Item
1. Business.
Overview
We are a blank check company
incorporated under the laws of the State of Delaware on May 27, 2021. We were formed for the purpose of effecting a merger, stock
exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer
to throughout this Report as our “initial business combination.”
Although there is no restriction or limitation on what industry or
geographic region our target operates in, we have pursued and will continue to pursue prospective targets that are in the Technology Metals
and ETMs sectors; however the geographic region of our search for a prospective target will not include China or the special administrative
regions of Hong Kong or Macau and we will not undertake our initial business combination with any entity with its principal business operations
in China (including Hong Kong and Macau).
Initial Public Offering
On December 30, 2021, we consummated
our initial public offering of 7,500,000 units. Each unit consists of one share of common stock, and one right of the Company, with each
right entitling the holder thereof to receive one-tenth of one share of common stock. The units were sold at a price of $10.00 per unit,
generating gross proceeds of $75,000,000.
Simultaneously with the closing
of the initial public offering, we completed the private sale of an aggregate of 347,500 units to our sponsor at a purchase price of $10.00
per private placement unit, generating gross proceeds of $3,475,000.
On January 14, 2022, Chardan
exercised the option to purchase up to 1,125,000 additional units to cover over-allotments (the “over-allotment units”) in
part and purchased 227,686 over-allotment units, which were sold at an offering price of $10.00 per over-allotment unit, generating gross
proceeds of $2,276,860. Simultaneously with the sale of the over-allotment units, the Company consummated a private sale of an additional
4,554 private placement units to the sponsor, generating gross proceeds of $45,540.
A total of $77,276,860, comprised
of proceeds from the initial public offering (including the over-allotment) and proceeds of the sale of the private placement units was
placed in the trust account maintained by Continental, acting as trustee.
It is the job of our sponsor
and management team to complete our initial business combination. Our management team is led by Daniel Mamadou, our Chief Executive Officer,
John Stanfield, our Chief Financial Officer, and Christopher Clower, our Chief Operating Officer, who have many years of experience in
managing supply chains of bulk commodities. We must complete our initial business combination by September 30, 2022, 9 months from the
closing of our initial public offering (or up to 12 or 15 months if extended as provided herein). If our initial business combination
is not consummated by September 30, 2022 (or December 20, 2022 or March 20, 2023, as applicable), then our existence will terminate, and
we will distribute all amounts in the trust account.
Our Business Strategy and Acquisition
Criteria
Background
Decarbonization, the shift
to alternative energy sources from carbon-based energy systems, has become a central component of economic plans for governments
and private sector companies in markets throughout the world. We are positioned to help drive and benefit from this energy transition.
“Net Zero” policies,
the promotion of holistic energy systems with zero net carbon emissions, are increasingly a goal of most major economic blocs. This trend
creates a major opportunity and a supportive backdrop for companies and enterprises that foster and participate in the production of carbon-neutral energy
systems and infrastructure.
According to Goldman Sachs,
the European Union Green Deal is estimated to channel more than $12 trillion of investment in clean energy infrastructure by 2050.
If these types of policies are adopted, the manner in which energy is produced will be transformed. Buildings and real estate in general
will be upgraded and transportation will undergo a dramatic change. By now, all major economies have embraced the energy transition.
The European Union Green Deal
recently implemented a more aggressive target to reduce greenhouse gas emissions by at least 50% by 2030. The EU Green Deal has a specific
focus on hydrogen power and offshore wind.
China has also pledged to
achieve net zero carbon status by 2060, pledging $16 trillion to cleantech infrastructure investments by 2060 via renewables, green
hydrogen, carbon capture nuclear energy and hydropower.
In the United States,
lawmakers and regulators are also following suit. In May 2021, for example, California and the U.S. federal government announced
an agreement to open up areas of the Pacific Coast to the first commercial wind energy farms in an effort to promote decarbonization.
In response to these initiatives,
new sources of metals and materials will need to be developed in order to feed the supply chains of de-carbonization technologies
and renewable energy. We call these metals and materials “Technology Metals,” “techmetals” or “Energy Transition
Metals” (ETMs). We intend to focus our search for our initial business combination on the Technology Metals and ETMs markets.
ETMs will be needed for the
refurbishment of factories, infrastructure to help the automotive industry transition away from combustion and the efficient storage of
intermittent sources of energy such as wind and solar. Welsbach is focused on the development of supply chains to meet this surge in ETMs
demand.
Through the transition to
electric vehicles, we expect a rise in the prices of ETMs, including certain rare earth elements (REEs), lithium, cobalt, graphite, manganese,
nickel, vanadium, copper and aluminum. Current supply chains are not calibrated to handle this increase in demand. Creating, investing
and supporting new supply chains for Technology Metals is the “raison d’être” of Welsbach.
In North America, ETMs supply
chains are underdeveloped as compared with Asia. According to a report commissioned by the United States Department of Energy on
rare earth magnets, there is “little time for North American supply chain developers to move to action on economically U.S-based mine-to-magnet technologies
to rebalance the supply chain away from China’s dominance.”
The report identifies the
mid-stream and downstream segments of the rare earths supply chain as having significant gaps in the areas of magnet manufacturing
processes, magnet powder composites, recycling technologies and environmental mitigation. The situation is similar for nickel, cobalt,
lithium and vanadium. We expect a significant ramp up of U.S. investment in ETMs and Technology Metals sectors over the coming years as
the Biden administration advances its own net zero carbon policy.
Through Welsbach Holdings
Pte Ltd, Daniel Mamadou, our CEO, and Chris Clower, our COO, invest in and support companies that are part of the global supply chain
of Technology Metals. Welsbach Holdings Pte Ltd operates across the entire supply chain of Technology Metals and ETMs in many geographies
globally.
Our Business Combination Opportunity
The coming dominance of renewables
will place further pressure on the already strained ETMs supply chains. Easy monetary policy and zero carbon policies have created the
right setting to accelerate the transition away from fossil fuels. New supply chains will need to be created to accommodate the growth
in demand for technology metals.
ETMs are critical to the shift
away from fossil fuels as the world gradually transitions to renewable and sustainable energy sources.
Electric vehicle batteries
utilize technology metals such as cobalt, lithium, manganese, nickel, graphite and vanadium. Neodymium, praseodymium, dysprosium and terbium
are also critical rare earth technology metals, and are widely used in magnet composition, with applications that range from tiny electric
motors to rotor-less drives used in wind turbines.
Traditionally, the demand
for these metals has been a fraction of the demand for major base metals consumption such as copper. Despite their critical nature, ETMs
have historically been obtained as by-products of other metals mining activities. The rise of renewables, the de-carbonization of
the grid, and the transition to electric vehicles is putting pressure on the ETMs supply chains, driving a fundamental transformation
of the Technology Metals supply chains.
We believe prices of Technology
Metals and ETMs will increase, as demand increases more than supply going forward. There is a long lead time to bring new mining projects
from discovery to production and the metallurgical and chemical midstream processes required can be capital intensive.
As the regulations designed
to address climate change act as catalysts for the Technology Metals sector, we expect renewable sources of energy to continue to increase
their share of the energy mix across the largest economies globally. With the resulting expansion in demand for battery storage solutions
and electric motors, we also expect supply chains to be reconfigured in order to withstand shocks such as pandemics and to provide more
diversity of suppliers and to protect access to critical metals and materials. From the perspective of North American and European consumption,
we expect this supply chain reconfiguration to include an emphasis on moving midstream activities currently located in Asia to European
and American based operations.
Our Approach to Environmental and Social Governance
As the CEO and COO of both
WTMAC and Welsbach Holdings Pte Ltd, our approach to ESG is conduct business that ensures our commercial relationships are balanced and
sustainable. Our business at WTMAC as well as Welsbach Holdings Pte Ltd is guided by the United Nations Global Compact and directed by
the UN Sustainable Development Goals. We have a climate strategy that focuses on investing in and supporting energy efficient supply chains,
reducing fossil fuels, and optimizing water use. In both WTMAC and Welsbach Holdings Pte Ltd we adhere to UN Sustainable Development Goals
#7 “Affordable And Clean Energy”, #8 “Decent Work And Economic Growth”, #9 “Industry Innovation and Infrastructure”,
#13 “Climate Action”, and #17 “Partnerships For The Goals”.
We believe in having our core
values implemented by our partners and business counterparties. Integrity, sustainability and accountability are the primary tenets which
guide our activity. We believe that businesses must serve the purposes of society and as such, we strongly endorse activities that foster
economic growth, while positively impacting the environment.
As an organization committed
to transitioning to a low carbon future, we deploy our resources in supply chains that support renewable energy. By facilitating the sourcing
and distribution of metals and materials that are critical to the clean energy transition, we fulfil our goal of becoming the partner
of choice for technology metals supply chain stakeholders and participants. Whether lithium or nickel for batteries, graphite for anode
material, or neodymium for the production of permanent magnets, we strive to create reliable, efficient and resilient supply chains that
deliver the highest quality product at the right time. We also ensure that our chains can withstand sudden shocks and disruptions.
As an organization committed
to good governance and social benefits, our sponsor is a participant in the United Nations Global Compact, and as such we publish our
policies regarding labor rights, anti-bribery, environmental as well as our conflict mineral policies. We keep our personnel accountable
to respect human rights and labor standards and to ensure that environmental protection is front and center in our activities. We collaborate
with our joint venture partners and our business counterparties to promote the best in class governance procedures and systems.
Our Competitive Advantage
Our team is composed of professionals
that have expertise in in private equity investments, portfolio management, corporate restructuring, metals and mining, physical commodity
trading, supply chain management and logistics. Our specific competitive strengths are:
Experience in capital markets and financing
solutions
Daniel Mamadou is the CEO
of WTMAC and also an executive director of Welsbach Holdings Pte Ltd; he has honed his capital markets skills over 20 years initially
as a derivatives structurer at Bank of Mitsubishi and Deutsche Bank in London, and then as a Debt and Equity Capital Markets officer at
Goldman Sachs in London, Deutsche Bank in Singapore and Nomura holdings in Hong Kong. During this period, Mr. Mamadou led multiple
fundraising projects for a wide range of companies and financial institutions in Europe, North Asia, Australia and Japan.
Christopher Clower is the
COO of WTMAC, and also an executive director of Welsbach Holdings Pte Ltd. Christopher sits on a number of boards in South East Asia companies,
including Malacca Trust Pte Ltd, a holding company in Singapore which owns the top asset management company in Indonesia. He spent 11 years
at Merrill Lynch and raised over $4 billion of capital in the resources space. Prior to this, Mr. Clower was Managing Director
and Head of Corporate Finance in Merrill Lynch for South East Asia. Christopher also worked at Deutsche Bank (1997 – 1998) and Bankers
Trust (1994 – 1997).
Experience in acquisition and development of
natural resource assets
Daniel Mamadou and his team
have been actively sourcing, analyzing, and investing in Technology Metals and ETMs markets since 2015. He has built up his knowledge
of the entire supply chain of ETMs and rare earths from upstream projects to junior mining, to the midstream refining sector and the downstream
industrial applications including neodymium and praseodymium metals and permanent magnets and recycling systems. As the founder and Executive
Director of the Talaxis Group (“Talaxis”), the Techmetals division within Noble Group, Daniel Mamadou invested approximately
$22.8 million of Noble Group internal capital to acquire equity stakes in seven Technology Metals companies and achieved a weighted
average deal level multiple of invested capital of 5.6x with 75.3% IRR over an investment period of slightly more than 3 years. Christopher
Clower co-founded, built and sold PT Manoor Bulatn Lestari, an Indonesian resource company and achieved 30x multiple of invested capital
(MOIC ) in two years for himself and his investors.
Experience in supply chain and logistics
The team has a track record
of managing supply chains of bulk commodities. Prior to WTMAC, Daniel Mamadou founded and led Talaxis, the Technology Metals division
of Noble Group Holdings. Noble Group Holdings is an Asia-based independent energy products and industrial raw materials supply chain
manager. Noble Group has operations in more than 50 countries and more than 35 years of experience in Asia. While leading Talaxis,
Daniel invested in and developed projects related to Technology Metals, with a special focus on rare earth elements. He was instrumental
in establishing a network of supply chain partners in the upstream and midstream segments. Mr. Mamadou’s range of activities
involved the sourcing, marketing, processing, supplying, financing and transporting of energy transition metals and materials, with a
particular focus on projects related to battery-grade and electric vehicle materials such as nickel, lithium, graphite, and vanadium
in various worldwide locations to cover the entire supply chain. As the founder and Executive Director of Talaxis, Daniel Mamadou invested
approximately $22.8 million of Noble Group internal capital to acquire equity stakes in seven Techmetals companies and achieved a
weighted average deal level multiple of invested capital of 5.6x with 75.3% IRR over an investment period of slightly more than 3 years.
Independent board members and network of advisors
WTMAC’s senior management
benefits from the support and assistance of independent board members and a network of advisors that have a proven track record in identifying,
evaluating and negotiating with businesses and companies in the sectors that are relevant for WTMAC. A strong emphasis on diversity
and skills has been made regarding the composition of the board, with the inclusion of independent directors that are competent in the
fields of mergers and acquisitions as well as disciplines related to geology and mining sectors.
Effecting Our Initial Business Combination
General
We are not presently engaged
in, and we will not engage in, any substantive commercial business until we consummate our initial business combination. We intend to
utilize cash derived from the proceeds of our initial public offering and the private placement of private units, our capital stock, debt
or a combination of these in effecting a business combination. Although substantially all of the net proceeds of our initial public offering
and the private placement of private units are intended to be applied generally toward effecting a business combination as described in
our prospectus in connection with our initial public offering or this Report, the proceeds are not otherwise being designated for any
more specific purposes. Accordingly, investors in our initial public offering have invested without first having an opportunity to evaluate
the specific merits or risks of any one or more business combinations. A business combination may involve the acquisition of, or merger
with, a company which does not need substantial additional capital but which desires to establish a public trading market for its shares,
while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays, significant
expense, loss of voting control and compliance with various U.S. Federal and state securities laws. In the alternative, we may seek
to consummate a business combination with a company that may be in its early stages of development or growth. While we may seek to effect
simultaneous business combinations with more than one target business, we will probably have the ability, as a result of our limited resources,
to effect only a single business combination.
Sources of Target Businesses
Target business candidates may be brought to our attention from various
unaffiliated sources, including investment bankers, venture capital funds, private equity funds, leveraged buyout funds, management buyout
funds and other members of the financial community. Target businesses may be brought to our attention by such unaffiliated sources as
a result of being solicited by us through calls or mailings which will not commence until after the completion of our initial public offering.
These sources may also introduce us to target businesses they think we may be interested in on an unsolicited basis, since many of these
sources will have read the prospectus in connection with our initial public offering or this Report and know what types of businesses
we are targeting. Our officers and directors, as well as their respective affiliates, may also bring to our attention target business
candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may
have, as well as attending trade shows or conventions. We may engage the services of professional firms or other individuals that specialize
in business acquisitions, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an
arm’s length negotiation based on the terms of the transaction. In no event, however, will any of our existing insiders, special
advisors or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation prior to,
or for any services they render in order to effectuate, the consummation of a business combination (regardless of the type of transaction).
If we decide to enter into a business combination with a target business that is affiliated with our insiders, we will do so only if we
have obtained an opinion from an independent investment banking firm that the business combination is fair to our unaffiliated stockholders
from a financial point of view. However, as of the date of this Report, there is no affiliated entity that we consider a business combination
target.
If any of our officers or
directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she
has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity
to such entity prior to presenting such business combination opportunity to us. All of our officers, directors and director nominees currently
have certain relevant pre-existing fiduciary duties or contractual obligations.
Fair Market Value of Target Business
Pursuant to the rules of the
Nasdaq Stock Market, our initial business combination must occur with one or more target businesses having an aggregate fair market value
of at least 80% of the value of the trust account (excluding any deferred underwriter’s fees and taxes payable on the income earned
on the trust account), which we refer to as the 80% test, at the time of the agreement to enter into the initial business combination.
Therefore, the fair market value of the target business will be calculated prior to any conversions of our shares in connection with a
business combination and therefore will be a minimum of $61,821,488 in order to satisfy the 80% test. While the fair market value of the
target business must satisfy the 80% test, the consideration we pay the owners of the target business may be a combination of cash (whether
cash from the trust account or cash from a debt or equity financing transaction that closes concurrently with the business combination)
or our equity securities. The exact nature and amount of consideration would be determined based on negotiations with the target business,
although we will attempt to primarily use our equity as transaction consideration. If our board is not able to independently determine
the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm with
respect to the satisfaction of such criteria. We will also obtain a fairness opinion from an independent investment banking firm before
consummating a business combination with an entity affiliated with any of our officers, directors or insiders. If we are no longer listed
on Nasdaq, we will not be required to satisfy the 80% test.
We anticipate structuring
our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire
100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination
such that the post-transaction company owns less than 100% of such interests or assets of the target business in order to meet certain
objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if
the post-transaction company owns 50% or more of the outstanding voting securities of the target or otherwise owns a controlling
interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act .
Even if the post-transaction company owns 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 would 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% test.
Lack of Business Diversification
For an indefinite period of
time after consummation of our initial business combination, the prospects for our success may depend entirely on the future performance
of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or
several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in
a single line of business. By consummating our initial business combination with only a single entity, our lack of diversification may:
| ● | subject us to negative economic, competitive and regulatory
developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial
business combination, and |
| ● | cause us to depend on the marketing and sale of a single
product or limited number of products or services. |
Limited Ability to Evaluate the Target’s
Management Team
Although we closely scrutinize
the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that
business, our assessment of the target business’ management may not prove to be correct. The future role of members of our management
team, if any, in the target business, cannot presently be stated with any certainty. Consequently, members of our management team may
not become a part of the target’s management team, and the future management may not have the necessary skills, qualifications or
abilities to manage a public company. Further, it is also not certain whether one or more of our directors will remain associated in some
capacity with us following our initial business combination. Moreover, members of our management team may not have significant experience
or knowledge relating to the operations of the particular target business. Our key personnel may not remain in senior management or advisory
positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will
be made at the time of our initial business combination.
Following our initial business
combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We may not have
the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary
to enhance the incumbent management.
Stockholder Approval of Business Combination
In connection with any proposed
business combination, we will either (1) seek stockholder approval of our initial business combination at a meeting called for such
purpose at which public stockholders (but not our insiders, officers or directors) may seek to convert their shares of common stock, regardless
of whether they vote for or against the proposed business combination, into a portion of the aggregate amount then on deposit in the trust
account, or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and therefore
avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust
account, in each case subject to the limitations described herein. If we determine to engage in a tender offer, such tender offer will
be structured so that each stockholder may tender all of his, her or its shares rather than some pro rata portion of his, her or its shares.
The decision as to whether we will seek stockholder approval of a proposed business combination or whether we 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. We
anticipate that our business combination could be completed by way of a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar transaction. Stockholder approval will not be required under Delaware law if the business combination
is structured as an acquisition of assets of the target company, a share exchange with target company stockholders or a purchase of stock
of the target company; however, Nasdaq rules would require us to obtain stockholder approval if we seek to issue shares representing 20%
or more of our outstanding shares as consideration in a business combination. A merger of our company into a target company would require
stockholder approval under Delaware law. A merger of a target company into our company would not require stockholder approval unless the
merger results in a change to our certificate of incorporation, or if the shares issued in connection with the merger exceed 20% of our
outstanding shares prior to the merger. A merger of a target company with a subsidiary of our company would not require stockholder approval
unless the merger results in a change in our certificate of incorporation; however, Nasdaq rules would require us to obtain stockholder
approval of such a transaction if we week to issue shares representing 20% or more of our outstanding shares as consideration.
If a stockholder vote is not
required and we do not decide to hold a stockholder vote for business or other legal reasons, we will provide our stockholders with an
opportunity to tender their shares to us pursuant to a tender offer pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act,
which regulate issuer tender offers, and we will file tender offer documents with the SEC which will contain substantially the same financial
and other information about the initial business combination as is required under the SEC’s proxy rules.
In the event we allow stockholders
to tender their shares pursuant to the tender offer rules, our tender offer will remain open for at least 20 business days, in accordance
with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until
the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more
than a specified number of public shares, which number will be based on the requirement that we may not purchase public shares in an amount
that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock”
rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business
combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete
the initial business combination.
If, however, stockholder approval
of the transaction is required by law or Nasdaq requirements, or we decide to obtain stockholder approval for business or other legal
reasons, we will:
| ● | permit stockholders to convert their shares in conjunction
with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and
not pursuant to the tender offer rules, and |
| ● | file proxy materials with the SEC. |
In the event that we seek
stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide stockholders
with the conversion rights described above upon completion of the initial business combination.
We will consummate our initial business combination only if public
stockholders do not exercise conversion rights in an amount that would cause our net tangible assets to be less than $5,000,001 and a
majority of the outstanding shares of common stock voted are voted in favor of the business combination. As a result, if stockholders
owning approximately 93.75% or more of the shares of common stock sold in our initial public offering exercise conversion rights,
the business combination will not be consummated. However, the actual percentages will only be able to be determined once a target business
is located and we can assess all of the assets and liabilities of the combined company (which would include the fee payable to the underwriters
in an amount equal to 3.5% of the total gross proceeds raised in the initial public offering as described elsewhere in this Report, any
out-of-pocket expenses incurred by our insiders or their affiliates in connection with certain activities on our behalf, such as
identifying and investigating possible business targets and business combinations that have not been repaid at that time, as well as any
other liabilities of ours and the liabilities of the target business) upon consummation of the proposed business combination, subject
to the requirement that we must have at least $5,000,001 of net tangible assets upon closing of such business combination. As a result,
the actual percentages of shares that can be converted may be significantly lower than our estimates. We chose our net tangible asset
threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act. However, if
we seek to consummate an initial business combination with a target business that imposes any type of working capital closing condition
or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination,
our net tangible asset threshold may limit our ability to consummate such initial business combination (as we may be required to have
a lesser number of shares converted) and may force us to seek third-party financing which may not be available on terms acceptable
to us or at all. As a result, we may not be able to consummate such initial business combination and we may not be able to locate another
suitable target within the applicable time period, if at all. Public stockholders may therefore have to wait until September 30, 2022
(or December 30, 2022 or March 30, 2023, as applicable, if we have extended the period of time as described in this Report) in order to
be able to receive a portion of the trust account.
Our insiders, including our
officers and directors, have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination,
(2) not to convert any shares of common stock into the right to receive cash from the trust account in connection with a stockholder
vote to approve a proposed initial business combination or a vote to amend the provisions of our certificate of incorporation relating
to stockholders’ rights or pre-business combination activity and (3) not to sell any shares of common stock in any tender
in connection with a proposed initial business combination.
Depending on how a business
combination was structured, any stockholder approval requirement could be satisfied by obtaining the approval of either (i) a majority
of the shares of our common stock that were voted at the meeting (assuming a quorum was present at the meeting), or (ii) a majority
of the outstanding shares of our common stock. Because our insiders collectively beneficially own approximately 22.8% of our issued and
outstanding shares of common stock and as a result of the insider’s agreement to vote in favor of a business combination, unless
otherwise required by applicable law, regulation or stock exchange rules, in addition to the founder shares, we would need only 3,073,910,
or approximately 39.77% (assuming all outstanding shares are voted) or 570,994, or approximately 73.88% (assuming only the minimum number
of shares representing a quorum are voted and the over-allotment option is not exercised), of the 7,727,686 public shares sold
in the initial public offering to be voted in favor of an initial business combination.
Stockholders May Not Have the Ability to
Approve an Initial Business Combination
We may conduct redemptions
without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required
by law or applicable stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons. Presented
in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval
is currently required under Delaware law for each such transaction.
Type of Transaction |
|
Whether Stockholder
Approval is Required |
Purchase of assets |
|
No |
Purchase of stock of target not involving a merger with the company |
|
No |
Merger of target into a subsidiary of the company |
|
No |
Merger of the company with a target |
|
Yes |
Under Nasdaq’s listing
rules, stockholder approval would be required for our initial business combination if, for example:
| ● | we issue shares of common stock that will be equal to or
in excess of 20% of the number of shares of our common stock then outstanding; |
| ● | any of our directors, officers or substantial stockholders
(as defined by Nasdaq rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or
indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could
result in an increase in outstanding common shares or voting power of 5% or more; or |
| ● | the issuance or potential issuance of common stock will result
in our undergoing a change of control. |
In connection with any proposed
business combination, we will either (1) seek stockholder approval of our initial business combination at a meeting called for such
purpose at which public stockholders may seek to redeem their public shares, regardless of whether they vote for or against the proposed
business combination, into their pro rata share of the aggregate amount then on deposit in the trust account (net of
taxes payable) or (2) provide our public stockholders with the opportunity to sell their public shares to us by means of a tender
offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate
amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein.
If we determine to engage
in a tender offer, such tender offer will be structured so that each stockholder may tender any or all of his, her or its public shares
rather than some pro rata portion of his, her or its shares. The decision as to whether we will seek stockholder approval
of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us based on
a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek
stockholder approval. If we so choose and we are legally permitted to do so, we have the flexibility to avoid a stockholder vote and allow
our stockholders to sell their shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act which regulate
issuer tender offers. In that case, we will file tender offer documents with the SEC which will contain substantially the same financial
and other information about the initial business combination as is required under the SEC’s proxy rules. We will consummate our
initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, solely if we seek
stockholder approval, a majority of the issued and outstanding shares of common stock voted are voted in favor of the business combination.
We chose our net tangible
asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419. However, if we seek to consummate an initial
business combination with a target business that imposes any type of working capital closing condition or requires us to have a minimum
amount of funds available from the trust account upon consummation of such initial business combination, our net tangible asset threshold
may limit our ability to consummate such initial business combination (as we may be required to have a lesser number of shares redeemed
or sold to us) and may force us to seek third party financing which may not be available on terms acceptable to us or at all. As a result,
we may not be able to consummate such initial business combination and we may not be able to locate another suitable target within the
applicable time period, if at all. Public stockholders may therefore have to until September 30, 2022 (or until March 30, 2023, if extended
as provided herein) in order to be able to receive a pro rata share of the trust account.
Permitted Purchases of our Securities
In the event we seek stockholder
approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant
to the tender offer rules, our sponsor, directors, officers, or their respective affiliates may purchase shares or rights in privately
negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is
no limit on the number of shares such persons may purchase. However, they have no current commitments, plans or intentions to engage in
such transactions and have not formulated any terms or conditions for any such transactions. In the event our sponsor, directors, officers,
or their respective affiliates determine to make any such purchases at the time of a stockholder vote relating to our initial business
combination, such purchases could have the effect of influencing the vote necessary to approve such transaction. None of the funds in
the trust account will be used to purchase shares or rights in such transactions. They will not make any such purchases when they are
in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M
under the Exchange Act. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record
holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. We have adopted
an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and
when they are in possession of any material non-public information and (ii) to clear all trades with our legal counsel prior
to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as
it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances,
our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.
In the event that our sponsor,
directors, officers, or their respective affiliates purchase shares in privately negotiated transactions from public stockholders who
have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections
to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender
offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act;
however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will
comply with such rules.
The purpose of such purchases
would be to (i) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder
approval of the business combination or (ii) to satisfy a closing condition in an agreement with a target that requires us to have
a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement
would otherwise not be met. The purpose of any such purchases of rights could be to reduce the number of rights, or underlying securities,
outstanding. This may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases
are made, the public “float” of our common stock may be reduced and the number of beneficial holders of our securities may
be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities
exchange.
Our sponsor, directors, officers,
or their respective affiliates anticipate that they may identify the stockholders with whom our sponsor, directors, officers, or their
respective affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of
redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination.
To the extent that our sponsor, directors, officers, or their respective affiliates enter into a private purchase, they would identify
and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust
account or vote against the business combination. Such persons would select the stockholders from whom to acquire shares based on the
number of shares available, the negotiated price per share and such other factors as any such person may deem relevant at the time of
purchase. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive
if it elected to redeem its shares in connection with our initial business combination. Our sponsor, directors, officers, or their respective
affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal
securities laws.
Any purchases by our sponsor,
directors, officers, or their respective affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act
will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability
for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain
technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, directors,
officers, or their respective affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or
Rule 10b-5 of the Exchange Act.
Ability to Extend Time to Complete Business
Combination
We will have until 9 months
from the closing of our initial public offering, or September 30, 2022, to consummate our initial business combination. In addition, if
we anticipate that we may not be able to consummate our initial business combination within such 9-month period, our insiders or
their affiliates may, but are not obligated to, extend the period of time to consummate a business combination by an additional three months
each time for a total of up to 15 months to complete a business combination, or March 30, 2023, provided that, pursuant to the terms
of our amended and restated certificate of incorporation and the trust agreement entered into between us and Continental, our insiders
or their affiliates or designees, upon five days’ advance notice prior to the applicable deadline, deposit into the trust account
$772,686.60, or ($0.10 per share), on or prior to the date of the applicable deadline. In the event that they elect to extend the time
to complete a business combination and deposited the applicable amount of money into trust, the insiders would receive a non-interest bearing,
unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that we are unable to close a business
combination unless there are funds available outside the trust account to do so. Such notes would either be paid upon consummation of
our initial business combination solely from funds available outside of the trust account or, at the relevant insider’s discretion,
converted upon consummation of our business combination into additional private units at a price of $10.00 per unit. Our stockholders
have approved the issuance of the private units upon conversion of such notes, to the extent the holder wishes to so convert such notes
at the time of the consummation of our initial business combination. In the event that we receive notice from our insiders five days
prior to the applicable deadline of their intent to effect an extension, we intend to issue a press release announcing such intention
at least three days prior to the applicable deadline. In addition, we intend to issue a press release the day after the applicable
deadline announcing whether or not the funds had been timely deposited. Our insiders and their affiliates or designees are not obligated
to fund the trust account to extend the time for us to complete our initial business combination. To the extent that some, but not all,
of our insiders, decide to extend the period of time to consummate our initial business combination, such insiders (or their affiliates
or designees) may deposit the entire amount required. If we are unable to consummate our initial business combination within such time
period, we will, as promptly as possible but not more than ten business days thereafter, redeem 100% of our outstanding public shares
for a pro rata portion of the funds held in the trust account, including a pro rata portion of any interest earned on the funds held in
the trust account and not previously released to us to pay our taxes, and then seek to dissolve and liquidate. However, we may not be
able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders.
In the event of our dissolution and liquidation, the private units will expire and will be worthless.
Conversion Rights
At any meeting called to approve an initial business combination, any
public stockholder, whether voting for or against such proposed business combination, will be entitled to demand that his or her shares
of common stock be converted for a full pro rata portion of the amount then in the trust account ($10.00 per share as of December 31,
2021), plus any pro rata interest earned on the funds held in the trust account and not previously released to us or necessary to pay
our taxes. 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, net of taxes payable.
Notwithstanding the foregoing,
a public stockholder, together with any affiliate of his or hers or any other person with whom he or she is acting in concert or as a
“group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking conversion rights
with respect to 20% or more of the shares of common stock sold in our initial public offering. Such a public stockholder would still be
entitled to vote against a proposed business combination with respect to all shares of common stock owned by him or her, or his or her
affiliates. We believe this restriction will prevent stockholders from accumulating large blocks of shares before the vote held to approve
a proposed business combination and attempt to use the conversion right as a means to force us or our management to purchase their shares
at a significant premium to the then current market price. By not allowing a stockholder to convert more than 20% of the shares of common
stock sold in our initial public offering, we believe we have limited the ability of a small group of stockholders to unreasonably attempt
to block a transaction which is favored by our other public stockholders.
None of our insiders will
have the right to receive cash from the trust account in connection with a stockholder vote to approve a proposed initial business combination
or a vote to amend the provisions of our certificate of incorporation relating to stockholders’ rights or pre-business combination
activity with respect to any shares of common stock owned by them, directly or indirectly, whether acquired prior to our initial public
offering or purchased by them in our initial public offering or in the aftermarket.
We may also require public
stockholders who wish to convert, whether they are a record holder or hold their shares in “street name,” to either tender
their certificates to our transfer agent at any time through the vote on the business combination or to deliver their shares to the transfer
agent electronically using the DWAC System, at the holder’s option. The proxy solicitation materials that we will furnish to stockholders
in connection with the vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy such
delivery requirements. Accordingly, a stockholder would have from the time the stockholder received our proxy statement through the vote
on the business combination to deliver his or her shares if he or she wishes to seek to exercise his or her conversion rights. Under Delaware
law and our bylaws, we are required to provide at least 10 days’ advance notice of any stockholder meeting, which would be
the minimum amount of time a public stockholder would have to determine whether to exercise conversion rights.
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 $45.00 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 to deliver their shares prior to the
vote on the business combination in order to exercise conversion rights. This is because a holder would need to deliver shares to exercise
conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event we require stockholders to
deliver their shares prior to the vote on the proposed business combination and the proposed business combination is not consummated,
this may result in an increased cost to stockholders.
The foregoing is different
from the procedures used by many blank check companies. Traditionally, in order to perfect conversion rights in connection with a blank
check company’s business combination, the company would distribute proxy materials for the stockholders’ vote on an initial
business combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating
such holder was seeking to exercise his or her conversion rights. After the business combination was approved, the company would contact
such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had
an “option window” after the consummation of the business combination during which he or she could monitor the price of the
company’s stock in the market. If the price rose above the conversion price, he or she could sell his or her shares in the open
market before actually delivering his or her shares to the company for cancellation. As a result, the conversion rights, to which stockholders
were aware they needed to commit before the stockholder meeting, would become a “continuing” right surviving past the consummation
of the business combination until the holder delivered its certificate.
The requirement for physical
or electronic delivery prior to the meeting ensures that a holder’s election to convert his or her shares is irrevocable once the
business combination is approved.
Any request to convert such
shares once made may be withdrawn at any time up to the vote on the proposed business combination. Furthermore, if a holder of a public
share delivered his or her certificate in connection with an election of their conversion and subsequently decides prior to the vote on
the proposed business combination not to elect to exercise such rights, he or she 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
If we do not complete a business
combination by September 30, 2022 (or by December 30, 2022 or March 30, 2023, if extended as provided elsewhere in this Report), we will
(i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and
(iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
At such time, the rights will expire and holders of the rights will receive nothing upon a liquidation with respect to such rights, and
the rights will be worthless. However, if we anticipate that we may not be able to consummate our initial business combination within
9 months, our insiders or their affiliates may, but are not obligated to, extend the period of time to consummate a business combination
by an additional three months each time for a total of up to 15 months to complete a business combination, provided that, pursuant
to the terms of our amended and restated certificate of incorporation and the trust agreement entered into between us and Continental,
our insiders or their affiliates or designees, upon five days’ advance notice prior to the applicable deadline, deposit into
the trust account $772,686.60, or ($0.10 per share), on or prior to the date of the applicable deadline. In the event that they elected
to extend the time to complete a business combination and deposited the applicable amount of money into trust, the insiders would receive
a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that
we are unable to close a business combination unless there are funds available outside the trust account to do so. Such notes would either
be paid upon consummation of our initial business combination solely from funds available outside of the trust account or, at the relevant
insider’s discretion, converted upon consummation of our business combination into additional private units at a price of $10.00
per unit. Our stockholders have approved the issuance of the private units upon conversion of such notes, to the extent the holder wishes
to so convert such notes at the time of the consummation of our initial business combination. In the event that we receive notice from
our insiders five days prior to the applicable deadline of their intent to effect an extension, we intend to issue a press release
announcing such intention at least three days prior to the applicable deadline. In addition, we intend to issue a press release the day
after the applicable deadline announcing whether or not the funds had been timely deposited. Our insiders and their affiliates or designees
are not obligated to fund the trust account to extend the time for us to complete our initial business combination. To the extent that
some, but not all, of our insiders, decide to extend the period of time to consummate our initial business combination, such insiders
(or their affiliates or designees) may deposit the entire amount required.
Under the DGCL, 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 DGCL intended
to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims
can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional
150-day waiting period before any redemptions are made to stockholders, any liability of stockholders with respect to a redemption
is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any
liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore,
if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public shares in
the event we do not complete our initial business combination within the required time period is not considered a liquidation distribution
under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute
of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years,
as in the case of a liquidation distribution. It is our intention to redeem our public shares as soon as reasonably possible following
the 9th, 12th or
15th month from the closing of our initial public
offering and, therefore, we do not intend to comply with the above procedures. As such, our stockholders could potentially be liable for
any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond
the third anniversary of such date.
Because we will not be complying
with Section 280 of the DGCL, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such
time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within
the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will
be limited to seeking to complete an initial business combination, the only likely claims to arise would be from our vendors (such as
lawyers, investment bankers, etc.) or prospective target businesses.
We seek to have all third
parties (including any vendors or other entities we engage after our initial public offering) and any prospective target businesses enter
into valid and enforceable agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies
held in the trust account. As a result, the claims that could be made against us will be limited, thereby lessening the likelihood that
any claim would result in any liability extending to the trust. We therefore believe that any necessary provision for creditors will be
reduced and should not have a significant impact on our ability to distribute the funds in the trust account to our public stockholders.
Nevertheless, there is no guarantee that vendors, service providers and prospective target businesses will execute such agreements. In
the event that a potential contracted party was to refuse to execute such a waiver, we will execute an agreement with that entity only
if our management first determines that we would be unable to obtain, on a reasonable basis, substantially similar services or opportunities
from another entity willing to execute such a waiver. Examples of instances where we may engage a third-party that refused to execute
a waiver would be the engagement of a third-party consultant who cannot sign such an agreement due to regulatory restrictions, such
as our auditors who are unable to sign due to independence requirements, or whose particular expertise or skills are believed by management
to be superior to those of other consultants that would agree to execute a waiver or a situation in which management does not believe
it would be able to find a provider of required services willing to provide the waiver. There is also no guarantee that, even if they
execute such agreements with us, they will not seek recourse against the trust account. Our insiders have agreed that they will be jointly
and severally liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective
target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to
below $10.00 per public share, except as to any claims by a third-party who executed a valid and enforceable agreement with us waiving
any right, title, interest or claim of any kind they may have in or to any monies held in the trust account and except as to any claims
under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities
Act. Our board of directors has evaluated our insiders’ financial net worth and believes they will be able to satisfy any indemnification
obligations that may arise. However, our insiders may not be able to satisfy their indemnification obligations, as we have not required
our insiders to retain any assets to provide for their indemnification obligations, nor have we taken any further steps to ensure that
they will be able to satisfy any indemnification obligations that arise. Moreover, our insiders will not be liable to our public stockholders
and instead will only have liability to us. As a result, if we liquidate, the per-share distribution from the trust account could
be less than approximately $10.00 due to claims or potential claims of creditors. We will distribute to all of our public stockholders,
in proportion to their respective equity interests, an aggregate sum equal to the amount then held in the trust account, inclusive of
any interest not previously released to us, (subject to our obligations under Delaware law to provide for claims of creditors as described
below).
If we are unable to consummate
an initial business combination and are forced to redeem 100% of our outstanding public shares for a portion of the funds held in the
trust account, we anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after such date and
anticipate it will take no more than 10 business days to effectuate the redemption of our public shares. Our insiders have waived
their rights to participate in any redemption with respect to their founder shares. We will pay the costs of any subsequent liquidation
from our remaining assets outside of the trust account. If such funds are insufficient, our insiders have agreed to pay the funds necessary
to complete such liquidation (currently anticipated to be no more than approximately $100,000) and have agreed not to seek repayment of
such expenses. Each holder of public shares will receive a full pro rata portion of the amount then in the trust account, plus any pro
rata interest earned on the funds held in the trust account and not previously released to us or necessary to pay our taxes. The proceeds
deposited in the trust account could, however, become subject to claims of our creditors that are in preference to the claims of public
stockholders.
Our public stockholders shall
be entitled to receive funds from the trust account only in the event of our failure to complete our initial business combination in the
required time period or if the stockholders seek to have us convert their respective shares of common stock upon a business combination
which is actually completed by us. In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust
account.
If we are forced to file a
bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could
be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with
priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per share redemption
or conversion amount received by public stockholders may be less than $10.00.
If, after we distribute the
proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed
against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy
laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek
to recover all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary
duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public
stockholders from the trust account prior to addressing the claims of creditors. Claims may be brought against us for these reasons.
Certificate of Incorporation
Our certificate of incorporation
contains certain requirements and restrictions relating to our initial public offering that will apply to us until the consummation of
our initial business combination. If we hold a stockholder vote to amend any provisions of our certificate of incorporation relating to
stockholder’s rights or pre-business combination activity (including the substance or timing within which we have to complete
a business combination), we will provide our public stockholders with the opportunity to redeem their shares of common stock upon approval
of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account,
including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes,
divided by the number of then outstanding public shares, in connection with any such vote. Our insiders have agreed to waive any conversion
rights with respect to any founder shares, private shares and any public shares they may hold in connection with any vote to amend our
certificate of incorporation. Specifically, our certificate of incorporation provides, among other things, that:
| ● | prior to the consummation of our initial business combination,
we shall either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which
public stockholders may seek to convert their shares of common stock, regardless of whether they vote for or against the proposed business
combination, into a portion of the aggregate amount then on deposit in the trust account, 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 public stockholders do not exercise conversion rights in an amount that would cause our net tangible assets to be less than $5,000,001
and a majority of the outstanding shares of common stock voted are voted in favor of the business combination; |
| ● | if our initial business combination is not consummated within
9 months (or 12 or 15 months, as applicable) the closing of our initial public offering, then our existence will terminate
and we will distribute all amounts in the trust account to all of our public holders of shares of common stock; |
|
● |
upon the consummation of our initial public offering and the partial exercise of the underwriter’s over-allotment option, $77,276,860 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 shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote
on any initial business combination. |
Potential Revisions to Agreements with Insiders
Each of our insiders has entered
into letter agreements with us pursuant to which each of them has agreed to do certain things relating to us and our activities prior
to a business combination. We could seek to amend these letter agreements without the approval of stockholders, although we have no intention
to do so. In particular:
| ● | Restrictions relating to liquidating the trust account if
we failed to consummate a business combination in the time-frames specified above could be amended, but only if we allowed all stockholders
to redeem their shares in connection with such amendment; |
| ● | Restrictions relating to our insiders being required to vote
in favor of a business combination or against any amendments to our organizational documents could be amended to allow our insiders to
vote on a transaction as they wished; |
| ● | The requirement of members of the management team to remain
our officer or director until the closing of a business combination could be amended to allow persons to resign from their positions
with us if, for example, the current management team was having difficulty locating a target business and another management team had
a potential target business; |
| ● | The restrictions on transfer of our securities could be amended
to allow transfer to third parties who were not members of our original management team; |
| ● | The obligation of our management team to not propose amendments
to our organizational documents could be amended to allow them to propose such changes to our stockholders; |
| ● | The obligation of insiders to not receive any compensation
in connection with a business combination could be modified in order to allow them to receive such compensation; and |
| ● | The requirement to obtain a valuation for any target business
affiliated with our insiders, in the event it was too expensive to do so. |
Except as specified above,
stockholders would not be required to be given the opportunity to redeem their shares in connection with such changes. Such changes could
result in:
| ● | Our having an extended period of time to consummate a business
combination (although with less in trust as a certain number of our stockholders would certainly redeem their shares in connection with
any such extension); |
| ● | Our insiders being able to vote against a business combination
or in favor of changes to our organizational documents; |
| ● | Our operations being controlled by a new management team
that our stockholders did not elect to invest with; |
| ● | Our insiders receiving compensation in connection with a
business combination; and |
| ● | Our insiders closing a transaction with one of their affiliates
without receiving an independent valuation of such business. |
We will not agree to any such
changes unless we believed that such changes were in the best interests of our stockholders (for example, if we believed such a modification
were necessary to complete a business combination). Each of our officers and directors has fiduciary obligations to us requiring that
he or she act in our best interests and the best interests of our stockholders.
Competition
In identifying, evaluating
and selecting a target business, we may encounter intense competition from other entities having a business objective similar to ours.
Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or
through affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources
will be relatively limited when contrasted with those of many of these competitors. While we believe there may be numerous potential target
businesses that we could complete a business combination with utilizing the net proceeds of our initial public offering, our ability to
compete in completing a business combination with certain sizable target businesses may be limited by our available financial resources.
The following also may not
be viewed favorably by certain target businesses:
| ● | our obligation to seek stockholder approval of our initial
business combination or engage in a tender offer may delay the completion of a transaction; |
| ● | our obligation to convert shares of common stock held by
our public stockholders may reduce the resources available to us for our initial business combination; |
| ● | our obligation to pay the deferred underwriting discounts
to the underwriters upon consummation of our initial business combination; |
| ● | our obligation to either repay working capital loans that
may be made to us by our insiders or their affiliates; |
| ● | our obligation to register the resale of the founder shares,
as well as the private units (and underlying securities) and any shares issued to our insiders or their affiliates upon conversion of
working capital loans; and |
| ● | the impact on the target business’ assets as a result
of unknown liabilities under the securities laws or otherwise depending on developments involving us prior to the consummation of a business
combination. |
Any of these factors may place
us at a competitive disadvantage in successfully negotiating our initial business combination. Our management believes, however, that
our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage
over privately held entities having a similar business objective as ours in connection with an initial business combination with a target
business with significant growth potential on favorable terms.
If we succeed in effecting
our initial business combination, there will be, in all likelihood, intense competition from competitors of the target business. Subsequent
to our initial business combination, we may not have the resources or ability to compete effectively.
Employees
We have three executive officers.
These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time
as they deem necessary to our affairs. The amount of time they devote in any time period will vary based on circumstances, including whether
a target business has been selected for the business combination and the stage of the business combination process the company is in.
Accordingly, once a suitable target business to consummate our initial business combination with has been located, management will spend
more time investigating such target business and negotiating and processing the business combination (and consequently spend more time
on our affairs) than had been spent prior to locating a suitable target business. We presently expect our executive officers to devote
an average of approximately 10 hours per week to our business. We do not intend to have any full time employees prior to the consummation
of our initial business combination.
Periodic Reporting and Audited Financial Statements
We have registered our units,
common stock and rights under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly
and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports, including this
Report, contain financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders
with audited financial statements of the prospective target business as part of any proxy solicitation materials or tender offer documents
sent to stockholders to assist them in assessing the target business. These financial statements will need to be prepared in accordance
with or reconciled to United States GAAP or IFRS as issued by the IASB. A particular target business identified by us as a potential
business combination candidate may not have the necessary financial statements. To the extent that this requirement cannot be met, we
may not be able to consummate our initial business combination with the proposed target business.
We may be required by the
Sarbanes-Oxley Act to have our internal control over financial reporting audited for the year ending December 31, 2022. A target
company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of their internal control over
financial reporting. The development of the internal control over financial reporting of any such entity to achieve compliance with the
Sarbanes-Oxley Act may increase the time and costs necessary to complete any such initial business combination.
JOBS
Act
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not “emerging growth companies” including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002,
or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,
and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of
any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be
a less active trading market for our securities and the prices of our securities may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period until we are
no longer an “emerging growth company.”
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth
anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion,
or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by
non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued
more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to “emerging
growth company” shall have the meaning associated with it in the JOBS Act.