage. RTW focuses on identifying transformational innovations across the life sciences space,
specifically backing scientific programs that have the potential to disrupt the current standard of care in their respective disease areas.
RTW’s screening process has been honed by Dr. Wong throughout his over 15-year tenure as an investment management professional.
RTW invests in healthcare companies across the
public/private spectrum, supporting investments through multiple stages of their respective life cycles. To date, RTW has not only delivered
attractive financial returns to investors but has also successfully supported companies through the U.S. Food and Drug Administration,
or FDA, approval process and the commercialization of six commercially available drugs.
RTW is a full life-cycle investor and, as
such, recognizes the importance of providing growth capital along with the support of an experienced team, if and when needed, at any
critical inflection point in an asset’s life cycle. RTW has engaged in new company formations around licensing promising programs
from both biotechnology companies and academic institutions and pairing these programs with world-class management teams. An example
of this is Rocket Pharmaceuticals, Inc., or Rocket, a now publicly traded gene therapy platform company (listed on the Nasdaq Global Market
under the ticker symbol “RCKT”), where Dr. Wong serves as Chairman and Dr. Yalamanchi serves as a director. Rocket
has a pipeline of four clinical stage programs and one pre-clinical stage program, each identified through RTW’s proprietary
“data-first” screening process.
RTW has long-term trusted relationships it
can leverage for investment purposes. Since RTW’s inception, the firm has formed three publicly traded biopharma companies, sponsored
a special purpose acquisition company (Health Sciences Acquisitions Corporation), and listed a closed-ended fund on the Specialist
Fund Segment of the London Stock Exchange that trades under the ticker symbol “RTW”. Since 2015, RTW has met with more than
300 private companies and invested in more than 30 private transactions. The majority of RTW’s private investments since 2015 have
been as a lead or participant in financing rounds involving other active and well-connected investors in the biopharma and medical
technology sectors, illustrative of the value RTW places on syndicating deals with trusted co-investors whose interest align with
maximizing long-term value.
RTW’s team is comprised of 60 individuals,
over 40% of whom have medical or advanced scientific training and/or legal or investment banking experience, all of which enable a deeply
differentiated approach to research, idea generation, and deal execution. Complementing RTW’s outstanding scientific perspicacity
and industry relationships is RTW’s business team, whose members bring valuable experiences as a life sciences attorney, industry
operators, consultants and investment bankers, who are actively engaging with banks and academic institutions, sophisticated family offices
and institutional investors, while cultivating strong relationships and expanding our network of key contacts and syndicate partners.
We believe the well-roundedness of the team, strengthened by strong ties across industry, academia, banking platforms, and unaffiliated
investor relationships, will enhance our management team’s ability to source viable prospective target businesses, capitalize them,
and ensure public-market readiness.
We believe that our management team is equipped
with the knowledge, experience, capital and human resources, and sustainable corporate governance practices to pursue unique opportunities
that will offer attractive risk-adjusted returns. In addition, we know first-hand the burden placed on management teams of healthcare
companies while they are simultaneously trying to advance their programs and sell their vision to both investors and the board of directors.
We are prepared to shoulder some of this burden upfront, ultimately allowing our business combination partner to focus on creating value.
With respect to the foregoing examples, past performance
by our management team or RTW, including with respect to Health Sciences Acquisitions Corporation, is not a guarantee either (i) of success
with respect to any business combination we may consummate or (ii) that we will be able to identify a suitable candidate for our initial
business combination. You should not rely on the historical record of our management’s or RTW’s performance as indicative
of our future performance.
Our Experience with Special Purpose Acquisition Companies (“SPACs”)
RTW sponsored Health Sciences Acquisitions Corporation’s
(Nasdaq: HSAC) $115 million initial public offering in May 2019. In December 2019, HSAC completed its business combination
with Immunovant Sciences, Ltd. (“Immunovant”), a clinical-stage biopharmaceutical company focused on enabling normal
lives for patients with autoimmune diseases, and is now publicly listed on Nasdaq as Immunovant, Inc. (Nasdaq: IMVT). HSAC and the subsequent
business combination achieved several important milestones. HSAC closed its business combination with Immunovant 216 days after the
initial public offering. Moreover, the HSAC-Immunovant SPAC achieved an IRR of 106% for ordinary shares and warrant shareholders
from initial public offering to the closing of the business combination. Additionally, the business combination closed with zero redemptions
from shareholders. Dr. Wong served as President, Chief Executive Officer and Chairman of HSAC, Dr. Yalamanchi served as Executive
Vice President, Chief Financial Officer and a board member of HSAC, Alice Lee served as Vice President of Operations and as Secretary
and Treasurer of HSAC, and Stephanie Sirota served as Vice President of Corporate Strategy and Corporate Communications of HSAC.
Our Board of Directors and Management
Roderick Wong, MD, has served as our President
and Chief Executive Officer since June 2020 and as a member of our board of directors since our inception. Dr. Wong has more
than 16 years of healthcare investing experience. Since 2009, he has served as Managing Partner and Chief Investment Officer of RTW.
Prior to forming RTW, Dr. Wong was a Managing Director and sole Portfolio Manager for the Davidson Kempner Healthcare Funds. Prior
to joining Davidson Kempner, Dr. Wong held various healthcare investment and research roles at Sigma Capital Partners and Cowen &
Company. Dr. Wong served as Chairman of the board of directors of Health Sciences Acquisitions Corporation (“HSAC”) and
its Chief Executive Officer from January 2019 until December 2019. Other current and previous directorships include: Rocket
Pharmaceuticals, Inc., where he serves as Chairman, a position he has held since Rocket’s inception in July 2015; Attune Pharmaceuticals,
a portfolio company of RTW, where he has served as a director since June 2018; Landos Biopharma and Ji Xing Pharmaceuticals, portfolio
companies of RTW, where he has served as director since 2019, and NiKang Therapeutics, a portfolio company of RTW, where he has served
as a director since September 2020. Dr. Wong previously served on the board of directors of Penwest Pharmaceuticals in 2010 and Avidity
Biosciences from 2019 until August 2021. He simultaneously received an MD from the University of Pennsylvania Medical School and an MBA
from Harvard Business School, and graduated Phi Beta Kappa with a BS in Economics from Duke University.
Naveen Yalamanchi, MD, has served as our
Executive Vice President and Chief Financial Officer and as a member of our board of directors since June 2020. Dr. Yalamanchi
has more than 15 years of healthcare investment and research experience. Since 2015, Dr. Yalamanchi has been a Partner and Portfolio
Manager at RTW. Prior to joining RTW, Dr. Yalamanchi was Vice President and Co-Portfolio Manager at Calamos Arista Partners,
a subsidiary of Calamos Investments, a position he held from 2011 to 2015. Prior to joining Calamos Arista Partners, Dr. Yalamanchi
held various healthcare investment roles at Millennium Management and Davidson Kempner Capital Management, where he worked with Dr. Wong.
Dr. Yalamanchi graduated Phi Beta Kappa with a BS in Biology from the Massachusetts Institute of Technology and received an MD from
the Stanford University School of Medicine. He completed his surgical internship at UCLA Medical Center. Dr. Yalamanchi served as
Vice President and Chief Financial Officer of HSAC from January 2019 until December 2019 and as a director of HSAC from December
2018 until December 2019. Other prior and current directorships include: Rocket Pharmaceuticals, Inc., where he has served as
a director since Rocket’s inception in July 2015, and Ancora Heart and Magnolia Medical Technologies, portfolio companies of
RTW, where Dr. Yalamanchi serves as an observer to the board of directors.
Alice Lee, JD, has served as our Vice President
of Operations and as our Secretary and Treasurer since June 2020. Ms. Lee has served as RTW’s Senior Counsel since October 2017
and Chief Compliance Officer from February 2019 to February 2021 and has more than a decade of experience advising life sciences
companies in corporate and transactional matters. Prior to joining RTW, she most recently served as a senior associate in the Life Sciences
practice at Ropes & Gray LLP from 2015 to 2017. Prior to that, she worked in the Intellectual Property Transactions and Technology
practice at Sullivan & Cromwell LLP from 2010 to 2015, and she began her legal career in the Mergers & Acquisitions
practice at Cravath, Swaine & Moore LLP. Ms. Lee served as Vice President of Operations of HSAC from January 2019 until
December 2019. Ms. Lee received her law degree from Columbia Law School, where she served as a Senior Editor of Columbia Law
Review and was a Harlan Fiske Stone Scholar. She earned an MS from Stanford University in Computer Science (with an emphasis in Bioinformatics),
completed two years of pre-clinical coursework at the Stanford University School of Medicine, where she was an MD candidate, and
graduated Phi Beta Kappa and summa cum laude with a BA in Philosophy from Columbia University. Prior to law school, Ms. Lee worked
as a computational biologist at the H. Lee Moffitt Cancer Center & Research Institute at the University of South Florida and
co-authored “The promise of gene signatures in cancer diagnosis and prognosis” included in the Encyclopedia of Genetics,
Genomics, Proteomics and Bioinformatics and “Fundamentals of Cancer Genomics and Proteomics” included in Surgery: Basic Science
and Clinical Evidence. She also worked as a software development engineer intern at Amazon.com.
Stephanie A. Sirota has served as our Vice
President of Corporate Strategy and Corporate Communications since June 2020. Ms. Sirota has served as RTW’s Chief Business
Officer since 2012 and as a Partner since 2014. Ms. Sirota is responsible for strategy and oversight of RTW’s business development
and strategic partnerships with counterparties including limited partners, banks and academic institutions. She is also responsible for
shaping the firm’s governance policies underscoring impact and sustainability. Ms. Sirota has more than a decade of deal experience
in financial services. Prior to joining RTW, from 2006 to 2010, she served as a director at Valhalla Capital Advisors, a macro and commodity
investment manager. From 2000 to 2003, Ms. Sirota worked in the New York and London offices of Lehman Brothers, where she advised
on various mergers & acquisitions, IPOs, and capital market financing transactions with a focus on cross-border transactions
for the firm’s global corporate clients. She began her career on the Fixed Income trading desk at Lehman Brothers, structuring derivatives
for municipal issuers from 1997 to 1999. Ms. Sirota served as Vice President of Corporate Strategy of HSAC from January 2019
until December 2019. Other current directorships include RTW Venture Fund Limited (LSE: “RTW”), where Ms. Sirota
has served as a director since October 2019. Ms. Sirota graduated with honors from Columbia University and also received an
MS from the Columbia Graduate School of Journalism. She has contributed to Fortune Magazine and ABCNews.com. Ms. Sirota is a supporter
of the arts, science, and children’s initiatives. She serves as Co-Chairman of the Council of the Phil at the New York
Philharmonic. She also serves as President of RTW Charitable Foundation.
Pedro Granadillo has served as our
director since August 2020. Mr. Granadillo has nearly 50 years of biopharmaceutical industry experience with expertise in human resources,
manufacturing, quality control, and corporate governance. From 1970 until his retirement in 2004, Mr. Granadillo held multiple leadership
roles at Eli Lilly and Company, including Senior Vice President of Global Manufacturing and Human Resources and a member of the Executive
Committee. Mr. Granadillo currently serves on the board of directors of Rocket Pharmaceuticals, Inc., a position he has held since
January 2018. Mr. Granadillo has previously served on the boards of directors at Haemonetics Corporation from 2004 to 2019, Dendreon
Corporation, Nile Therapeutics and Noven Pharmaceuticals, as well as NPS Pharmaceuticals, which was sold to Shire for $5.2 billion
in 2015. Mr. Granadillo is also a co-founder and board member of Neumentum Pharmaceuticals, a private non opioid pain company.
Mr. Granadillo graduated from Purdue University with a Bachelor of Science in Industrial Engineering.
Carsten Boess has served as our director
since August 2020. Mr. Boess has served as a director for Rocket Pharmaceuticals, Inc. since January 2016, Avidity Biosciences since
April 2020, and Achilles Therapeutics since April 2020. Previously, Mr. Boess was the Executive Vice President of Corporate Affairs
at Kiniksa Pharmaceuticals, Ltd. from August 2015 until February 2020. Before Kiniksa, Mr. Boess was the Chief Financial Officer
at Alexion Pharmaceuticals from 2004 to 2005 and the Senior Vice President and Chief Financial Officer at Synageva BioPharma Corp. from
2011 until the company’s acquisition by Alexion Pharmaceuticals in 2015. Previously, Mr. Boess served in multiple roles with
increasing responsibility at Insulet Corporation, including Chief Financial Officer from 2006 to 2009 and Vice President of International
Operations from 2009 to 2011. Prior to that, Mr. Boess served as Executive Vice President of Finance at Serono Inc. from 2005 to
2006. In addition, he was a member of the Geneva-based World Wide Executive Finance Management Team while at Serono. Mr. Boess
also held several financial executive roles at Novozymes of North America and Novo Nordisk in France, Switzerland and China. During his
tenure at Novo Nordisk, he served on Novo Nordisk’s Global Finance Board. Mr. Boess received a Bachelor’s degree and
Master’s degree in Economics and Finance, specializing in Accounting and Finance from the University of Odense, Denmark.
Stuart Peltz, PhD, has served as our
director since August 2020. Dr. Peltz founded PTC Therapeutics in 1998 and has served as Chief Executive Officer and a member of the board
of directors since our inception. Prior to founding PTC, Dr. Peltz was a Professor in the Department of Molecular Genetics & Microbiology
at the Robert Wood Johnson Medical School, Rutgers University. Dr. Peltz currently serves as a director of the Biotechnology Industry
Organization (BIO) and serves on BIO’s Emerging Companies Section Governing Board. Dr. Peltz received a Ph.D. from the McArdle Laboratory
for Cancer Research at the University of Wisconsin.
Michael Brophy has served as our director
since August 2020. Mr. Brophy has served as the Chief Financial Officer of Natera since February 2017. Previously, Mr. Brophy
served as Natera’s Senior Vice President, Finance and Investor Relations since September 2016, and prior to that, as Vice President,
Corporate Development and Investor Relations since September 2015. Prior to joining Natera, Mr. Brophy served in the investment banking
division at Morgan Stanley and Deutsche Bank where he focused on advising corporate clients in the life science tools and diagnostics
sector. Mr. Brophy holds an MBA from the University of California, Los Angeles and a Bachelor of Science in Economics from the United
States Air Force Academy.
Acquisition Strategy
Our acquisition strategy is to identify an untapped
opportunity within our target industry and offer a public-ready business a facility through which to enter the public sphere accessing
capital markets and advancing its priorities. We believe that our management team’s and directors’ experiences in evaluating
assets through investing and company building will enable us to source the highest quality targets. Our selection process will leverage
the relationships of our management team with industry captains, leading venture capitalists, private equity and hedge fund managers,
respected peers, and our network of investment banking executives, attorneys, and accountants. Together with this network of trusted partners,
we intend to capitalize the target business and create purposeful strategic initiatives in order to achieve attractive growth and performance
targets.
We will focus on targeting companies in the most
innovative subsectors within the broader healthcare complex where emerging technologies in pharmaceuticals, biotechnology, and medical
technologies are engendering explosive growth in drug development.
Investment Criteria
We intend to focus on companies that possess under-researched and
underappreciated asset(s) poised for significant growth once adequately capitalized.
Consistent with our strategy, we have identified
the following criteria to evaluate prospective target businesses. Although we may decide to enter into our initial business combination
with a target business that does not meet the criteria described below, it is our intention to acquire companies that we believe:
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have a scientific or other competitive advantage in the markets; |
We intend to seek target companies
that have significant competitive advantages and underexploited expansion opportunities that can benefit from access to additional capital
as well as our industry relationships and expertise.
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are ready to be public, with strong management, corporate governance and reporting policies in place; ’ |
We will seek to identify companies
with strong and experienced public-ready management teams. Specifically, we will look for management teams that have a proven track
record of value creation for their shareholders. We will seek to partner with a potential target’s management team and expect that
the operating and investment abilities of our executive team and board will complement their own capabilities.
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will likely be well received by public investors and are expected to have good access to the public capital markets; |
We believe that there are a substantial
number of potential target businesses with appropriate valuations that can benefit from a public listing and new capital for growth to
support significant revenue and earnings growth or to advance clinical programs.
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have significant embedded and/or underexploited growth opportunities of which our team is uniquely positioned to identify and monetize; |
We intend to seek target companies
that have significant and underexploited expansion opportunities. This can be accomplished through a combination of accelerating organic
growth and finding attractive add-on acquisition targets. Our management team has significant experience in identifying such targets
and in helping target management assess the strategic and financial fit. Similarly, our management has the expertise to assess the likely
synergies and a process to help a target integrate acquisitions.
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exhibit unrecognized value or other characteristics that we believe have been misevaluated by the market; |
We will seek target companies which
exhibit value or other characteristics that we believe have been overlooked or misevaluated by the marketplace based on our company-specific analyses
and due diligence. For a potential target company, this process will include, among other things, a review and analysis of the company’s
capital structure, quality of current or future earnings, preclinical or clinical data, potential for operational improvements, corporate
governance, customers, and material contracts. We intend to leverage the operational experience and disciplined investment approach of
our team to identify opportunities to unlock value that our experience in complex situations allows us to pursue.
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will offer attractive risk-adjusted equity returns for our shareholders. |
We intend to seek to acquire a target
on terms and in a manner that leverage our experience. We expect to evaluate a company based on its potential to successfully achieve
regulatory approval and commercialize its product(s). We also expect to evaluate financial returns based on (i) risk-adjusted peak
sales potential, (ii) the growth potential of pipeline products and the scientific platform, (iii) the ability to accelerate
growth via other options, including through the opportunity for follow-on acquisitions, and (iv) the prospects for creating
value through other initiatives. Potential upside, for example, from the growth in the target business’s earnings or an improved
capital structure, will be weighed against any identified downside risks.
Competitive Strengths
We believe our competitive strengths to be the
following:
Status as a public company
We believe our structure will make us an attractive
business combination partner to target businesses. As an existing public company, we offer a target business an alternative to the traditional
initial public offering through a merger or other business combination. In this situation, the owners of the target business would exchange
their shares of stock, shares or other equity interests in the target business for shares of our shares or for a combination of shares
of our shares and cash, allowing us to tailor the consideration to the specific needs of the sellers. We believe target businesses might
find this method a more certain and cost-effective method to becoming a public company than the typical initial public offering.
In a typical initial public offering, there are additional expenses incurred in marketing, roadshow and public reporting efforts that
will likely not be present to the same extent in connection with a business combination with us. Furthermore, once the business combination
is consummated, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’
ability to complete the offering, as well as general market conditions that could prevent the offering from occurring. Once public, we
believe the target business would then have greater access to capital and an additional means of providing management incentives consistent
with shareholders’ interests than it would have as a privately held company. It can offer further benefits by augmenting a company’s
profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our status as a public company
will make us an attractive business partner, some potential target businesses may view the inherent limitations in our status as a blank
check company, such as our lack of an operating history and our requirements to seek shareholder approval of any proposed initial business
combination and provide holders of public shares the opportunity to convert their shares into cash from the trust account, as a deterrent
and may prefer to effect a business combination with a more established entity or with a private company.
Transaction flexibility
We offer a target business a variety of options
such as providing the owners of a target business with shares in a public company and a public means to sell such shares, providing cash
for shares, and providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing
its debt ratio. Because we are able to consummate our initial business combination using our cash, debt or equity securities, or a combination
of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid
to the target business to fit its needs and desires. However, since we have no specific business combination under consideration, we have
not taken any steps to secure third-party financing and it may not be available to us.
Competitive Weaknesses
We believe our competitive weaknesses to be the
following:
Limited financial resources
Our financial reserves are relatively
limited when contrasted with those of venture capital firms, leveraged buyout firms and operating businesses competing for acquisitions.
In addition, our financial resources could be reduced because of our obligation to convert shares held by our public shareholders as well
as any tender offer we conduct.
Limited technical and human resources
As a blank check company, we have limited
technical and human resources. Many venture capital funds, leveraged buyout firms and operating businesses possess greater technical and
human resources than we do and thus we may be at a disadvantage when competing with them for target businesses.
Delay associated with shareholder approval or tender offer
We may be required to seek shareholder
approval of our initial business combination. If we are not required to obtain shareholder approval of an initial business combination,
we will allow our shareholders to sell their shares to us pursuant to a tender offer. Both seeking shareholder approval and conducting
a tender offer will delay the consummation of our initial business combination. Other companies competing with us for acquisition opportunities
may not be subject to similar requirement or may be able to satisfy such requirements more quickly than we can. As a result, we may be
at a disadvantage in competing for these opportunities.
Effecting Our Initial Business Combination
General
We are not presently engaged in, and we will not
engage in, any substantive commercial business until we complete a business combination. We intend to utilize cash derived from the proceeds
of our initial public offering, our shares, debt or a combination of these in effecting our initial business combination. Our initial
business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital but
which desires to establish a public trading market for its shares. In the alternative, we may seek to consummate a business combination
with a company that may be financially unstable or in its early stages of development or growth. While we may seek to effect simultaneous
business combinations with more than one target business, we will probably have the ability, as a result of our limited resources, to
effect only a single business combination.
Sources of Target Businesses
We believe based on our management’s business
knowledge and past experience that there are numerous business combination candidates. We anticipate that target business candidates will
be brought to our attention from various unaffiliated sources, including investment bankers, venture capital funds, private equity funds,
leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses may be brought to our
attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce
us to target businesses in which they think we may be interested on an unsolicited basis. Our officers and directors, as well as their
affiliates, may also bring to our attention target business candidates that they become aware of through their business contacts as a
result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. We may engage professional
firms or other individuals that specialize in business acquisitions or mergers in the future, in which event we may pay a finder’s
fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction.
Except for the $10,000 per month administrative services fee paid to our sponsor, in no event will our initial shareholders or any of
the members of our management team be paid any finder’s fee, consulting fee or other compensation prior to, or for any services
they render in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it
is). We have no present intention to enter into a business combination with a target business that is affiliated with any of our initial
shareholders or director nominees. However, we are not restricted from entering into any such transactions and may do so if (1) such
transaction is approved by a majority of our disinterested and independent directors (if we have any at that time) and (2) we obtain
an opinion from an independent investment banking firm that the business combination is fair to our unaffiliated shareholders from a financial
point of view.
Selection of a Target Business and Structuring of Our Initial Business
Combination
Subject to our management team’s fiduciary
duties and the limitation that one or more target businesses have an aggregate fair market value of at least 80% of the value of the trust
account (excluding any deferred underwriter’s fees and taxes payable on the income earned on the trust account) at the time of the
execution of a definitive agreement for our initial business combination, as described below in more detail, our management will have
virtually unrestricted flexibility in identifying and selecting a prospective target business. Therefore, the fair market value of the
target business will be calculated prior to any conversions of our shares in connection with a business combination and therefore will
be a minimum of $128,000,000 in order to satisfy the 80% test. While the fair market value of the target business must satisfy the 80%
test, the consideration we pay the owners of the target business may be a combination of cash (whether cash from the trust account or
cash from a debt or equity financing transaction that closes concurrently with the business combination) or our equity securities. The
exact nature and amount of consideration would be determined based on negotiations with the target business, although we will attempt
to primarily use our equity as transaction consideration. There is no limitation on our ability to raise funds privately or through loans
in connection with our initial business combination. We have not established any specific attributes or criteria (financial or otherwise)
for prospective target businesses.
To the extent we effect our initial business combination
with a financially unstable company or an entity in its early stage of development or growth, including entities without established records
of sales or earnings, we may be affected by numerous risks inherent in the business and operations of financially unstable and early stage
or potential emerging growth companies. Although our management will endeavor to evaluate the risks inherent in a particular target business,
we may not properly ascertain or assess all significant risk factors. In evaluating a prospective target business, our management may
consider a variety of factors, including one or more of the following:
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financial condition and results of operations; |
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brand recognition and potential; |
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return on equity or invested capital; |
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market capitalization or enterprise value; |
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experience and skill of management and availability of additional personnel; |
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stage of development of the products, processes or services; |
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existing distribution and potential for expansion; |
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degree of current or potential market acceptance of the products, processes or services; |
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proprietary aspects of products and the extent of intellectual property or other protection for products or formulas; |
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impact of regulation on the business; |
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regulatory environment of the industry; |
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costs associated with effecting the business combination; |
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industry leadership, sustainability of market share and attractiveness of market industries in which a target business participates; and |
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macro competitive dynamics in the industry within which the company competes. |
These criteria are not intended to be exhaustive.
Our management may not consider any of the above criteria in evaluating a prospective target business. The retention of our officers and
directors following the completion of any business combination will not be a material consideration in our evaluation of a prospective
target business.
Any evaluation relating to the merits of a particular
business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our
management in effecting a business combination consistent with our business objective. In evaluating a prospective target business, we
will conduct an extensive due diligence review which will encompass, among other things, meetings with incumbent management and inspection
of facilities, as well as review of financial and other information which is made available to us. This due diligence review will be conducted
either by our management or by unaffiliated third parties we may engage, although we have no current intention to engage any such third
parties.
The time and costs required to select and evaluate
a target business and to structure and complete our initial business combination remain to be determined. Any costs incurred with respect
to the identification and evaluation of a prospective target business with which a business combination is not ultimately completed will
result in a loss to us and reduce the amount of capital available to otherwise complete a business combination.
Fair Market Value of Target Business
Pursuant to Nasdaq listing rules, our initial
business combination must occur with one or more target businesses having an aggregate fair market value equal to at least 80% of the
value of the funds in the trust account (excluding any deferred underwriter’s fees and taxes payable on the income earned on the
trust account), which we refer to as the 80% test, at the time of the execution of a definitive agreement for our initial business combination,
although we may structure a business combination with one or more target businesses whose fair market value significantly exceeds 80%
of the trust account balance. Therefore, the fair market value of the target business will be calculated prior to any conversions of our
shares in connection with a business combination and therefore will be a minimum of $128,000,000 in order to satisfy the 80% test. While
the fair market value of the target business must satisfy the 80% test, the consideration we pay the owners of the target business may
be a combination of cash (whether cash from the trust account or cash from a debt or equity financing transaction that closes concurrently
with the business combination) or our equity securities. The exact nature and amount of consideration would be determined based on negotiations
with the target business, although we will attempt to primarily use our equity as transaction consideration. If our board is not able
to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment
banking firm with respect to the satisfaction of such criteria. We will also obtain a fairness opinion from an independent investment
banking firm before consummating a business combination with an entity affiliated with any of our officers, directors or initial shareholders.
If we are no longer listed on Nasdaq, we will not be required to satisfy the 80% test.
We currently anticipate structuring a business
combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure a business
combination where we merge directly with the target business or where we acquire less than 100% of such interests or assets of the target
business in order to meet certain objectives of the target management team or shareholders or for other reasons, but we will only complete
such business combination if the post-transaction company owns 50% or more of the outstanding voting securities of the target or
otherwise owns a controlling interest in the target 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”). Even if the post-transaction company owns
50% or more of the voting securities of the target, our shareholders prior to the business combination may collectively own a minority
interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction.
For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding
capital stock, shares or other equity interests of a target. In this case, we would acquire a 100% controlling interest in the target.
However, as a result of the issuance of a substantial number of new shares, our shareholders immediately prior to our initial business
combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100%
of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion
of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% test. In order to consummate such
an acquisition, we may issue a significant amount of our debt or equity securities to the sellers of such businesses and/or seek to raise
additional funds through a private offering of debt or equity securities. Since we have no specific business combination under consideration,
we have not entered into any such fund-raising arrangement and have no current intention of doing so. The fair market value of the
target will be determined by our board of directors based upon one or more standards generally accepted by the financial community (such
as actual and potential sales, earnings, cash flow and/or book value). If our board is not able to independently determine that the target
business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another
independent entity that commonly renders valuation opinions on the type of target business we are seeking to acquire, with respect to
the satisfaction of such criteria. We will not be required to obtain an opinion from an independent investment banking firm, or another
independent entity that commonly renders valuation opinions on the type of target business we are seeking to acquire, as to the fair market
value if our board of directors independently determines that the target business complies with the 80% threshold. However, if we seek
to consummate an initial business combination with an entity that is affiliated with any of our officers, directors or other initial shareholders
and are therefore required to obtain an opinion from an independent investment banking firm that the business combination is fair to our
unaffiliated shareholders from a financial point of view, we may ask that banking firm to opine on whether the target business met the
80% fair market value test. Nevertheless, we are not required to do so and could determine not to do so without consent of our shareholders.
Lack of Business Diversification
We expect to complete only a single business combination,
although this process may entail simultaneous business combinations with several operating businesses. Therefore, at least initially,
the prospects for our success may be entirely dependent upon the future performance of a single business operation. Unlike other entities
which may have the resources to complete several business combinations of entities operating in multiple industries or multiple areas
of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from the possible spreading
of risks or offsetting of losses. By consummating our initial business combination with only a single entity, our lack of diversification
may:
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subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination, and |
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result in our dependency upon the performance of a single operating business or the development or market acceptance of a single or limited number of products, processes or services. |
If we determine to simultaneously consummate our
initial business combination with 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 combinations, which may make
it more difficult for us, and delay our ability, to complete the business combination. With a business combination with several businesses,
we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence
investigations and the additional risks associated with the subsequent assimilation of the operations and services or products of the
target companies in a single operating business.
Limited Ability to Evaluate the Target Business’ Management
Team
Although we intend to scrutinize the management
team of a prospective target business when evaluating the desirability of effecting our initial business combination, our assessment of
the target business’ management team may not prove to be correct. In addition, the future management team may not have the necessary
skills, qualifications or abilities to manage a public company. Furthermore, the future role of our officers and directors, if any, in
the target business following our initial business combination remains to be determined. While it is possible that some of our key personnel
will remain associated in senior management or advisory positions with us following our initial business combination, it is unlikely that
they will devote their full-time efforts to our affairs subsequent to our initial business combination. Moreover, they would only be able
to remain with the company after the consummation of our initial business combination if they are able to negotiate employment or consulting
agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the
business combination and could provide for them to receive compensation in the form of cash payments and/or our ordinary shares for services
they would render to the company after the consummation of the business combination. While the personal and financial interests of our
key personnel may influence their motivation in identifying and selecting a target business, their ability to remain with the company
after the consummation of our initial business combination will not be the determining factor in our decision as to whether or not we
will proceed with any potential business combination. Additionally, our officers and directors may not have significant experience or
knowledge relating to the operations of the particular target business.
Following our initial business combination, we
may seek to recruit additional managers to supplement the incumbent management of the target business. We may not have the ability to
recruit additional managers, or that any such additional managers we do recruit will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management.
Shareholder Approval of Business Combination
In connection with any proposed business combination,
we will either (1) seek shareholder approval of our initial business combination at a general meeting called for such purpose at
which public shareholders may seek to convert their public shares, regardless of whether they vote for or against the proposed business
combination, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable),
or (2) provide our public shareholders with the opportunity to sell their public shares to us by means of a tender offer (and thereby
avoid the need for a shareholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit
in the trust account (net of taxes payable), in each case subject to the limitations described herein. Notwithstanding the foregoing,
our initial shareholders have agreed, pursuant to written letter agreements with us, not to convert any public shares held by them into
their pro rata share of the aggregate amount then on deposit in the trust account. If we determine to engage in a tender
offer, such tender offer will be structured so that each shareholder may tender any or all of his, her or its public shares rather than
some pro rata portion of his, her or its shares. The decision as to whether we will seek shareholder approval of a proposed
business combination or will allow shareholders to sell their shares to us in a tender offer will be made by us based on a variety of
factors such as the timing of the transaction, whether the terms of the transaction would otherwise require us to seek shareholder approval
or whether we were deemed to be a foreign private issuer (which would require us to conduct a tender offer rather than seeking shareholder
approval under SEC rules). If we so choose and we are legally permitted to do so, we have the flexibility to avoid a shareholder vote
and allow our shareholders to sell their shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act which regulate
issuer tender offers. In that case, we will file tender offer documents with the SEC which will contain substantially the same financial
and other information about the initial business combination as is required under the SEC’s proxy rules. We will consummate our
initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, solely if we seek
shareholder approval, an ordinary resolution under Cayman Islands 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.
We chose our net tangible asset threshold of $5,000,001
to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act. However, if we seek to consummate an
initial business combination with a target business that imposes any type of working capital closing condition or requires us to have
a minimum amount of funds available from the trust account upon consummation of such initial business combination, our net tangible asset
threshold may limit our ability to consummate such initial business combination (as we may be required to have a lesser number of shares
converted or sold to us) and may force us to seek third party financing which may not be available on terms acceptable to us or at all.
As a result, we may not be able to consummate such initial business combination and we may not be able to locate another suitable target
within the applicable time period, if at all. Public shareholders may therefore have to wait August 6, 2022 in order to be able to receive
a pro rata share of the trust account.
Our initial shareholders and our officers and
directors have agreed (1) to vote any ordinary shares owned by them in favor of any proposed business combination, (2) not to
convert any ordinary shares in connection with a shareholder vote to approve a proposed initial business combination and (3) not
sell any ordinary shares in any tender in connection with a proposed initial business combination. As a result, if we sought shareholder
approval of a proposed transaction we could need as little as 632,501 of our public shares (or approximately 4.0% of our public shares)
to be voted in favor of the transaction in order to have such transaction approved.
If a shareholder vote is not required and we do
not decide to hold a shareholder vote for business or other legal reasons, we will provide our shareholders with an opportunity to tender
their shares to us pursuant to a tender offer pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate
issuer tender offers, and we will file tender offer documents with the SEC which will contain substantially the same financial and other
information about the initial business combination as is required under the SEC’s proxy rules.
In the event we allow shareholders to tender their
shares pursuant to the tender offer rules, our tender offer will remain open for at least 20 business days, in accordance with Rule 14e-1(a)
under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer
period. In addition, the tender offer will be conditioned on public shareholders not tendering more than a specified number of public
shares, which number will be based on the requirement that we may not purchase public shares in an amount that would cause our net tangible
assets to be less than $5,000,001 (so that we are not 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 our initial business combination. If public shareholders
tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
If, however, shareholder approval of the transaction
is required by law or Nasdaq requirements, or we decide to obtain shareholder approval for business or other legal reasons, we will:
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permit shareholders to convert their shares in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and |
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file proxy materials with the SEC. |
In the event that we seek shareholder approval
of our initial business combination, we will distribute proxy materials and, in connection therewith, provide shareholders with the conversion
rights described above upon completion of the initial business combination.
We will consummate our initial business combination
only if we have net tangible assets of at least $5,000,001 upon such consummation and, solely if we seek shareholder approval, an ordinary
resolution under Cayman Islands 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. We chose our net tangible asset threshold of $5,000,001 to
ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act. However, if we seek to consummate an initial
business combination with a target business that imposes any type of working capital closing condition or requires us to have a minimum
amount of funds available from the trust account upon consummation of such initial business combination, our net tangible asset threshold
may limit our ability to consummate such initial business combination (as we may be required to have a lesser number of shares converted)
and may force us to seek third-party financing which may not be available on terms acceptable to us or at all. As a result, we may
not be able to consummate such initial business combination and we may not be able to locate another suitable target within the applicable
time period, if at all. Public shareholders may therefore have to wait August 6, 2022 in order to be able to receive a portion of the
trust account.
Our initial shareholders, including our officers
and directors, have agreed (1) to vote any ordinary shares owned by them in favor of any proposed business combination, (2) not
to convert any ordinary shares into the right to receive cash from the trust account in connection with a shareholder vote to approve
a proposed initial business combination or a vote to amend the provisions of our memorandum and articles of association relating to shareholders’
rights or pre-business combination activity and (3) not to sell any ordinary shares in any tender in connection with a proposed
initial business combination.
Depending on how a business combination was structured,
any shareholder approval requirement could be satisfied by obtaining the approval of either (i) a majority of the ordinary shares
that were voted at the general meeting (assuming a quorum was present at the general meeting), or (ii) a majority of the outstanding
ordinary shares. Because our initial shareholders, including our officers and directors, collectively beneficially own approximately 20%
of our issued and outstanding ordinary shares, a minimum of approximately 632,501 public shares, or 4.0% of the outstanding ordinary shares,
would need to be voted in favor a business combination in order for it to be approved.
None of our initial shareholders or their affiliates
has indicated any intention to purchase ordinary shares from persons in the open market or in private transactions. However, if we seek
shareholder approval of a business combination and if we hold a meeting to approve a proposed business combination and a significant number
of shareholders vote, or indicate an intention to vote, against such proposed business combination, we or our initial shareholders or
their affiliates could make such purchases in the open market or in private transactions in order to influence the vote. However, they
have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any
such transactions. No funds from the trust account can be released from the trust account prior to the consummation of a business combination
to make such purchases (although such purchases could be made using funds available to us after the closing of a business combination).
We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the
Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers
determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
Notwithstanding the foregoing, we or our initial shareholders or their affiliates will not make purchases of ordinary shares if the purchases
would violate Sections 9(a)(2) or 10(b) of the Exchange Act or Regulation M, which are rules that prohibit manipulation of a company’s
stock, shares or other equity interests, and we and they will comply with Rule 10b-18 under the Exchange Act in connection with
any open-market purchases. If purchases cannot be made without violating applicable law, no such purchases will be made. The purpose
of such purchases would be to (i) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining
shareholder approval of the business combination or (ii) to satisfy a closing condition in an agreement with a target that requires
us to have a minimum net worth or a certain amount of cash at the closing of our business combination, where it appears that such requirement
would otherwise not be met. This may result in the completion of our business combination that may not otherwise have been possible. In
addition, if such purchases are made, the public “float” of our ordinary shares may be reduced and the number of beneficial
holders of our ordinary shares may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of
our ordinary shares on a national securities exchange. Our initial shareholders anticipate that they may identify the shareholders with
whom our initial shareholders or their affiliates may pursue privately negotiated purchases by either the shareholders contacting us directly
or by our receipt of redemption requests submitted by shareholders following our mailing of proxy materials in connection with our initial
business combination. To the extent that our initial shareholders or their affiliates enter into a private purchase, they would identify
and contact only potential selling shareholders who have expressed their election to redeem their shares for a pro rata share of the trust
account or vote against the business combination.
Conversion/Tender Rights
At any general meeting called to approve an initial
business combination, public shareholders may seek to convert their public shares, regardless of whether they vote for or against the
proposed business combination, into their pro rata share of the aggregate amount then on deposit in the trust account,
less any taxes then due but not yet paid. Notwithstanding the foregoing, our initial shareholders have agreed, pursuant to written letter
agreements with us, not to convert any public shares held by them into their pro rata share of the aggregate amount then
on deposit in the trust account. The conversion rights will be effected under our Amended and Restated Memorandum and Articles of Association
and Cayman Islands law as redemptions. If we hold a meeting to approve an initial business combination, a holder will always have the
ability to vote against a proposed business combination and not seek conversion of his shares.
Alternatively, if we engage in a tender offer,
each public shareholder will be provided the opportunity to sell his public shares to us in such tender offer. The tender offer rules
require us to hold the tender offer open for at least 20 business days. Accordingly, this is the minimum amount of time we would need
to provide holders to determine whether they want to sell their public shares to us in the tender offer or remain an investor in our company.
Our initial shareholders, officers and directors
will not have conversion rights with respect to any ordinary shares owned by them, directly or indirectly.
We may also require public shareholders, whether
they are a record holder or hold their shares in “street name,” to either tender their certificates (if any) to our transfer
agent or to deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal
At Custodian) System, at the holder’s option, at any time at or prior to the vote on the business combination. Once the shares are
converted by the holder, and effectively redeemed by us under Cayman Islands law, the transfer agent will then update our Register of
Members to reflect all conversions. The proxy solicitation materials that we will furnish to shareholders in connection with the vote
for any proposed business combination will indicate whether we are requiring shareholders to satisfy such delivery requirements. Accordingly,
a shareholder would have from the time our proxy statement is mailed through the vote on the business combination to deliver his, her
or its shares if he, she or it wishes to seek to exercise his conversion rights. Under our Amended and Restated Memorandum and Articles
of Association, we are required to provide at least 10 days’ advance notice of any general meeting, which would be the minimum
amount of time a shareholder would have to determine whether to exercise conversion rights. As a result, if we require public shareholders
who wish to convert their ordinary shares into the right to receive a pro rata portion of the funds in the trust account
to comply with the foregoing delivery requirements, holders may not have sufficient time to receive the notice and deliver their shares
for conversion. Accordingly, investors may not be able to exercise their conversion rights and may be forced to retain our ordinary shares
when they otherwise would not want to.
There is a nominal cost associated with this tendering
process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the
tendering broker $45 and it would be up to the broker whether or not to pass this cost on to the converting holder. However, this fee
would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to deliver shares is
a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event
we require shareholders seeking to exercise conversion rights to deliver their shares prior to the consummation of the proposed business
combination and the proposed business combination is not consummated, this may result in an increased cost to shareholders.
Any request to convert or tender such shares,
once made, may be withdrawn at any time up to the vote on the proposed business combination or expiration of the tender offer. Furthermore,
if a holder of a public share delivered his, her or its certificate in connection with an election of his, her or its conversion or tender
and subsequently decides prior to the vote on the business combination or the expiration of the tender offer not to elect to exercise
such rights, he, she or it may simply request that the transfer agent return the certificate (physically or electronically).
If the initial business combination is not approved
or completed for any reason, then our public shareholders who elected to exercise their conversion or tender rights would not be entitled
to convert their shares for the applicable pro rata share of the trust account. In such case, we will promptly return
any shares delivered by public holders.
Liquidation if No Business Combination
If we do not complete a business combination by
August 6, 2022, it will trigger our automatic winding up, liquidation and dissolution pursuant to the terms of our Amended and Restated
Memorandum and Articles of Association. As a result, this has the same effect as if we had formally gone through a voluntary liquidation
procedure under the Companies Law. Accordingly, no vote would be required from our shareholders to commence such a voluntary winding up,
liquidation and dissolution. At such time, the private warrants will expire and our sponsor will receive nothing upon a liquidation with
respect to such private warrants, and the private warrants will be worthless.
The amount in the trust account (less approximately
$1,600 representing the aggregate nominal par value of the shares of our public shareholders) under the Companies Law will be treated
as share premium which is distributable under the Companies Law, provided that immediately following the date on which the proposed distribution
is proposed to be made, we are able to pay our debts as they fall due in the ordinary course of business. If we are forced to liquidate
the trust account, we anticipate that we would distribute to our public shareholders the amount in the trust account calculated as of
the date that is two days prior to the distribution date (including any accrued interest). Prior to such distribution, we would be required
to assess all claims that may be potentially brought against us by our creditors for amounts they are actually owed and make provision
for such amounts, as creditors take priority over our public shareholders with respect to amounts that are owed to them. We cannot assure
you that we will properly assess all claims that may be potentially brought against us. As such, our shareholders could potentially be
liable for any claims of creditors to the extent of distributions received by them as an unlawful payment in the event we enter an insolvent
liquidation. Furthermore, while we will seek to have all vendors and service providers (which would include any third parties we engaged
to assist us in any way in connection with our search for a target business) and prospective target businesses execute agreements with
us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, there is no guarantee
that they will execute such agreements. Nor is there any guarantee that, even if such entities execute such agreements with us, they will
not seek recourse against the trust account or that a court would conclude that such agreements are legally enforceable.
Each of our initial shareholders and our sponsor
has agreed to waive its rights to participate in any liquidation of our trust account or other assets with respect to the insider shares
and private shares and to vote their insider shares and private shares in favor of any dissolution and plan of distribution which we submit
to a vote of shareholders. There will be no distribution from the trust account with respect to our private warrants, which will expire
worthless.
If we do not complete an initial business combination
and expend all of the proceeds of our initial public offering other than the proceeds deposited in the trust account, and without taking
into account interest, if any, earned on the trust account, the initial per-share distribution from the trust account would be $10.00.
The proceeds deposited in the trust account could,
however, become subject to the claims of our creditors, which would be prior to the claims of our public shareholders. Although we will
seek to have all vendors, including lenders for money borrowed, prospective target businesses or other entities we engage 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, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be
prevented from bringing claims against the trust account, including but not limited to, fraudulent inducement, breach of fiduciary responsibility
or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with
a claim against our assets, including the funds held in the trust account. If any third party refused to execute an agreement waiving
such claims to the monies held in the trust account, we would perform an analysis of the alternatives available to us if we chose not
to engage such third party and evaluate if such engagement would be in the best interest of our shareholders if such third party refused
to waive such claims. Examples of possible instances where we may engage a third party that refused to execute a waiver include the engagement
of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those
of other consultants that would agree to execute a waiver or in cases where management is unable to find a provider of required services
willing to provide the waiver. In any event, our management would perform an analysis of the alternatives available to it and would only
enter into an agreement with a third party that did not execute a waiver if management believed that such third party’s engagement
would be significantly more beneficial to us than any alternative. In addition, there is no guarantee that such entities will agree to
waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and
will not seek recourse against the trust account for any reason.
Our sponsor, HSAC 2 Holdings, LLC, has agreed
that, if we liquidate the trust account prior to the consummation of a business combination, it will be liable to pay debts and obligations
to target businesses or vendors or other entities that are owed money by us for services rendered or contracted for or products sold to
us, but only to the extent necessary to ensure that such debts or obligations do not reduce the amounts in the trust account and only
if such parties have not executed a waiver agreement. However, we cannot assure you that our sponsor will be able to satisfy those obligations
if it is required to do so. Accordingly, the actual per-share distribution could be less than $10.00 due to claims of creditors.
Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed,
the proceeds held in the trust account could be subject to applicable bankruptcy or insolvency 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 cannot assure you we will be able to return to our public shareholders at least $10.00 per ordinary share.
Potential Revisions to Agreements with our Initial Shareholders
Each of our initial shareholders has entered into
letter agreements with us pursuant to which each of them has agreed to do certain things relating to us and our activities prior to a
business combination. We could seek to amend these letter agreements without the approval of shareholders, although we have no intention
to do so. In particular:
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Restrictions relating to liquidating the trust account if we failed to consummate a business combination in the time frames specified above could be amended, but only if we allowed all shareholders to redeem their shares in connection with such amendment; |
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Restrictions relating to our initial shareholders being required to vote in favor of a business combination or against any amendments to our organizational documents could be amended to allow our initial shareholders to vote on a transaction as they wished; |
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The requirement of members of the management team to remain our officer or director until the closing of a business combination could be amended to allow persons to resign from their positions with us if, for example, the current management team was having difficulty locating a target business and another management team had a potential target business; |
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The restrictions on transfer of our ordinary shares could be amended to allow transfer to third parties who were not members of our original management team; |
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The obligation of our management team to not propose amendments to our organizational documents could be amended to allow them to propose such changes to our shareholders; |
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The obligation of our initial shareholders to not receive any compensation in connection with a business combination could be modified in order to allow them to receive such compensation; and |
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The requirement to obtain a valuation for any target business affiliated with our initial shareholders, in the event it was too expensive to do so. |
Except as specified above, shareholders would
not be required to be given the opportunity to redeem their shares in connection with such changes. Such changes could result in:
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Our initial shareholders being able to vote against a business combination or in favor of changes to our organizational documents; |
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Our operations being controlled by a new management team that our shareholders did not elect to invest with; |
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Our initial shareholders receiving compensation in connection with a business combination; and |
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Our initial shareholders closing a transaction with one of their affiliates without receiving an independent valuation of such business. |
We will not agree to any such changes unless we
believed that such changes were in the best interests of our shareholders (for example, if we believed such a modification were necessary
to complete a business combination). Each of our officers and directors has fiduciary obligations to us requiring that he or she act in
our best interests and the best interests of our shareholders.
Emerging Growth Company Status and Other Information
We are an emerging growth company as defined in
Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act
of 2012 (which we refer to herein as the JOBS Act). As such, we are eligible to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the
requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments
not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market
for our securities and the prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means
that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an
emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may
make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor
an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
We will remain an emerging growth company until
the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the IPO, (b) in which we have total
annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market
value of our ordinary shares that are held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we
have issued more than $1.0 billion in non-convertible debt during the prior three year period.
Competition
In identifying, evaluating and selecting a target
business, we may encounter intense competition from other entities having a business objective similar to ours. Many of these entities
are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many
of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited
when contrasted with those of many of these competitors. While we believe there may be numerous potential target businesses that we could
complete a business combination with utilizing the net proceeds of our initial public offering, our ability to compete in completing a
business combination with certain sizable target businesses may be limited by our available financial resources.
The following also may not be viewed favorably
by certain target businesses:
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our obligation to seek shareholder approval of our initial business combination or engage in a tender offer may delay the completion of a transaction; |
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our obligation to convert ordinary shares held by our public shareholders may reduce the resources available to us for our initial business combination; |
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our outstanding private warrants and the potential future dilution they represent; |
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our obligation to pay the deferred underwriting commission to Chardan Capital Markets, LLC upon consummation of our initial business combination; |
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our obligation to either repay working capital loans that may be made to us by our initial shareholders or their affiliates; |
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our obligation to register the resale of the insider shares, as well as the private shares and private warrants (and underlying securities) and any shares issued to our initial shareholders or their affiliates upon conversion of working capital loans; and |
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the impact on the target business’ assets as a result of unknown liabilities under the securities laws or otherwise depending on developments involving us prior to the consummation of a business combination. |
Any of these factors may place us at a competitive
disadvantage in successfully negotiating our initial business combination. Our management believes, however, that our status as a public
entity and potential access to the United States public equity markets may give us a competitive advantage over privately held entities
having a similar business objective as ours in connection with an initial business combination with a target business with significant
growth potential on favorable terms.
If we succeed in effecting our initial business
combination, there will be, in all likelihood, intense competition from competitors of the target business. Subsequent to our initial
business combination, we may not have the resources or ability to compete effectively.
Employees
We have four executive officers. These individuals
are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they deem necessary
to our affairs. The amount of time they will devote in any time period will vary based on whether a target business has been selected
for the business combination and the stage of the business combination process the company is in. Accordingly, once a suitable target
business to consummate our initial business combination with has been located, management will spend more time investigating such target
business and negotiating and processing the business combination (and consequently spend more time on our affairs) than had been spent
prior to locating a suitable target business. We presently expect our executive officers to devote an average of approximately 10 hours
per week to our business. We do not intend to have any full-time employees prior to the consummation of our initial business combination.