Item 1. Business.
Introduction
We are a blank check company formed
for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses, which we refer to throughout this annual report as our initial business combination.
We have reviewed a number of opportunities to enter into a business combination. We have neither engaged in any operations nor
generated any revenue to date. Based on our business activities, the Company is a “shell company” as defined under
the Exchange Act because we have no operations and nominal assets consisting almost entirely of cash.
Our executive offices are located
at 8556 Oakmont Lane, Indianapolis, IN 46260 and our telephone number is (317) 590-6959. Our corporate website address is novuscapitalcorporation.com.
Our website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by
reference in, and is not considered part of, this annual report. You should not rely on any such information in making your decision
whether to invest in our securities.
Company History
Novus Capital Corporation (the “Company”)
was incorporated in Delaware on March 5, 2020. The Company is a blank check company formed for the purpose of entering into
a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination
with one or more businesses or entities (the “business combination”).
The Company is an early stage and emerging
growth company and, as such, the Company is subject to all the risks associated with early stage and emerging growth companies.
In March 2020, we issued
an aggregate of 2,875,000 shares of our common stock, (the “founder shares”) for an aggregate purchase price of $25,000,
or approximately $0.01 per share, to our initial stockholders. In connection with the IPO, our initial stockholders forfeited 375,000
shares because the underwriters’ over-allotment option was not exercised. In March 2020, we also issued to designees
of EarlyBirdCapital, Inc. (“EarlyBirdCapital”), the representative of the underwriters of the IPO, an aggregate of
150,000 shares of common stock (the “representative shares”) at a price of $0.0001 per share.
The registration statement for the Company’s
IPO was declared effective on May 14, 2020. On May 19, 2020, the Company consummated the IPO of 10,000,000 units
(the “units” and, with respect to the shares of common stock included in the units sold, the “public shares”)
at $10.00 per unit, generating gross proceeds of $100,000,000.
Simultaneously with the closing of the IPO,
the Company consummated the sale of 3,250,000 warrants (the “private warrants”) at a price of $1.00 per private warrant
in a private placement to the Company’s founding stockholders (the “initial stockholders”) and EarlyBirdCapital
(together with the initial stockholders, the “founders”), generating gross proceeds of $3,250,000.
Following the closing of the IPO on May 19,
2020, an amount of $100,000,000 ($10.00 per unit) from the net proceeds of the sale of the units in the IPO and the sale of the
private warrants was placed in a trust account (the “trust account”) located in the United States, and invested in
U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended
(the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that
holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company
Act, as determined by the Company, until the earlier of: (i) the completion of a business combination or (ii) the distribution
of the trust account.
Transaction costs amounted to $2,456,726
consisting of $2,000,000 of underwriting fees and $456,726 of other offering costs.
Our activities since May 19, 2020, have
consisted of the search and evaluation of potential targets in contemplation of a business combination. All activity for the period
from March 5, 2020 (inception) through May 18, 2020 relates to the Company’s formation and the IPO, which is described
below. The Company will not generate any operating revenues until after the completion of a business combination, at the earliest.
The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO.
Proposed Business Combination
On September 28, 2020, Novus, Orga,
Inc., a wholly owned subsidiary of Novus, (“Merger Sub”) and AppHarvest, Inc. (“AppHarvest”) entered into
a business combination agreement (the “Business Combination Agreement”), pursuant to which Novus and AppHarvest will
consummate the business combination. The Business Combination Agreement contains customary representations and warranties, covenants,
closing conditions, termination fee provisions and other terms relating to the merger (the “Merger”) and the other
transactions contemplated thereby.
The Merger is to become effective by the
filing of a certificate of merger with the Secretary of State of the State of Delaware, in accordance with the relevant provisions
of the DGCL and mutually agreed by the parties, and will be effective immediately upon such filing or upon such later time as may
be agreed by the parties and specified in such certificate of merger (such time, “Effective Time”). The parties will
hold the closing of the Merger (the “Closing”) immediately prior to such filing of a certificate of merger, on the
“Closing Date.”
The Effective Time shall occur as promptly
as practicable but in no event later than three business day after the satisfaction or, if permissible, waiver of the conditions
to the completion of the business combination set forth in the Business Combination Agreement (other than those conditions that
by their nature are to be satisfied at Closing, provided that the occurrence of the Closing shall remain subject to the satisfaction
or, if permissible, waiver at the Closing).
Immediately prior to the Effective Time,
AppHarvest shall cause each share of AppHarvest preferred stock that is issued and outstanding immediately prior to the Effective
Time to be automatically converted into a number of shares of AppHarvest common stock at the then effective conversion rate as
calculated pursuant to AppHarvest’s amended and restated certificate of incorporation. All of the shares of AppHarvest preferred
stock converted into shares of AppHarvest common stock shall no longer be outstanding and shall cease to exist, and each holder
of AppHarvest preferred stock shall thereafter cease to have any rights with respect to such securities.
Immediately prior to the Effective Time,
Novus shall assume the AppHarvest interim period convertible notes with an aggregate principal balance of $30.0 million (the
“AppHarvest Interim Period Convertible Notes”) and cause the outstanding principal and unpaid accrued interest due
on such AppHarvest Interim Period Convertible Notes outstanding immediately prior to the Effective Time to be automatically converted
into a number of shares of our common stock at a purchase price of $9.50 per share, and such converted AppHarvest Interim Period
Convertible Notes will no longer be outstanding and will cease to exist. All of the AppHarvest Interim Period Convertible Notes
converted into shares of our common stock shall no longer be outstanding and shall cease to exist, any liens securing obligations
under the AppHarvest Interim Period Convertible Notes shall be released and each holder of AppHarvest Interim Period Convertible
Notes shall thereafter cease to have any rights with respect to such securities.
At the Effective Time, by virtue of the Merger
and without any action on the part of Novus, Merger Sub, AppHarvest or the holders of any of AppHarvest’s securities:
|
•
|
Each share of AppHarvest common stock issued and outstanding
immediately prior to the Effective Time (including shares of AppHarvest common stock resulting from the conversion of AppHarvest preferred
stock and shares of AppHarvest common stock subject to forfeiture restrictions or other restrictions issued pursuant to the AppHarvest,
Inc. 2018 Equity Incentive Plan (“2018 Plan”) or otherwise (each an “AppHarvest Restricted Share”) will be cancelled
and automatically converted into the right to receive the number of shares of our common stock equal to the exchange ratio provided for
in the Business Combination Agreement (the “Exchange Ratio”); provided, however, that each share of our common stock issued
in exchange for AppHarvest Restricted Shares shall be subject to the terms and conditions giving rise to a substantial risk of forfeiture
that applied to such AppHarvest Restricted Shares immediately prior to the Effective Time to the extent consistent with the terms of
such AppHarvest Restricted Shares.
|
|
•
|
All shares of AppHarvest common stock and AppHarvest preferred
stock held in the treasury of AppHarvest shall be canceled without any conversion thereof and no payment or distribution shall be made
with respect thereto.
|
|
•
|
Each share of Merger Sub common stock issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share
of common stock, par value $0.001 per share, of the surviving corporation.
|
|
•
|
Each AppHarvest option that is outstanding immediately prior
to the Effective Time, whether vested or unvested, shall be converted into an option to purchase a number of shares of our common stock
(such option, an “Exchanged Option”) equal to the product (rounded down to the nearest whole number) of (x) the number
of shares of AppHarvest common stock subject to such AppHarvest option immediately prior to the Effective Time and (y) the Exchange
Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such AppHarvest
option immediately prior to the Effective Time divided by (B) the Exchange Ratio.
|
|
•
|
Each award of outstanding restricted stock units to acquire
shares of AppHarvest common stock immediately prior to the Closing issued pursuant to an award granted under the 2018 Plan or otherwise
(each an “AppHarvest RSU”) that is outstanding immediately prior to the Effective Time shall be assumed by Novus and converted
into an award of restricted stock units to acquire shares of our common stock (each, a “Converted RSU Award”). Each
Converted RSU Award will represent the right to acquire that number of shares of our common stock equal to the product (rounded down
to the nearest whole number) of (1) the number of shares of AppHarvest common stock subject to the AppHarvest RSU award immediately
before the Effective Time and (2) the Exchange Ratio; provided, that, except as specifically provided above, following the Effective
Time, each Converted RSU Award shall continue to be governed by the same terms and conditions (including vesting terms) as were applicable
to the corresponding former AppHarvest RSU award immediately prior to the Effective Time.
|
|
•
|
No certificates or scrip or shares representing fractional shares
of our common stock shall be issued upon the exchange of AppHarvest common stock and such fractional share interests will not entitle
the owner thereof to vote or to have any rights of a stockholder of Novus or a holder of shares of our common stock. In lieu of any fractional
share of our common stock to which each holder of AppHarvest common stock would otherwise be entitled, the fractional share shall be
rounded up or down to the nearest whole share of our common stock, with a fraction of 0.5 rounded up. No cash settlements shall be made
with respect to fractional shares eliminated by rounding.
|
On
September 28, 2020, we executed Subscription Agreements with subscribers for the sale of an aggregate of 37,500,000 shares
of our common stock at a purchase price of $10.00 per share for aggregate gross proceeds of $375.0 million, in a private placement
(the “PIPE”). The closing of the PIPE will occur contemporaneously with the consummation of our proposed business combination.
We will receive net proceeds of $354.3 million from the PIPE.
Fair Market Value of Target Business
The Nasdaq rules require
that the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the
balance of the funds in the trust account (less any taxes payable on the interest earned on the trust account) at the time of the
execution of a definitive agreement for our initial business combination. Notwithstanding the foregoing, if we are not then listed
on the Nasdaq for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.
We currently anticipate
structuring a business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may,
however, structure our initial business combination where we merge directly with the target business or a newly formed subsidiary
or where we acquire less than 100% of such interests or assets of the target business in order to meet certain objectives of the
target management team or shareholders or for other reasons, but we will only complete such business combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even
if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to
the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed
to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial
number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we could acquire a 100% controlling
interest in the target; however, as a result of the issuance of a substantial number of new shares, our stockholders immediately
prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business
combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the
post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes
of the 80% of trust account balance test.
The fair market value
of the target will be determined by our board of directors based upon one or more standards generally accepted by the financial
community (such as actual and potential sales, earnings, cash flow and/or book value). The proxy solicitation materials or tender
offer documents used by us in connection with any proposed transaction will provide public stockholders with our analysis of the
fair market value of the target business, as well as the basis for our determinations. If our board is not able to independently
determine that the target business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent
investment banking firm, or another independent entity that commonly renders valuation opinions, with respect to the satisfaction
of such criteria. We will not be required to obtain an opinion from an investment banking firm as to the fair market value if our
board of directors independently determines that the target business complies with the 80% threshold.
Conversion Rights
At any meeting called
to approve an initial business combination, public stockholders may seek to convert their shares, regardless of whether they vote
for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then
on deposit in the trust account as of two business days prior to the consummation of the initial business combination, less any
taxes then due but not yet paid. Alternatively, we may provide our public stockholders with the opportunity to sell their shares
of our common stock to us through a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their
pro rata share of the aggregate amount then on deposit in the trust account, less any taxes then due but not yet paid.
Our initial stockholders
and our officers and directors will not have conversion rights with respect to any shares of common stock owned by them, directly
or indirectly. Additionally, the holders of the representative shares will not have conversion rights with respect to the representative
shares.
We may require public
stockholders, whether they are a record holder or hold their shares in “street name,” to either (i) tender their
certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically using Depository Trust
Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case prior to a date set forth
in the proxy materials sent in connection with the proposal to approve the business combination.
There is a nominal
cost associated with the above-referenced delivery process and the act of certificating the shares or delivering them through the
DWAC System. The transfer agent will typically charge the tendering broker a nominal amount and it would be up to the broker whether
or not to pass this cost on to the holder. However, this fee would be incurred regardless of whether or not we require holders
seeking to exercise conversion rights. The need to deliver shares is a requirement of exercising conversion rights regardless of
the timing of when such delivery must be effectuated. However, in the event we require stockholders seeking to exercise conversion
rights prior to the consummation of the proposed business combination and the proposed business combination is not consummated
this may result in an increased cost to stockholders.
Any proxy solicitation
materials we furnish to stockholders in connection with a vote for any proposed business combination will indicate whether we are
requiring stockholders to satisfy such certification and delivery requirements. Accordingly, a stockholder would have from the
time the stockholder received our proxy statement up until the vote on the proposal to approve the business combination to deliver
his shares if he wishes to seek to exercise his conversion rights. This time period varies depending on the specific facts of each
transaction. However, as the delivery process can be accomplished by the stockholder, whether or not he is a record holder or his
shares are held in “street name,” in a matter of hours by simply contacting the transfer agent or his broker and requesting
delivery of his shares through the DWAC System, we believe this time period is sufficient for an average investor. However, we
cannot assure you of this fact. Please see the risk factor titled “In connection with any stockholder meeting called to
approve a proposed initial business combination, we may require stockholders who wish to convert their shares in connection with
a proposed business combination 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” for further information on the risks
of failing to comply with these requirements.
Any request to convert
such shares once made, may be withdrawn at any time up to the vote on the proposed business combination or the expiration of the
tender offer. Furthermore, if a holder of public shares delivered his certificate in connection with an election of their conversion
and subsequently decides prior to the applicable date not to elect to exercise such rights, he may simply request that the transfer
agent return the certificate (physically or electronically).
If the initial business
combination is not approved or completed for any reason, then our public stockholders who elected to exercise their conversion
rights would not be entitled to convert their shares for the applicable pro rata share of the trust account. In such case, we will
promptly return any shares delivered by public holders.
Liquidation if No Business Combination
Our amended and restated
certificate of incorporation provides that we will have only 18 months from the closing of the IPO, or until November 19, 2021,
to complete an initial business combination. If we have not completed an initial business combination by such date, we will (i) cease
all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account, including any interest not previously released to us but net of taxes payable, divided by
the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board
of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable law.
Our initial stockholders,
officers and directors have agreed that they will not propose any amendment to our amended and restated certificate of incorporation
that would affect our public stockholders’ ability to convert or sell their shares to us in connection with a business combination
as described herein or affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete
a business combination by November 19, 2021 unless we provide our public stockholders with the opportunity to convert their shares
of common stock upon such approval at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
trust account, including interest not previously released to us but net of franchise and income taxes payable, divided by the number
of then outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment, whether
proposed by our initial stockholders, officers, directors or any other person.
Under the Delaware
General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions
received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption
of 100% of our outstanding public shares in the event we do not complete our initial business combination within the required time
period may be considered a liquidation distribution under Delaware law. If the corporation complies with certain procedures set
forth in Section 280 of the Delaware General Corporation Law intended to ensure that it makes reasonable provision for all
claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation,
a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any
liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is
limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and
any liability of the stockholder would be barred after the third anniversary of the dissolution. It is our intention to redeem
our public shares as soon as reasonably possible following our 18th month, and, therefore, we do not intend to
comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions
received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Furthermore, if the
pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public shares in
the event we do not complete our initial business combination within the required time period is not considered a liquidation distribution
under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware
General Corporation Law, the statute of limitations for claims of creditors could then be six years after the unlawful redemption
distribution, instead of three years, as in the case of a liquidation distribution.
Because we will not
be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation
Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and
pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a
blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses
to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective
target businesses.
We are required to
seek to have all third parties and any prospective target businesses enter into agreements with us waiving any right, title, interest
or claim of any kind they may have in or to any monies held in the trust account. As a result, the claims that could be made against
us will be limited, thereby lessening the likelihood that any claim would result in any liability extending to the trust. We therefore
believe that any necessary provision for creditors will be reduced and should not have a significant impact on our ability to distribute
the funds in the trust account to our public stockholders. Nevertheless, Marcum LLP, our independent registered public accounting
firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in the trust
account. Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses will execute
such agreements. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse against
the trust account. Vincent Donargo, our Chief Financial Officer, has agreed that he will be liable to ensure that the proceeds
in the trust account are not reduced below $10.00 per share by the claims of target businesses or claims of vendors or other entities
that are owed money by us for services rendered or contracted for or products sold to us, but we cannot assure you that he will
be able to satisfy his indemnification obligations if he is required to do so. We have not asked Mr. Donargo to reserve for
such indemnification obligations, nor have we independently verified whether Mr. Donargo has sufficient funds to satisfy its
indemnity obligations. Therefore, we cannot assure you that Mr. Donargo will be able to satisfy his indemnification obligations
if he is required to do so. Additionally, the agreement Mr. Donargo entered into specifically provides for two exceptions
to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor
or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may have in
or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of the IPO against
certain liabilities, including liabilities under the Securities Act. As a result, if we liquidate, the per-share distribution from
the trust account could be less than $10.00 due to claims or potential claims of creditors.
We anticipate notifying
the trustee of the trust account to begin liquidating such assets promptly after our 18th month and anticipate
it will take no more than ten business days to effectuate such distribution. The holders of the founder shares have waived their
rights to participate in any liquidation distribution from the trust account with respect to such shares. There will be no distribution
from the trust account with respect to our warrants, including the private warrants, which will expire worthless. We will pay the
costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are insufficient, Mr. Laikin
has contractually agreed to advance us the funds necessary to complete such liquidation (currently anticipated to be no more than
approximately $15,000) and has contractually agreed not to seek repayment for such expenses.
If we are unable to
complete an initial business combination and expend all of the net proceeds of the IPO, other than the proceeds deposited in the
trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption price would
be approximately $10.00 as of December 31, 2020. As discussed above, the proceeds deposited in the trust account could become subject
to claims of our creditors that are in preference to the claims of public stockholders.
Our public stockholders
shall be entitled to receive funds from the trust account only in the event of our failure to complete a business combination within
the required time period, if the stockholders seek to have us convert or purchase their respective shares upon a business combination
which is actually completed by us or upon certain amendments to our amended and restated certificate of incorporation prior to
consummating an initial business combination. In no other circumstances shall a stockholder have any right or interest of any kind
to or in the trust account.
If we are forced to
file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust
account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of
third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account,
we cannot assure you we will be able to return to our public stockholders at least $10.00 per share.
If we are forced to
file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received
by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer”
or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders promptly after 18
months from the closing of the IPO, or November 19, 2021, this may be viewed or interpreted as giving preference to our public
stockholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our board may
be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself
and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims
of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Amended and Restated Certificate
of Incorporation
Our amended and restated
certificate of incorporation contains certain requirements and restrictions that apply to us until the consummation of our initial
business combination. These provisions cannot be amended without the approval of a majority of our stockholders. If we seek to
amend any provisions of our amended and restated certificate of incorporation that would affect our public stockholders’
ability to convert or sell their shares to us in connection with a business combination as described herein or affect the substance
or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination within 18 months from
the closing of the IPO, or November 19, 2021, we will provide dissenting public stockholders with the opportunity to convert their
public shares in connection with any such vote. This conversion right shall apply in the event of the approval of any such amendment,
whether proposed by any officer, director or director nominee, or any other person. Our initial stockholders, officers and directors
have agreed to waive any conversion rights with respect to any founder shares and any public shares they may hold in connection
with any vote to amend our amended and restated certificate of incorporation. Specifically, our amended and restated certificate
of incorporation provides, among other things, that:
|
•
|
we shall either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein;
|
|
•
|
we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 immediately prior to or upon consummation of such business combination and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination;
|
|
•
|
if our initial business combination is not consummated within 18 months from the IPO, or November 19, 2021, then we will redeem all of the outstanding public shares and thereafter liquidate and dissolve our company;
|
|
•
|
upon the consummation of the IPO, $100.0 million was placed into the trust account;
|
|
•
|
we may not consummate any other business combination, merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction prior to our initial business combination; and
|
|
•
|
prior to our initial business combination, we may not issue additional stock that participates in any manner in the proceeds of the trust account, or that votes as a class with the common stock sold in the IPO on an initial business combination.
|
Certain Potential Conflicts of Interest Relating to Our Officers
and Directors
Our
officers and directors are, and may in the future become, affiliated with other companies. In order to minimize potential conflicts
of interest which may arise from such other corporate affiliations, each of our officers and directors has contractually agreed,
pursuant to a written agreement with us, until the earliest of our execution of a definitive agreement for a business combination,
our liquidation or such time as he ceases to be an officer or director, to present to our company for our consideration, prior
to presentation to any other entity, any suitable business opportunity which may reasonably be required to be presented to us,
subject to any fiduciary or contractual obligations he might have.
Our officers and directors
have agreed to present to us all target business opportunities that have a fair market value of at least 80% of the assets held
in the trust account, subject to any fiduciary or contractual obligations they have. As more fully discussed in “Management
— Conflicts of Interest,” if any of our officers or directors becomes aware of an initial business combination
opportunity that might be attractive to any entity to which he has fiduciary or contractual obligations, he may be required to
present such initial business combination opportunity to such entity prior to presenting such initial business combination opportunity
to us. For more information on the relevant fiduciary duties or contractual obligations of our management team, see the section
titled “Management — Conflicts of Interest.”
Indemnity
In connection with the Merger, Vincent
Donargo, the Chief Financial Officer of Novus, has agreed that he will be liable to Novus if and to the extent any claims by a
third party (other than Novus’s independent registered public accounting firm) for services rendered or products sold to
us, or a prospective target business with which Novus has discussed entering into a transaction agreement, reduce the amount of
funds in the trust account to below $10.00 per public share, except as to any claims by a third party who executed a waiver of
any and all rights to seek access to the trust account and except as to any claims under Novus’s indemnity of the underwriters
of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed
waiver is deemed to be unenforceable against a third party, Mr. Donargo, will not be responsible to the extent of any liability
for such third-party claims. Novus has not independently verified whether Mr. Donargo has sufficient funds to satisfy his
indemnity obligations and, therefore, Mr. Donargo may not be able to satisfy those obligations. Novus has not asked Mr. Donargo
to reserve for such obligations. As a result, if any such claims were successfully made against the trust account, the funds available
for Novus’s initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event,
Novus may not be able to complete its initial business combination, and its stockholders would receive such lesser amount per share
in connection with any redemption of their public shares. Except to the extent of Mr. Donargo’s indemnification obligations
described above, none of Novus’s officers or directors will indemnify Novus for claims by third parties including, without
limitation, claims by vendors and prospective target businesses.
Facilities
We
currently maintain our principal executive offices at 8556 Oakmont Lane, Indianapolis, IN 46260 which is provided to us by Robert
J. Laikin, our Chairman, for no fee. We consider our current office space, combined with the other office space otherwise available
to our executive officers, adequate for our current operations.
Employees
We have two 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 acquire has been located, management may spend more time investigating such target business and negotiating
and processing the business combination (and consequently spend more time on our affairs) than had been spent prior to locating
a suitable target business. We presently expect our executive officers to devote such amount of time as they reasonably believe
is necessary to our business. We do not intend to have any full-time employees prior to the consummation of an initial business
combination.
Periodic Reporting and Financial Information
Our units, common stock and
warrants are registered under the Exchange Act and we have reporting obligations, including the requirement that we file annual,
quarterly and current reports with the SEC. The SEC maintains an internet site at http://www.sec.gov that contains such
reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. In accordance
with the requirements of the Exchange Act, our annual reports contain financial statements audited and reported on by our independent
registered public accounting firm.
We will provide stockholders with
audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials
sent to shareholders to assist them in assessing the target business. These financial statements may be required to be prepared
in accordance with, or be reconciled to United States generally accepted accounting principles (“GAAP”) or international
financial reporting standards as promulgated by the international accounting standards board (“IFRS”), depending on
the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the
Public Company Accounting Oversight Board (“PCAOB”). These financial statement requirements may limit the pool of potential
target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose
such financial statements in accordance with federal proxy rules and complete our initial business combination within the completion
window. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will
be material.
We will be required to evaluate our
internal control procedures for the fiscal year ending December 31, 2020 as required by the Sarbanes-Oxley Act. Only in the
event we are deemed to be a large accelerated filer or an accelerated filer will we be required to have our internal control procedures
audited. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal
controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase
the time and costs necessary to complete any such acquisition.
We are an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by 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, reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the
JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a
class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that
apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out
of such extended transition period which means that when a standard is issued or revised and it has different application dates
for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with
another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using
the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Item 1A. Risk Factors.
An investment in our securities
involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information
contained in this annual report before making a decision to invest in our securities. If any of the following events occur, our
business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our
securities could decline, and you could lose all or part of your investment.
In addition to the risks and uncertainties
set forth below, we face certain material risks and uncertainties related to the business combination with AppHarvest. In addition,
if we succeed in effecting the proposed business combination, we will face additional and different risks and uncertainties related
to the business of AppHarvest. Such material risks will be set forth in the Registration Statement on Form S-4, as amended, that
we file with the SEC in connection with the meeting to be called to approve the proposed business combination.
We are a newly formed 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 newly formed 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 independent registered
public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue
as a “going concern.”
As
of December 31, 2020, we had $311,954 in cash and a working capital deficit of $2,606,959. Further, we have incurred and expect
to continue to incur significant costs in pursuit of our finance and acquisition plans. We cannot assure you that our plans
to raise capital or to consummate an initial business combination will be successful. These factors, among others, raise substantial
doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this annual report do not
include any adjustments that might result from our inability to continue as a going concern.
If we are unable to consummate a
business combination, our public stockholders may be forced to wait until November 19, 2021 before receiving distributions from
the trust account.
We
have 18 months from our IPO, or until November 19, 2021, in which to complete a business combination. We have no obligation to
return funds to stockholders prior to such date unless we consummate a business combination prior thereto and only then in cases
where stockholders have sought to convert or sell their shares to us. Only after the expiration of this full time period will public
security holders be entitled to distributions from the trust account if we are unable to complete a business combination. Accordingly,
stockholders’ funds may be unavailable to them until after such date and to liquidate your investment, public security holders
may be forced to sell their public shares or warrants, potentially at a loss.
Our public stockholders may not be
afforded an opportunity to vote on our proposed business combination.
We
will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which
public stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination
or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes
payable), or (2) provide our public stockholders with the opportunity to sell their shares to us by means of a tender offer
(and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on
deposit in the trust account (net of taxes payable), in each case subject to the limitations described elsewhere in this annual
report. Accordingly, it is possible that we will consummate our initial business combination even if holders of a majority of our
public shares do not approve of the business combination we consummate. The decision as to whether we will seek stockholder approval
of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us,
solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms
of the transaction would otherwise require us to seek stockholder approval. For instance, the Nasdaq rules currently allow
us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we
were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination.
Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding shares, we
would seek stockholder approval of such business combination instead of conducting a tender offer.
Our stockholders are not be entitled
to protections normally afforded to investors of blank check companies.
Since
the net proceeds of our IPO are intended to be used to complete a business combination with a target business that has not been
identified, we may be deemed to be a “blank check” company under the United States securities laws. However, since
we had net tangible assets in excess of $5,000,000 upon the consummation of our IPO and filed a Current Report on Form 8-K,
including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors
of blank check companies such as Rule 419. Accordingly, our stockholders will not be afforded the benefits or protections
of those rules which would, for example, completely restrict the transferability of our securities, require us to complete
a business combination within 18 months of the effective date of the initial registration statement and restrict the use of interest
earned on the funds held in the trust account. Because we are not subject to Rule 419, our securities will be immediately
tradable, we are entitled to withdraw amounts from the funds held in the trust account prior to the completion of a business combination.
If
we determine to change our acquisition criteria or guidelines, many of the disclosures contained in this annual
report would not be applicable and you would be investing in our company without any basis on which to evaluate the
potential target business we may acquire.
We
could seek to deviate from the acquisition criteria or guidelines disclosed in this annual report although we have no current intention
to do so. Accordingly, investors may be making an investment in our company without any basis on which to evaluate the potential
target business we may acquire. Regardless of whether or not we deviate from the acquisition criteria or guidelines in connection
with any proposed business combination, stockholders will always be given the opportunity to convert their shares or sell them
to us in a tender offer in connection with any proposed business combination as described in this annual report.
We may issue shares of our capital
stock or debt securities to complete a business combination, which would reduce the equity interest of our stockholders and likely
cause a change in control of our ownership.
Our
amended and restated certificate of incorporation authorizes the issuance of up to 30,000,000 shares of common stock, par value
$.0001 per share, and 1,000,000 shares of preferred stock, par value $.0001 per share. As of December 31, 2020, there are 4,100,000
authorized but unissued shares of common stock available for issuance (after appropriate reservation for the issuance of the shares
underlying the public and private warrants). The issuance of additional shares of common stock or preferred stock:
|
•
|
may significantly reduce the equity interest of our stockholders;
|
|
•
|
may subordinate the rights of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of common stock;
|
|
•
|
may cause a change in control if a substantial number of shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
|
|
•
|
may adversely affect prevailing market prices for our shares of common stock.
|
Similarly, if we issue
debt securities, it could result in:
|
•
|
default and foreclosure on our assets if our operating revenues after a business combination are insufficient to repay our debt obligations;
|
|
•
|
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
|
|
•
|
our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and
|
|
•
|
our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding.
|
If we incur indebtedness,
our lenders will not have a claim on the cash in the trust account and such indebtedness will not decrease the per-share conversion
amount in the trust account.
If the existing cash held out of
the trust account is insufficient to allow us to operate for at least the next 18 months, we may be unable to complete a business
combination.
As
of December 31, 2020, we have $311,954 of cash held outside of the trust account. If we use all of the funds held outside of the
trust account, we may not have sufficient funds available with which to structure, negotiate or close an initial business combination.
In such event, we would need to borrow funds from initial stockholders, officers or directors or their affiliates to operate or
may be forced to liquidate. Our initial stockholders, officers, directors and their affiliates may, but are not obligated to, loan
us funds, from time to time or at any time, in whatever amount that they deem reasonable in their sole discretion for our working
capital needs. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial
business combination, without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants
at a price of $1.00 per warrant.
If third parties bring claims against
us, the proceeds held in trust could be reduced and the per-share redemption price received by stockholders may be less than $10.00.
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 stockholders,
they may not execute such agreements. Furthermore, even if such entities execute such agreements with us, they may seek recourse
against 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 stockholders. If we are unable to complete a business combination
and distribute the proceeds held in trust to our public stockholders, Vincent Donargo, our Chief Financial Officer, has agreed
(subject to certain exceptions described elsewhere in this annual report) that he will be liable to ensure that the proceeds in
the trust account are not reduced below $10.00 per share by the claims of target businesses or claims of vendors or other
entities that are owed money by us for services rendered or contracted for or products sold to us. However, we have not asked Mr. Donargo
to reserve for such indemnification obligations, nor have we independently verified whether Mr. Donargo has sufficient funds
to satisfy its indemnity obligations. Therefore, we cannot assure you that Mr. Donargo will be able to satisfy his indemnification
obligations if he is required to do so. As a result, the per-share distribution from the trust account may be less than $10.00,
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, the proceeds
held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject
to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the
trust account, we may not be able to return to our public stockholders at least $10.00.
Our stockholders may be held liable
for claims by third parties against us to the extent of distributions received by them.
Our
amended and restated certificate of incorporation provides that we will continue in existence only until 18 months from the closing
of our IPO, or until November 19, 2021. If we have not completed a business combination by such date, we will (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account, including any interest not previously released to us but net of franchise and income taxes
payable, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and
(iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations
under Delaware law to provide for claims of creditors and the requirements of other applicable law. We cannot assure you that we
will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable
for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well
beyond the third anniversary of the date of distribution. Accordingly, we cannot assure you that third parties will not seek to
recover from our stockholders amounts owed to them by us.
If
we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions
received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential
transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received
by our stockholders. Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders
promptly after expiration of the time we have to complete an initial business combination, this may be viewed or interpreted as
giving preference to our public stockholders over any potential creditors with respect to access to or distributions from our assets.
Furthermore, our board may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith,
and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account
prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our directors may decide not to enforce
Mr. Donargo’s indemnification obligations, resulting in a reduction in the amount of funds in the trust account available
for distribution to our public stockholders.
In
the event that the proceeds in the trust account are reduced below $10.00 per public share and Mr. Donargo asserts that he
is unable to satisfy his obligations or that he has no indemnification obligations related to a particular claim, our independent
directors would determine whether to take legal action against Mr. Donargo to enforce such indemnification obligations. It
is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance.
If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account
available for distribution to our public stockholders may be reduced below $10.00 per share.
If we do not file and maintain a
current and effective prospectus relating to the common stock issuable upon exercise of the warrants, holders will only be able
to exercise such warrants on a “cashless basis.”
If
we do not file and maintain a current and effective prospectus relating to the 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 holders will
receive upon exercise of the warrants will be fewer than it would have been had such holder exercised his warrant for cash. Further,
if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be
able to exercise their warrants for cash if a current and effective prospectus relating to the 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 file and maintain a current and effective prospectus relating to the 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.
A stockholder will only be able to
exercise a warrant 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 and we will not be obligated to issue shares of common stock unless the shares of common stock issuable
upon such exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of residence
of the holder of the warrants. 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.
The private warrants may be exercised
at a time when the public warrants may not be exercised.
Once
the private warrants become exercisable, such warrants may immediately be exercised on a cashless basis, at the holder’s
option, so long as they are held by the initial purchasers or their permitted transferees. The public warrants, however, will only
be exercisable on a cashless basis at the option of the holders if we fail to register the shares issuable upon exercise of the
warrants under the Securities Act within 90 days following the closing of our initial business combination. Accordingly, it is
possible that the holders of the private warrants could exercise such warrants at a time when the holders of public warrants could
not.
We may amend the terms of the warrants
in a manner that may be adverse to holders with the approval by the holders of at least a majority of the then outstanding warrants.
Our
warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company,
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. The warrant agreement requires the approval by the holders of
at least a majority of the then outstanding warrants in order to make any change that adversely affects the interests of the registered
holders.
A provision of our warrant agreement
may make it more difficult for us to consummate an initial business combination.
If:
|
•
|
we issue additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of common stock,
|
|
•
|
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), and
|
|
•
|
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 higher of the Market Value and the price at which we issue the additional
shares of common stock or equity-linked securities. This may make it more difficult for us to consummate an initial business combination
with a target business.
Because we are not limited to any
particular industry, specific geographic location or any specific target businesses with which to pursue our initial business combination,
you will be unable to ascertain the merits or risks of any particular target business’ operations.
Although we intend
to focus on target businesses in the smart technology innovation markets, including the 5G communications, virtual reality, artificial
intelligence, cloud based technology, machine learning and digital logistics, distribution and storage sectors, we may pursue acquisition
opportunities in any business industry or sector or geographic location. Except for the limitations that a target business have
a fair market value of at least 80% of the value of the trust account (less any taxes payable on interest earned on the trust account)
and that we are not permitted to effectuate our initial business combination with another blank check company or similar company
with nominal operations, we will have virtually unrestricted flexibility in identifying and selecting a prospective acquisition
candidate. Because we have not yet identified or approached any specific target business with respect to our initial business combination,
there is no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations,
cash flows, liquidity, financial condition or prospects. To the extent we consummate our initial business combination, we may be
affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially
unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in
the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor
to evaluate the risks inherent in a particular target business, we may not properly ascertain or assess all of the significant
risk factors or we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our
control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
An investment in our units may not ultimately prove to be more favorable to investors than a direct investment, if such opportunity
were available, in an acquisition target.
Past performance by our management
team may not be indicative of future performance of an investment in the Company.
Information regarding
performance by, or businesses associated with, our management team and their affiliates is presented for informational purposes
only. Past performance by our management team is not a guarantee either (i) that we will be able to identify a suitable candidate
for our initial business combination or (ii) of success with respect to any business combination we may consummate. You should
not rely on the historical record of our management team’s performance as indicative of our future performance of an investment
in the company or the returns the company will, or is likely to, generate going forward.
We may seek acquisition opportunities
outside the smart technology innovation markets, which may be outside of our management’s areas of expertise.
We
may consider a business combination outside the smart technology innovation markets, which may be outside of our management’s
areas of expertise, if a business combination candidate is presented to us and we determine that such candidate offers an attractive
acquisition opportunity for our company. In the event we elect to pursue an acquisition outside of the areas of our management’s
expertise, our management’s expertise may not be directly applicable to its evaluation or operation, and the information
contained in this annual report regarding the areas of our management’s expertise
would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able
to adequately ascertain or assess all of the significant risk factors relevant to such acquisition. Accordingly, any stockholder
who chooses to remain a stockholder following our initial business combination could suffer a reduction in the value of their securities.
Such stockholders are unlikely to have a remedy for such reduction in value.
Although we identified general criteria
and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business
combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter
into our initial business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified
specific criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which
we enter into our initial business combination will not have all of these positive attributes. If we consummate our initial business
combination with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination
with a business that does meet all of our general criteria and guidelines. In addition, if we announce our initial business combination
with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption
rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum
net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by Nasdaq rules, or
we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain stockholder
approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we are
unable to complete our initial business combination, our public stockholders may only receive $10.00 per share (whether or not
the underwriters’ over-allotment option is exercised in full) or potentially less on our redemption, and our warrants will
expire worthless.
Management’s flexibility in
identifying and selecting a prospective acquisition candidate, along with our management’s financial interest in consummating
our initial business combination, may lead management to enter into an acquisition agreement that is not in the best interest of
our stockholders.
Subject to the requirement
that our initial business combination must be with one or more target businesses or assets having an aggregate fair market value
of at least 80% of the value of the trust account (less any taxes payable on interest earned on the trust account) at the time
of the agreement to enter into such initial business combination, we will have virtually unrestricted flexibility in identifying
and selecting a prospective acquisition candidate. Our security holders will be relying on management’s ability to identify
business combinations, evaluate their merits, conduct or monitor diligence and conduct negotiations. Management’s flexibility
in identifying and selecting a prospective acquisition candidate, along with management’s financial interest in consummating
our initial business combination, may lead management to enter into an acquisition agreement that is not in the best interest of
our stockholders.
We may seek acquisition opportunities
with an early stage company, a financially unstable business or an entity lacking an established record of revenue or earnings.
To the extent we complete
our initial business combination with an early stage company, a financially unstable business or an entity lacking an established
record of sales or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine.
These risks include investing in a business without a proven business model and with limited historical financial data, volatile
revenues or earnings, intense competition and difficulties in obtaining and retaining executive officers and directors. Although
our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to
properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore,
some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks
will adversely impact a target business.
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
recent coronavirus (COVID-19) outbreak.
In December 2019,
a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China
and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak
of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S.
Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare
community in responding to COVID-19. The COVID-19 pandemic has resulted in a widespread health crisis and is adversely affecting
the economies and financial markets in the U.S. and worldwide, and could adversely affect the business of any potential target
business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may
be unable to complete a business combination if continued concerns relating to COVID-19 continue restrict travel, continue
to 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.
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 is required to commit any specified amount of time to our affairs and, accordingly, our officers 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 after a business combination, however, cannot presently be ascertained. Although some of our key personnel
serve in senior management or advisory positions following a business combination, it is likely that most, if not all, of the management
of the target business will remain in place. 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.
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 appropriate 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 causing conflicts of interest in their determination as to how much time to devote to our
affairs. This could have a negative impact on our ability to consummate a business combination.
Our
officers and directors will not commit their full time to our affairs. We presently expect each of our officers and directors 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. The foregoing could have a negative impact on our ability to consummate
our initial business combination.
Our officers and directors may have
a conflict of interest in determining whether a particular target business is appropriate for a business combination.
Our
initial stockholders waived their right to convert their founder shares or any other shares purchased after the IPO, or to receive
distributions from the trust account with respect to their founder shares upon our liquidation if we are unable to consummate a
business combination. Accordingly, the founder shares, as well as the private warrants and any warrants purchased by our officers
or directors in the aftermarket, will be worthless if we do not consummate a 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 and in determining whether the terms, conditions and timing of a particular business combination are appropriate
and in our stockholders’ best interest.
Our officers and directors or their
affiliates have fiduciary and contractual obligations and may in the future become affiliated with other entities engaged in business
activities similar to those intended to be conducted by us. Accordingly, they may have conflicts of interest in determining to
which entity a particular business opportunity should be presented.
Our
officers and directors or their affiliates have fiduciary and contractual obligations to other companies. 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. Additionally, our officers
and directors may in the future become affiliated with entities that are engaged in a similar business, including another blank
check company that may have acquisition objectives that are similar to ours. Accordingly, they may have conflicts of interest in
determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor
and a potential target business may be presented to other entities prior to its presentation to us, subject to our officers’
and directors’ fiduciary duties under Delaware law. For a more detailed description of our officers’ and directors’
business affiliations and the potential conflicts of interest that you should be aware of, see the sections titled “Management
— Directors and Executive Officers” and “Management — Conflicts of Interest.”
EarlyBirdCapital may have a conflict
of interest in rendering services to us in connection with our initial business combination.
We
have engaged EarlyBirdCapital to assist us in connection with our initial business combination. We will pay EarlyBirdCapital a
cash fee for such services in an aggregate amount equal to up to 3.5% of the total gross proceeds raised in the offering only if
we consummate our initial business combination. The private warrants purchased by EarlyBirdCapital or its designees and the representative
shares will also be worthless if we do not consummate an initial business combination. These financial interests may result in
EarlyBirdCapital having a conflict of interest when providing the services to us in connection with an initial business combination.
Nasdaq may delist our securities
from quotation on its exchange which could limit securityholders’ ability to make transactions in our securities and subject
us to additional trading restrictions.
Our
securities are listed on Nasdaq, a national securities exchange. We cannot assure you that our securities will continue to be listed
on Nasdaq in the future prior to an initial business combination. Additionally, 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. Nasdaq will also have discretionary authority to not approve our listing if it determines that the listing
of the company to be acquired is against public policy at that time.
If
Nasdaq delists our securities from trading on its exchange, or we are not listed in connection with our initial business combination,
we could face significant material adverse consequences, including:
|
•
|
a limited availability of market quotations for our securities;
|
|
•
|
reduced liquidity with respect to our securities;
|
|
•
|
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;
|
|
•
|
a limited amount of news and analyst coverage for our company; and
|
|
•
|
a decreased ability to issue additional securities or obtain additional financing in the future.
|
|
|
|
The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating
the sale of certain securities, which are referred to as “covered securities.” Because we expect that our units and
eventually our common stock and warrants will be listed on Nasdaq, our units, common stock and warrants will be covered securities.
Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate
companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or
bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit
or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies
unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies
in their states. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be
subject to regulation in each state in which we offer 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 shares of common stock 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 $1.07 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, we would cease to be an emerging growth company as of the following fiscal year. As an
emerging growth company, we are not 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 stockholder 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 of common stock less attractive because we may rely on these
provisions. If some investors find our shares of common stock less attractive as a result, there may be a less active trading market
for our shares and our share price may be more volatile.
It is likely we will only be able
to complete one business combination with the cash held in our trust account, which will cause us to be solely dependent on a single
business which may have a limited number of products or services.
It
is likely we will consummate a business combination with a single target business, although we have the ability to simultaneously
acquire several target businesses. 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:
|
•
|
solely dependent upon the performance of a single business, or
|
|
•
|
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.
The ability of our stockholders to
exercise their conversion rights or sell their shares to us in a tender offer may not allow us to effectuate the most desirable
business combination or optimize our capital structure.
If
our business combination requires us to use substantially all of our cash to pay the purchase price, because we will not know how
many stockholders may exercise conversion rights or seek to sell their shares to us in a tender offer, we may either need to reserve
part of the trust account for possible payment upon such conversion, or we may need to arrange third party financing to help fund
our business combination. In the event that the acquisition involves the issuance of our stock as consideration, we may be required
to issue a higher percentage of our stock to make up for a shortfall in funds. Raising additional funds to cover any shortfall
may involve dilutive equity financing or incurring indebtedness at higher than desirable levels. This may limit our ability to
effectuate the most attractive business combination available to us.
In connection with any vote to approve
a business combination, we will offer each public stockholder the option to vote in favor of a proposed business combination and
still seek conversion of his, her or its shares.
In
connection with any vote to approve a business combination, we will offer each public stockholder (but not our initial stockholders,
officers or directors) the right to have his, her or its shares of common stock converted to cash (subject to the limitations described
elsewhere in this annual report) regardless of whether such stockholder votes for or against such proposed business combination
or does not vote at all. The ability to seek conversion while voting in favor of our proposed business combination may make it
more likely that we will consummate a business combination.
In connection with any stockholder
meeting called to approve a proposed initial business combination, we may require stockholders who wish to convert their shares
in connection with a proposed business combination 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 stockholder meeting called to approve a proposed initial business combination, each public stockholder will
have the right, regardless of whether he is voting for or against such proposed business combination or does not vote at all, to
demand that we convert his shares into a pro rata share of the trust account as of two business days prior to the consummation
of the initial business combination. We may require public stockholders who wish to convert their shares in connection with a proposed
business combination to either (i) tender their certificates to our transfer agent or (ii) deliver their shares to the
transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the
holders’ option, in each case prior to a date set forth in the tender offer documents or proxy materials sent in connection
with the proposal to approve the business combination. In order to obtain a physical stock certificate, a stockholder’s broker
and/or clearing broker, DTC and our transfer agent will need to act to facilitate this request. It is our understanding that stockholders
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
stock certificate. While we have been advised that it takes a short time to deliver shares through the DWAC System, we cannot assure
you of this fact. Accordingly, if it takes longer than we anticipate for stockholders to deliver their shares, stockholders 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.
If, in connection with any stockholder
meeting called to approve a proposed business combination, we require public stockholders who wish to convert their shares to comply
with specific requirements for conversion, such converting stockholders 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 stockholders who wish to convert their shares to comply with specific requirements for conversion and such proposed
business combination is not consummated, we will promptly return such certificates to the tendering public stockholders. Accordingly,
stockholders 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 of common stock may decline during
this time and you may not be able to sell your securities when you wish to, even while other stockholders that did not seek conversion
may be able to sell their securities.
Because of our structure, other companies
may have a competitive advantage and we may not be able to consummate an attractive business combination.
We
expect to encounter intense competition from entities other than blank check companies having a business objective similar to ours,
including venture capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these entities
are well established and have extensive experience in identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater technical, human and other resources than we do and our financial resources will be relatively
limited when contrasted with those of many of these competitors. While we believe that there are numerous potential target businesses
that we could acquire with the cash held in our trust account, our ability to compete in acquiring certain sizable target businesses
will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing
the acquisition of certain target businesses. Furthermore, seeking stockholder approval or engaging in a tender offer in connection
with any proposed business combination may delay the consummation of such a transaction. Additionally, our outstanding warrants,
and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Any of the foregoing
may place us at a competitive disadvantage in successfully negotiating a business combination.
Our initial stockholders control
a substantial interest in us and thus may influence certain actions requiring a stockholder vote.
Our
initial stockholders own approximately 19.8% of our issued and outstanding shares of common stock. Our officers, directors, initial
stockholders or their affiliates could determine in the future to make such purchases in the open market or in private transactions,
to the extent permitted by law, in order to influence the vote or magnitude of the number of shareholders seeking to tender their
shares to us. In connection with any vote for a proposed business combination, our initial stockholders, as well as all of our
officers and directors, have agreed to vote the founder shares as well as any shares of common stock acquired in our IPO or in
the aftermarket in favor of such proposed business combination.
It
is unlikely that there will be an annual meeting of stockholders to elect new directors prior to the consummation of a business
combination, in which case all of the current directors will continue in office until at least the consummation of the business
combination. Accordingly, you may not be able to exercise your voting rights under corporate law until the first stockholders’
meeting following a business combination.
Our
board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class
of directors being elected in each year. It is unlikely that there will be an annual meeting of stockholders to elect new directors
prior to the consummation of a business combination, in which case all of the current directors will continue in office until at
least the consummation of the business combination. Accordingly, you may not be able to exercise your voting rights under corporate
law until the first stockholders’ meeting following a business combination. If there is an annual meeting, as a consequence
of our “staggered” board of directors, only a minority of the board of directors will be considered for election and
our initial stockholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly,
our initial stockholders will continue to exert control at least until the consummation of a business combination.
Our outstanding warrants may have
an adverse effect on the market price of our common stock and make it more difficult to effect a business combination.
We
issued warrants to purchase 10,000,000 shares of common stock as part of the units sold in the IPO and private warrants to purchase
3,250,000 shares of common stock. We may also issue other warrants to our initial stockholders, officers, directors or their affiliates
in payment of working capital loans made to us as described in this annual report. To the extent we issue shares of common stock
to effect a business combination, the potential for the issuance of a substantial number of additional shares upon exercise of
these warrants could make us a less attractive acquisition vehicle in the eyes of a target business. Such securities, when exercised,
will increase the number of issued and outstanding shares of common stock and reduce the value of the shares issued to complete
the business combination. Accordingly, our warrants may make it more difficult to effectuate a business combination or increase
the cost of acquiring the target business. Additionally, the sale, or even the possibility of sale, of the shares underlying the
warrants could have an adverse effect on the market price for our securities or on our ability to obtain future financing. If and
to the extent these warrants are exercised, you may experience dilution to your holdings.
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 (excluding the private warrants and any warrants issued to our initial stockholders, officers
or directors in payment of working capital loans made to us) at any time after they become exercisable and prior to their expiration,
at a price of $0.01 per warrant, provided that the last reported sales price of the common stock equals or exceeds $18.00 per share (as
adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading-day period
commencing at any time after the warrants become exercisable and ending on the third business day prior to proper notice of such redemption
provided that on the date we give notice of redemption and during the entire period thereafter until the time we redeem the warrants,
we have an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the
warrants and a current prospectus relating to them is available. If and when the warrants become redeemable by us, we may exercise our
redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities
laws. 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 warrants will
be redeemable by us so long as they are held by the initial purchasers or their permitted transferees.
Our management’s ability to
require holders of our warrants to exercise such warrants on a cashless basis will cause holders to receive fewer shares of common
stock upon their exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If
we call our public warrants for redemption after the redemption criteria described elsewhere in this annual report have been satisfied,
our management will have the option to require any holder that wishes to exercise his warrant (including any private warrants)
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 warrant for cash. This will have the effect of reducing the potential “upside” of the holder’s
investment in our company.
If our security holders exercise
their registration rights, it may have an adverse effect on the market price of our shares of common stock and the existence of
these rights may make it more difficult to effect a business combination.
Our
initial stockholders are entitled to make a demand that we register the resale of the founder shares at any time commencing three
months prior to the date on which their shares may be released from escrow. Additionally, the holders of representative shares,
the private warrants and any warrants our initial stockholders, officers, directors, or their affiliates may be issued in payment
of working capital loans made to us, are entitled to demand that we register the resale of the representative shares, private warrants
and any other warrants we issue to them (and the underlying securities) commencing at any time after we consummate an initial business
combination. The presence of these additional securities trading in the public market may have an adverse effect on the market
price of our securities. In addition, the existence of these rights may make it more difficult to effectuate a business combination
or increase the cost of acquiring the target business, as the stockholders of the target business may be discouraged from entering
into a business combination with us or will request a higher price for their securities because of the potential effect the exercise
of such rights may have on the trading market for our shares of common stock.
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, as amended, or the Investment Company Act. Since we will invest the proceeds held in the trust account,
it is possible that we could be deemed an investment company. Notwithstanding the foregoing, we do not believe that our anticipated
principal activities will subject us to the Investment Company Act. To this end, the proceeds held in trust may be invested by
the trustee only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment
Company Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government treasury obligations. By restricting the investment
of the proceeds to these instruments, we intend to meet the requirements for the exemption provided in Rule 3a-1 promulgated
under the Investment Company Act.
If we are nevertheless
deemed to be an investment company under the Investment Company Act, we may be subject to certain restrictions that may make it
more difficult for us to complete a business combination, including:
|
•
|
restrictions on the nature of our investments; and
|
|
•
|
restrictions on the issuance of securities.
|
In addition, we may have
imposed upon us certain burdensome requirements, including:
|
•
|
registration as an investment company;
|
|
•
|
adoption of a specific form of corporate structure; and
|
|
•
|
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 for which we have not allotted.
If we do not conduct an adequate
due diligence investigation of a target business, we may be required to subsequently 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 our stock price, which could cause you to lose some or all of your investment.
We
must conduct a due diligence investigation of the target businesses we intend to acquire. Intensive due diligence is time consuming
and expensive due to the operations, accounting, finance and legal professionals who must be involved in the due diligence process.
Even if we conduct extensive due diligence on a target business, this diligence may not reveal all material issues that may affect
a particular target business, and factors outside the control of the target business and outside of our control may later arise.
If our diligence fails to identify issues specific to a target business, industry or the environment in which the target business
operates, 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 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 common
stock. 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 post-combination debt financing.
The requirement that we complete
an initial business combination within 18 months from the closing of our IPO, or by November 19, 2021, may give potential target
businesses leverage over us in negotiating a business combination.
We
have 18 months from the closing of our IPO, or until November 19, 2021, to complete an initial business combination. Any potential
target business with which we enter into negotiations concerning a business combination will be aware of this requirement. Consequently,
such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete a business
combination with that particular target business, we may be unable to complete a business combination with any other target business.
This risk will increase as we get closer to the time limit referenced above.
We may not obtain a fairness opinion
with respect to the target business that we seek to acquire and therefore you may be relying solely on the judgment of our board
of directors in approving a proposed business combination.
We
will only be required to obtain a fairness opinion with respect to the target business that we seek to acquire if it is an entity
that is affiliated with any of our initial stockholders, officers, directors or their affiliates. In all other instances, we will
have no obligation to obtain an opinion. Accordingly, stockholders will be relying solely on the judgment of our board of directors
in approving a proposed business combination.
Resources could be spent researching
acquisitions that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge
with another business.
It
is anticipated that the investigation of each specific target business and the negotiation, drafting, and execution of relevant
agreements, disclosure documents, and other instruments will require substantial management time and attention and substantial
costs for accountants, attorneys and others. If a decision is made not to complete a specific business combination, the costs incurred
up to that point for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating
to a specific target business, we may fail to consummate the business combination for any number of reasons including those beyond
our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent
attempts to locate and acquire or merge with another business.
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 that
we have such system of internal controls audited beginning with our Annual Report on Form 10-K for the year ending December 31,
2021. If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal
penalties and/or stockholder litigation. Any inability to provide reliable financial reports could harm our business. Section 404
of the Sarbanes-Oxley Act also requires that our independent registered public accounting firm report on management’s evaluation
of our system of internal controls. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding
adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the
Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition. 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 stock.
We
have identified a material weakness in our internal control over financial reporting. This
material weakness could continue to adversely affect our ability to report our results of
operations and financial condition accurately and in a timely manner.
Our management
is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose
any changes and material weaknesses identified through such evaluation of those internal controls. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
In connection with
the restatement as described elsewhere in this Annual Report, including within Note 2 to the consolidated financial statements,
management re-evaluated the effectiveness of Novus’s disclosure controls and procedures as of December 31, 2020. Management
concluded that Novus’s disclosure controls and procedures were not effective as of December 31, 2020, due to a material
weakness in the internal control over financial reporting related to the accounting for complex equity instruments, solely as a
result of Novus’s classification of the warrants as a component of equity instead of derivative liabilities and classification
of the common stock as a component of equity instead of common stock subject to possible redemption.
AppHarvest believes
that the above identified material weakness was remediated following the Business Combination as the disclosure controls and procedures
and internal controls over financial reporting of privately held AppHarvest (as the deemed accounting acquirer) became the disclosure
controls and procedures and internal control over financial reporting of the combined company, and the financial reporting and accounting
personnel of privately held AppHarvest assumed such roles and responsibilities of the combined company.
There can be no assurance that other material weaknesses will not arise in the future. Any material weaknesses in our internal control over financial reporting could cause us to fail to meet our future
reporting obligations or could result in material misstatements in our financial statements, which in turn could have an adverse
effect on our financial condition. Any material weakness could also adversely affect the results of the periodic management evaluations
and, to the extent we are no longer an emerging growth company, the annual auditor attestation reports regarding the effectiveness
of our internal control over financial reporting that will be required under Section 404 of the Sarbanes-Oxley Act of 2002. Internal
control deficiencies could also cause investors to lose confidence in our reported financial information which could have an adverse
effect on the trading price of our securities.
The
valuation of our Warrants could increase the volatility in our net income (loss) in our consolidated statements of earnings (loss).
The
change in fair value of our Private Warrants is the result of changes in stock price and the number of warrants outstanding at each reporting
period. The Change in Fair Value of Warrant Liabilities represents the mark-to-market fair value adjustments to the outstanding Private
Warrants issued in connection with the Company’s IPO. Significant changes in our stock price or number of Private Warrants outstanding
may adversely affect our net income (loss) in our consolidated statements operations.
If we effect a business combination
with a company located in a foreign jurisdiction, we would be subject to a variety of additional risks that may negatively impact
our operations.
If
we consummate a business combination with a target business in a foreign country, we would be subject to any special considerations
or risks associated with companies operating in the target business’ home jurisdiction, including any of the following:
|
•
|
rules and regulations or currency conversion or corporate withholding taxes on individuals;
|
|
•
|
tariffs and trade barriers;
|
|
•
|
regulations related to customs and import/export matters;
|
|
•
|
tax issues, such as tax law changes and variations in tax laws as compared to the United States;
|
|
•
|
currency fluctuations and exchange controls;
|
|
•
|
challenges in collecting accounts receivable;
|
|
•
|
cultural and language differences;
|
|
•
|
employment regulations;
|
|
•
|
crime, strikes, riots, civil disturbances, terrorist attacks and wars; and
|
|
•
|
deterioration of political relations with the United States.
|
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.
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 stockholders 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.
Provisions in our amended and restated
certificate of incorporation and bylaws 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 common stock and could entrench management.
Our
amended and restated certificate of incorporation and bylaws contain provisions that may discourage unsolicited takeover proposals
that stockholders may consider to be in their best interests. Our board of directors is divided into three classes, each of which
will generally serve for a term of three years with only one class of directors being elected in each year. As a result, at a given
annual meeting only a minority of the board of directors may be considered for election. Since our “staggered board”
may prevent our stockholders from replacing a majority of our board of directors at any given annual meeting, it may entrench management
and discourage unsolicited stockholder proposals that may be in the best interests of stockholders. Moreover, our board of directors
has the ability to designate the terms of and issue new series of preferred stock.
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 more difficult the removal of management and may discourage transactions that otherwise could involve payment
of a premium over prevailing market prices for our securities.
Because we must furnish our stockholders
with target business financial statements prepared in accordance with U.S. generally accepted accounting principles or international
financial reporting standards, we will not be able to complete a business combination with prospective target businesses unless
their financial statements are prepared in accordance with U.S. generally accepted accounting principles or international financial
reporting standards.
The
federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial
significance tests include historical and/or pro forma financial statement disclosure in periodic reports. These financial statements
may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United
States of America, or GAAP, or international financial reporting standards, or IFRS, depending on the circumstances, and the historical
financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight
Board (United States), or PCAOB. We will include the same financial statement disclosure in connection with any tender offer documents
we use, whether or not they are required under the tender offer rules. Additionally, to the extent we furnish our stockholders
with financial statements prepared in accordance with IFRS, such financial statements will need to be audited in accordance with
U.S. GAAP at the time of the consummation of the business combination. These financial statement requirements may limit the pool
of potential target businesses we may acquire.
Changes in laws or regulations, or
a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We
are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply
with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult,
time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time
and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure
to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business
and results of operations.
There may be tax consequences to
our business combinations that may adversely affect us.
While
we expect to undertake any merger or acquisition so as to minimize taxes both to the acquired business and/or assets and us, such
business combination might not meet the statutory requirements of a tax-free reorganization, or the parties might not obtain the
intended tax-free treatment upon a transfer of shares or assets. A business combination that does not qualify for tax-free treatment
could result in the imposition of substantial taxes.
Our amended and restated certificate
of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware is the sole and exclusive
forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers, employees or stockholders.
Our
amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought
in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar 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, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising
under the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall have
concurrent 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 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 or employees, which may discourage lawsuits with respect to such claims,
although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and
regulations thereunder and may therefore bring a claim in another appropriate forum. We cannot be certain that a court will decide
that this provision is either applicable or enforceable, and 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 provides that the exclusive forum provision is applicable to the fullest extent
permitted by applicable law. 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.