ITEM 1. Business.
Introduction
This
information included in this Annual Report on Form 10-K should be read in conjunction with the consolidated financial statements and
related notes following Item 16 of this Annual Report on Form 10-K.
Please
see the definitions above for a list of terms used throughout this Report.
Some
of our logos, trademarks or tradenames may be used in this Report. This Report also includes trademarks, tradenames and service marks
that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report may appear
without the®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended to indicate
in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if
any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their
rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with,
or endorsement or sponsorship of us by, any other companies.
The
market data and certain other statistical information used throughout this Report are based on independent industry publications, reports
by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research,
surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do
not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosures contained in this Report,
and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any
misstatements regarding any third-party information presented in this Report, their estimates, in particular, as they relate to projections,
involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those
discussed under the section entitled “Risk Factors” of this Report. These and other factors could cause our future performance
to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors
as they relate to the Company is also based on our good faith estimates.
Organizational History
and Business
We are a newly organized blank check company incorporated
as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization, or similar business combination with one or more businesses, which we refer to throughout this Annual Report as our initial
business combination. We have had discussions with potential business combination targets in the energy sector, including energy transition
and renewable fuels industries.
Initial Public Offering
The
registration statement for our IPO was declared effective on August 12, 2021. On August 17, 2021, we consummated our IPO of 15,000,000 units.
Each unit consists of one Class A common stock of the Company, par value $0.0001 per share, and three-quarters of one redeemable
warrant of the Company, each whole Warrant entitling the holder thereof to purchase one Class A common stock for $11.50 per share.
The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $150,000,000.
Certain
qualified institutional buyers or institutional accredited investors which are not affiliated with any member of the Company’s
management have purchased up to 1,485,000 units in the IPO at the offering price of $10.00 per unit, generating gross
proceeds of $14,850,000 included in the gross proceeds from units offered to public of $150,000,000.
In
connection with the closing of the IPO, the Sponsor sold membership interest reflecting an allocation of 75,000 founder shares,
or an aggregate of 825,000 founder shares, to each anchor investor at their original purchase price of approximately $0.0058 per
share.
Substantially
with the closing of the IPO, the Company completed the private sale of an aggregate of 6,000,000 warrants to the Sponsor and
the Underwriters at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $6,000,000.
The Private Placement Warrants are identical to the Warrants sold in the IPO, except that the Sponsor and the Underwriters agreed not
to transfer, assign or sell any of the Private Placement Warrants (except to certain permitted transferees) until 30 days after the completion
of the Company’s initial Business Combination.
The
underwriters had a 45-day option from the date of the Company’s IPO to purchase up to an additional 2,250,000 Units to
cover over-allotments, if any. On August 19, 2021, the underwriters exercised the over-allotment in full, at $10.00 per Unit, generating
additional gross proceeds of $22,500,000. Simultaneously with the closing of the over-allotment, the Company consummated the sale of
additional 450,000 Private Placement Warrants to the Sponsor, and additional 225,000 Private Placement Warrants to
the Underwriters, at $1.00 per warrant, generating gross proceeds to the Company of $675,000.
Transaction costs of our initial public offering and
the over-allotment amounted to $17,771,253 consisting of $3,450,000 of underwriting discount, $6,037,500 of deferred underwriting discount,
an excess of fair value of the founder shares acquired by the Anchor Investors of $6,265,215, fair value of the 189,750 representative
shares of $1,442,100 and $576,438 of other cash offering costs were charged to additional paid in capital.
A total
of $174,225,000 was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as
trustee.
Our units, public shares and public warrants are
each traded on the NASDAQ Stock Market under the symbols “CENQU,” “CENQ” and “CENQW,” respectively.
Business Strategy and Management Team Experience
Our Management Team Experience
Our
management team has extensive experience in identifying and executing potential acquisitions across the upstream, downstream
and midstream energy sectors. In addition, our team has significant hands-on experience working with oil
companies across all sectors and serving as active owners and directors working closely with energy companies to create value in the
public markets.
Our
acquisition strategy will leverage our management team’s extensive experience and relationships built over more than 170 combined
years of forming, financing, and operating public and private oil and gas companies, and the financial and operational expertise of the
rest of our team, to identify potential proprietary and public transaction opportunities that we believe could benefit from our knowledge
and experience and that offer the potential for an attractive risk-adjusted return profile under our ownership. Our management team has
developed a broad network of contacts and corporate relationships over their careers that we believe will serve as a useful source of
acquisition opportunities. Our ability to evaluate public/private and brokered/non-brokered deals provides us exposure to a broad set
of potential acquisition opportunities in the energy sector that may not broadly available to our potential competitors.
We
will seek to capitalize on the extensive experience of each of the members of our management team. The members of our management team,
including John B. Connally III, J. Russell Porter and Michael Mayell, each have a history of creating significant value and generating
attractive shareholder returns.
Our
CEO, J. Russell Porter, has sourced and financed the acquisition of over 150 oil and gas producing properties in multiple basins within
North America. While Executive Vice President of Forcenergy Inc., Mr. Porter lead the acquisition team that acquired over 125 separate
producing assets in 29 transactions with aggregate net production at the time of acquisition of 18,500 BOPD and 146 MMCFD and proven
reserves of 54 million barrels of oil and 273 Bcf of natural gas. When Mr. Porter was CEO of Gastar Exploration, Inc. (“Gastar”),
he structured the acquisition of approximately 160,000 acres in the Sooner Trend of Oklahoma from Chesapeake Energy in 2013 for $80 million
in a negotiated transaction. Shortly after closing, approximately one half of that acreage position was sold to Newfield Exploration
for $80 million. Before that, Mr. Porter identified and captured an onshore coal bed methane opportunity in New South Wales, Australia,
brought in an Australian operating partner and arranged an exit from the project realizing an approximate 6:1 return on investment.
Members
of our management team and Board are not obligated to devote any specific number of hours to our matters, but they intend to devote as
much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time
that any members of our management team or our Board will devote in any time period will vary based on whether a target business has
been selected for our initial business combination and the current stage of the business combination process.
We
believe the operational and transactional experience and industry relationships of our management team and Board will provide us with
a substantial number of potential business combination targets. Over the course of their careers, the members of our management team
and our Board have developed a broad network of contacts and corporate relationships around the world. This network has grown through
the activities of our management team and our Board sourcing, acquiring and financing businesses, and building relationships with sellers,
financing sources and management teams. The members of our management team and our Board also have a proven track record of executing
transactions under varying economic and financial market conditions, which we believe will make us an attractive partner to potential
target businesses.
Our
management team also has extensive experience in energy joint ventures. In 2005 Mr. Porter structured a joint venture between Gastar
and Chesapeake Energy in which Chesapeake acquired 33% of Gastar’s Deep Bossier play in East Texas along with a 20% equity ownership
stake in Gastar’s common stock. In 2010, Mr. Porter lead Gastar’s formation of a joint venture in the Marcellus and Utica
plays with a South Korean E&P company that resulted in the joint development of Gastar’s 40,000-acre lease position. Also,
in 2016, he oversaw the formation of a “Drilco” type joint venture between Gastar and a New York based hedge fund for
the drilling of development wells in Kingfisher County, Oklahoma within the “STACK” play.
Our Business Strategy
In
addition to industry and lending community relationships, we plan to leverage relationships with management teams of public and private
companies, family offices, private equity firms, investment bankers, restructuring advisers, attorneys and accountants, which we believe
should provide us with numerous business combination opportunities. Members of our management team and Board will communicate with their
networks of relationships to articulate the parameters for our search for a target business and a potential business combination and
begin the process of pursuing and reviewing said targets.
One
possibility we are exploring is identifying and acquiring long-lived assets with relatively stable decline profiles and low fixed costs
supported by existing production and cash flow, but that we believe are underperforming their potential due to capital starvation, shifting
ownership focus or geographical stranding. We believe that especially in today’s financial and commodity markets, otherwise fundamentally
sound companies can underperform their full-potential due to numerous factors, including lack of capital, a temporary period of dislocation
in the markets in which they operate, over-leveraged capital structures, excessive cost structures, incomplete management teams and/or
business strategies that no longer appeal to capital markets. Our management team has extensive experience in identifying and executing
such full-potential acquisitions in the energy industry. We plan to capitalize on the broad range of our team’s skill sets, backgrounds,
experiences, and other intellectual capital, to identify and realize unexploited value. Our management team and Board have successfully
executed on this business strategy across multiple energy market cycles, identifying value that the broader market has not recognized
and acquiring assets at attractive valuations. Furthermore, we believe that the current market allows for capturing assets at attractive
valuations while also taking a conservative approach to valuation. When implementing our business strategy, we will be agnostic about
commodity type (e.g., oil or gas) and will place significant emphasis on cash-on-cash returns, which we plan to maximize by employing
a conservative capital allocation strategy based on full cycle economics. We intend to mitigate risk through commodity price hedging
that will be employed for any producing assets to minimize commodity price risk and lock in projected returns. By using a disciplined
approach to capital allocation, both at the time of acquisition and the subsequent optimization of the target, we believe that we can
generate meaningful returns for our equity holders. Our objective is to form a sustainable business with multiple competitive advantages
and the potential to generate meaningful cash flow in excess of its capital. We believe that a new business model for publicly traded
energy companies is emerging that will be based on returning capital to shareholders, either through debt reduction, share buy-backs
or dividends. Inherent in the ability to return capital to shareholders will be a disciplined approach to management that is highly selective
of acquisitions, maintains a low leverage profile and keeps overhead costs low. We would expect to grow the business over time, both
organically and through acquisitions, with a focus on achieving attractive risk-adjusted returns for our stockholders, while maintaining
conservative balance sheet metrics.
Commodity prices have increased recently due to
multiple factors. We believe that these factors will continue to influence commodity prices well into 2022. In addition, both public
and private capital available to the E&P sector has become scarce, limiting the pool of potential asset purchasers, as well as
limiting existing companies’ operational flexibility. Escalating tensions resulting from the Russian invasion of Ukraine could
lead to increased volatility in global oil and gas prices, including due to increases in oil production by Russia to finance its
activities in Ukraine or to destabilize global oil and gas prices. We will also evaluate opportunities to extend our management
team’s energy expertise into energy asset related activities that utilize “green” or “clean”
components of the energy chain, such as hydrogen-based or renewable fuel supplies or carbon sequestration associated with oil and
gas production, as well as natural gas derivative plays such as helium extraction. Many of these types of opportunities may involve
traditional oil and gas products as a base and utilize additional processing or technologies to enhance the value proposition.
Acquisition Criteria
Consistent
with our acquisition strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating
prospective target assets and/or businesses. We will use these criteria and guidelines in evaluating acquisition opportunities. While
we intend to acquire companies or assets that we believe exhibit one or more of the following characteristics, we may decide to enter
into our initial business combination with a target business that does not meet these criteria and guidelines. We intend to focus on
companies or assets that we believe have the following characteristics:
| ● | Attractive
Returns: we will seek to acquire companies or assets with the
ability to generate attractive returns based upon conservative reserve or asset valuations. |
| ● | Operational
Control: we will seek to acquire companies or assets over which
we will have operational control. This will allow our management team to use their operational
and financial expertise to create value from existing assets and have control over future
capital deployment. |
| ● | Optimization
of Operations: we will seek to acquire assets or companies that: |
| ● | present opportunities
to reduce costs, increase production or otherwise optimize operations that would result in
near-term improved economics and returns to shareholders; |
| ● | have been underinvested
in by current owners due to, among other causes, liquidity limitations resulting from the
current commodity price environment, the capital intensity of other operations and balance
sheet considerations; and/or |
| ● | are at an inflection
point requiring additional capital, additional operational expertise or are susceptible to
innovative and superior optimization techniques that drive improved financial performance. |
| ● | Ease of Operating: Health,
Safety, Security, Environmental and Social (“HSSES”) standards, procedures and
performance will be a critical element of future operational activity; historical records
and performance will be an essential element in assessing suitability for future efficient
and effective performance. We will attempt to avoid operations that result in the potential
for harmful greenhouse gas emissions and will seek to use industry “best practices”
for minimizing the environmental impact of all operations. |
These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be
based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management
may deem relevant. If we decide to enter into our initial business combination with a target business that does not meet the above criteria
and guidelines, we will disclose that the target business does not meet the above criteria in our shareholder communications related
to our initial business combination, which would be in the form of proxy solicitation materials or tender offer documents that we would
file with the SEC.
Initial Business Combination
Our
initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least
80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on
the trust account) at the time of the agreement to enter into the initial business combination. 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 that is a member of the Financial Industry Regulatory Authority or FINRA or an independent accounting firm with respect to the satisfaction
of such criteria. Except as required by applicable law, our stockholders may not be provided with a copy of such opinion, nor will they
be able to rely on such opinion.
Any
party may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds
to complete the acquisition by issuing a class of equity or equity-linked securities to specified purchasers that we may determine in
connection with financing our initial business combination. We refer to this potential future issuance, or a similar issuance to other
specified purchasers, as a “specified future issuance” throughout this Annual Report. The amount and other terms and conditions
of any such specified future issuance would be determined at the time thereof. We are not obligated to make any specified future issuance
and may determine not to do so. This is not an offer for any specified future issuance. Pursuant to the anti-dilution provisions of our
Class B common stock, any such specified future issuance would result in an adjustment to the conversion ratio such that our initial
stockholders and their permitted transferees, if any, would retain their aggregate percentage ownership at 20% of the sum of the total
number of all shares of common stock outstanding plus all shares issued in the specified future issuance, unless the holders of a majority
of the then outstanding shares of Class B common stock agreed to waive such adjustment with respect to the specified future issuance
at the time thereof. We cannot determine at this time whether a majority of the holders of our Class B common stock at the time
of any such specified future issuance would agree to waive such adjustment to the conversion ratio. If such adjustment is not waived,
the specified future issuance would not reduce the percentage ownership of holders of our Class B common stock but would reduce
the percentage ownership of holders of our Class A common stock. If such adjustment is waived, the specified future issuance would
reduce the percentage ownership of holders of both classes of our common stock.
Our Acquisition Process
We
believe that conducting comprehensive due diligence on prospective investments is particularly important within the energy sector. We
will use the diligence, rigor, and expertise of our management, members of our Board and our technical committee to evaluate potential
targets’ strengths, weaknesses, and opportunities to identify the relative risk and return profile of any potential target for
our initial business combination. Given our management team’s tenure investing in energy companies, we will often be familiar with
the prospective target area of operation, upside potential and potential risks.
In
evaluating a prospective initial business combination, we expect to conduct a thorough diligence review that will encompass, among other
things, meetings with incumbent management and employees, document reviews, inspection of assets and facilities and financial analyses,
as well as a review of other information that will be made available to us.
Our
ability to evaluate assets and/or businesses is greatly enhanced by the prior experience and expertise of our management team and technical
committee. We plan to incorporate a rigorous due diligence process that will lever the diverse experience and talents of management and
the Technical Committee.
Certain
of our officers and directors are employed by or affiliated with various investment companies or funds. Such funds and individuals
are continuously made aware of potential investment opportunities, one or more of which we may desire to pursue for a business
combination, but we have not (nor has anyone on our behalf, including members of our Board) contacted any prospective target
business or had any substantive discussions, formal or otherwise, with respect to a business combination transaction with any
prospective target business.
We
may, at our option, pursue an opportunity with an entity to which an officer or director has a fiduciary or contractual obligation. Any
such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional
proceeds to complete the acquisition by making a specified future issuance to any such entity. Our amended and restated certificate of
incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity
is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one
we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Status as a Public Company
We
believe our structure will make us an attractive business combination partner to target businesses. As an existing public company, we
offer a target business an alternative to the traditional initial public offering through a merger or other business combination. In
this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock
or for a combination of shares of our stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although
there are various costs and obligations associated with being a public company, we believe target businesses will find this method a
more certain and cost-effective method to becoming a public company than the typical initial public offering. In a typical initial public
offering, there are additional expenses incurred in marketing, road show and public reporting efforts that may not be present to the
same extent in connection with a business combination with us.
Furthermore,
once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public
offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could
delay or prevent the offering from occurring or could have negative valuation consequences. Once public, we believe the target business
would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’
interests. It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in
attracting talented employees.
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. 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 do not intend to take advantage of the benefits of this extended transition period and our election
to opt out is irrevocable.
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 the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation
pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market
value of our Class A 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 securities during the prior three-year period.
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may
take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial
statements. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market
value of our common stock held by non-affiliates did not exceed $250 million as of the prior June 30, or (2) our annual revenues
did not exceed $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates did not
exceed $700 million as of the prior June 30.
Financial Position
With
funds in the trust account available for a business combination initially in the amount of $174,225,000 in full ($10.10 per unit), in
each case before underwriting commissions, fees and expenses associated with our initial business combination, we offer a target business
a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its
operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our business combination
using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination
that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken
any steps to secure third party financing and there can be no assurance it will be available to us.
Effecting our Initial Business Combination
We
are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following the IPO. We intend
to complete our initial business combination using cash from the proceeds of the IPO and the private placement of the private placement
warrants, our capital stock, debt or a combination of these as the consideration to be paid in our initial business combination. We may
seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages
of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If
our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account
are used for payment of the consideration in connection with our business combination or used for redemptions of our Class A common
stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance
or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing
our initial business combination, to fund the purchase of other assets, companies or for working capital.
We
may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial
business combination (which may include a specified future issuance), and we may complete our initial business combination using the
proceeds of such offering rather than using the amounts held in the trust account. Subject to compliance with applicable securities laws,
we would expect to complete such financing only simultaneously with the completion of our business combination. In the case of an initial
business combination funded with assets other than the trust account assets, our tender offer documents or proxy materials disclosing
the business combination would disclose the terms of the financing and, only if required by law, we would seek stockholder approval of
such financing. There are no prohibitions on our ability to raise funds privately, including pursuant to any specified future issuance,
or through loans in connection with our initial business combination. At this time, we are not a party to any arrangement or understanding
with any third party with respect to raising any additional funds through the sale of securities or otherwise.
The
time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs
associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification
and evaluation of a prospective target business with which our business combination is not ultimately completed will result in our incurring
losses and will reduce the funds we can use to complete another business combination.
Sources of Target Businesses
We
expect to receive a number of proprietary transaction opportunities to originate as a result of the business relationships, direct outreach,
and deal sourcing activities of our officers and directors. In addition to the proprietary deal flow, we anticipate that target business
candidates will be brought to our attention from various unaffiliated sources, including investment banking firms, consultants, accounting
firms, private equity groups, large business enterprises, and other market participants. These sources may also introduce us to target
businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read our reports and
know what types of businesses we are targeting. Our officers and directors, as well as their affiliates, may also bring to our attention
target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions
they may have, as well as attending trade shows or conventions. Some of our officers or directors may enter into employment or consulting
agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or
arrangements will not be used as a criterion in our selection process of an acquisition candidate. In no event will our sponsor or any
of our existing officers or directors, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or
other compensation before, or for any services they render in order to effectuate, the completion of our initial business combination
(regardless of the type of transaction that it is). However, in connection with the successful completion of our initial business combination,
we may determine to provide a payment to our sponsor, officers, directors, advisors or our or their affiliates, which payment would not
be made from the proceeds of the IPO held in the trust account. We currently do not have any agreement or arrangement with our sponsor,
any of our officers, directors, advisors or our or their affiliates to make any such payments.
We
are not prohibited from pursuing an initial business combination with a business combination target that is affiliated with our sponsor,
officers or directors or making the acquisition through a joint venture or other form of shared ownership with our sponsor, officers
or directors. In the event we seek to complete our initial business combination with a business combination target that is affiliated
with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment
banking firm which is a member of FINRA or an independent accounting firm that such an initial business combination is fair to our company
from a financial point of view. We are not required to obtain such an opinion in any other context. 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 before
presenting such business combination opportunity to us. Any such entity may co-invest with us in the target business at the time of our
initial business combination, or we could raise additional proceeds to complete the acquisition by making a specified future issuance
to any such entity.
Lack of Business Diversification
For
an indefinite period of time after the completion 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 completing our 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 intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our business
combination with that business, our assessment of the target business’ management may not prove to be correct. In addition, the
future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future
role of members of our management team or of our Board, if any, in the target business cannot presently be stated with any certainty.
While it is possible that one or more of our directors will remain associated in some capacity with us following our business combination,
it is presently unknown if any of them will devote their full efforts to our affairs after our business combination. Moreover, we cannot
assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular
target business. The determination as to whether any members of our Board will remain with the combined company will be made at the time
of our initial business combination.
Following
a business combination, to the extent that we deem it necessary, we may seek to recruit additional managers to supplement the incumbent
management team of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional
managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to
Approve our 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 Class A common stock that will be equal to or in excess of 20% of the number of shares
of our Class A 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. |
Permitted Purchases of our Securities
In
the event we seek stockholder approval of our business combination and we do not conduct redemptions in connection with our business
combination pursuant to the tender offer rules, our sponsor, directors, officers, advisors or their affiliates may purchase shares or
public warrants in privately negotiated transactions or in the open market either before or after the completion of our initial business
combination. There is no limit on the number of shares our sponsor, directors, officers, advisors or their affiliates may purchase in
such transactions, subject to compliance with applicable law and the rules of NASDAQ. 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. None of the funds
in the trust account will be used to purchase shares or public warrants in such transactions. If they engage 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. If our sponsor, directors, officers, advisors or their 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 any such purchases of shares could 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 business combination, where
it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce
the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection
with our initial business combination. Any such purchases of our securities may result in the completion of our business combination
that may not otherwise have been possible.
In
addition, if such purchases are made, the public “float” of our 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, officers, directors, advisors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsor,
officers, directors, advisors or their 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, officers, directors, advisors or their 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. Our sponsor, officers, directors, advisors or their
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, officers, directors, advisors and/or their 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,
officers, directors, advisors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2)
or Rule 10b-5 of the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange
Act to the extent such purchasers are subject to such reporting requirements.
Redemption Rights for Public Stockholders
upon Completion of our Initial Business Combination
We
will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon
the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the trust account as of two business days before the consummation of the initial business combination including interest earned on
the funds held in the trust account and not previously released to us to pay our franchise and income taxes as well as expenses relating
to the administration of the trust account, divided by the number of then outstanding public shares, subject to the limitations described
herein. The amount in the trust account is initially anticipated to be approximately $10.10 per public share. The per-share amount we
will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay
to the underwriters. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed
to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion
of our business combination. The anchor investors will not be entitled to redemption rights with respect to any founder shares held by
them in connection with the completion of our business combination.
Manner of Conducting
Redemptions
We
will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon
the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the business
combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business
combination or conduct 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 require us to seek stockholder approval under the law or
stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval while direct
mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or
seek to amend our amended and restated certificate of incorporation would require stockholder approval. If we structure a business combination
transaction with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a
stockholder vote to approve the proposed business combination. We intend to conduct redemptions without a stockholder vote pursuant to
the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose
to seek stockholder approval for business or other legal reasons. So long as we obtain and maintain a listing for our securities on NASDAQ,
we will be required to comply with such rules.
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, pursuant
to our amended and restated certificate of incorporation:
| ● | conduct the redemptions
pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer
tender offers, and |
| ● | file tender offer
documents with the SEC before completing our initial business combination that contain substantially
the same financial and other information about the initial business combination and the redemption
rights as is required under Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies. |
Upon
the public announcement of our business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1
to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer,
to comply with Rule 14e-5 under the Exchange Act.
If
we conduct redemptions pursuant to the tender offer rules, our offer to redeem 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 are not purchased by our sponsor, which number will be based on the requirement that we may not redeem
public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon completion of our initial business
combination (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 stock exchange listing requirement, or we decide to obtain stockholder
approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
| ● | conduct the redemptions
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. |
If
we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide
our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete
our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business
combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock
of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote
at such meeting. Our sponsor will count toward this quorum and has agreed to vote its founder shares and any public shares purchased during
or after the IPO, and the anchor investors have agreed to vote any founder shares held by them, in favor of our initial business combination.
For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the
approval of our initial business combination once a quorum is obtained. We intend to give approximately 30 days (but not less than
10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve
our initial business combination. These quorum and voting thresholds, and the voting agreement of our sponsor, and the voting agreements
of our initial shareholders and the anchor investors, may make it more likely that we will consummate our initial business combination.
Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction.
The anchor investors are not required to vote any of their public shares in favor of our initial business combination or for or against
any other matter presented for a shareholder vote.
Our
amended and restated certificate of incorporation provides that in no event will we redeem our 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.
For example, the proposed business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash
to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy
other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we
would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required
to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to
us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption
will be returned to the holders thereof.
Limitation on Redemption
upon Completion of our Initial Business Combination if we Seek Stockholder Approval
Notwithstanding
the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public
stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as
a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with
respect to more than an aggregate of 15% of the shares sold in the IPO (the “Excess Shares”). We believe this restriction
will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to
exercise their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares
at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder
holding more than an aggregate of 15% of the shares sold in the IPO could threaten to exercise its redemption rights if such holder’s
shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting
our stockholders’ ability to redeem no more than 15% of the shares sold in the IPO, we believe we will limit the ability of a small
group of stockholders to unreasonably attempt to block our ability to complete our business combination, particularly in connection with
a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash.
However, our amended and restated certificate of incorporation will not restrict our stockholders’ ability to vote all of their
shares (including Excess Shares) for or against our business combination.
Tendering Stock Certificates
in Connection with a Tender Offer or Redemption Rights
We
may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares
in “street name,” to either tender their certificates to our transfer agent before the date set forth in the tender offer
documents, or up to two business days before the vote on the proposal to approve the business combination in the event we distribute
proxy materials, or to deliver their shares to the transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal
At Custodian) System, at the holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to holders
of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to
satisfy such delivery requirements. Accordingly, a public stockholder would have from the time we send out our tender offer materials
until the close of the tender offer period, or up to two days before the vote on the business combination if we distribute proxy materials,
as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period,
it is advisable for stockholders to use electronic delivery of their public shares.
There
is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through
the DWAC System. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not
to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking
to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless
of the timing of when such delivery must be effectuated.
The
foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with
their business combinations, many blank check companies 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 redemption 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 completion 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 redemption 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 redemption rights, to which stockholders
were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion
of the business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery
before the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the business combination is approved.
Any
request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the
date of the stockholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered
its certificate in connection with an election of redemption rights and subsequently decides before the applicable date not to elect
to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically).
It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed
promptly after the completion of our business combination.
If
our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their
redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case,
we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If
our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different
target until 12 months (or until 18 months if we extend the period of time to consummate our initial business combination in accordance
with the terms described in the IPO’s registration statement) from the closing of the IPO.
Redemption of Public
Shares and Liquidation if no Initial Business Combination
Our
amended and restated certificate of incorporation provides that we will have only 12 months from the closing of the IPO to complete our
initial business combination. If we anticipate that we may not be able to consummate our initial business combination within 12 months,
we may, but are not obligated to, extend the period of time to consummate a business combination two times by an additional three months
each time (for a total of up to 18 months to complete a business combination); provided that our Sponsor, as defined below (or its designees)
must deposit into the trust account funds equal to one percent (1%) of the gross proceeds of the offering (including such proceeds from
the exercise of the underwriters’ over-allotment option) for each 3-month extension of the time period to complete our initial
business combination (the “Additional Funds”), in exchange for a non-interest bearing, unsecured promissory note. However,
if we filed a proxy statement, registration statement or similar filing for an initial business combination within the initial 12-month
period, we may extend the period of time to consummate a business combination by three months (or up to 15 months to complete a business
combination) without depositing the Additional Funds. If we are unable to complete our business combination within such prescribed time
period, 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 the public shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to
us to pay our franchise and income taxes as well as expenses relating to the administration of the trust account (less up to $100,000
of interest released to us to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will
completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), 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, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions
with respect to our warrants, which will expire worthless if we fail to complete our business combination within the prescribed time
period.
Holders
of our founder shares will not be entitled to rights to liquidating distributions from the trust account with respect to the founder
shares held by them if we fail to complete our initial business combination within 12 months (or up to 18 months, as applicable) from
the closing of the IPO. However, if our sponsor, officers, directors, or the anchor investors acquire public shares in or after the IPO,
they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our
initial business combination within the allotted 12-month time period (or up to 18-month time period, as applicable). Our sponsor, officers
and directors have agreed, pursuant to a letter agreement with us, that they will not propose any amendment to our amended and restated
certificate of incorporation that would modify the substance or timing of our obligation to redeem 100% of our public shares if we do
not complete our initial business combination within 12 months (or within 18 months if we extend the period of time to consummate our
initial business combination in accordance with the terms described in the IPO’s registration statement) from the closing of the
IPO, unless we provide our public stockholders with the opportunity to redeem their shares of Class A 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 as well
as expenses relating to the administration of the trust account divided by the number of then outstanding public shares. However, we
may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon completion of
our initial business combination (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption
right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement
(described above) we would not proceed with the amendment or the related redemption of our public shares.
All costs and expenses
associated with implementing our plan of dissolution, as well as payments to any creditors, have been funded from amounts remaining out
of the approximately $600,000 of proceeds held outside the trust account, although we cannot assure you that there will be sufficient
funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan
of dissolution, to the extent that there is any interest accrued in the trust account not required to pay franchise and income taxes
as well as expenses relating to the administration of the trust account on interest income earned on the trust account balance, we may
request the trustee to release to us an amount of up to $100,000 of such accrued interest to pay those costs and expenses. As of March
28, 2022, we have not requested the trustee to release any funds.
If
we were to expend all of the net proceeds of the IPO and the sale of the private placement warrants, 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 amount
received by stockholders upon our dissolution would be approximately $10.10.
The
proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority
than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders
will not be substantially less than $10.10. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims
against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These
claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay
such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although
we will seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities
with which we do business execute agreements with us waiving any right, title, interest and claim of any kind in or to any monies held
in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even
if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited
to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability
of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the
trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management
will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed
a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party
consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants
that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver.
In
addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising
out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Our sponsor
has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent auditors) 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 (i) $10.10 per public share or (ii) such lesser amount per public share
held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in
each case net of the amount of interest which may be withdrawn to pay taxes as well as expenses relating to the administration of the
trust account, 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 our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under
the Securities Act. If an executed waiver is deemed to be unenforceable against a third party, then our sponsor will not be responsible
to the extent of any liability for such third party claims Our sponsor does not have sufficient funds to satisfy its indemnity obligations
and our sponsor’s only assets are securities of our company. We have not asked our sponsor to reserve for such indemnification
obligations. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. As a result, if any such claims
were successfully made against the trust account, the funds available for our initial business combination and redemptions could be reduced
to less than $10.10 per public share. In such event, we may not be able to complete our initial business combination, and you would receive
such lesser amount per share in connection with any redemption of your public shares. None of our officers will indemnify us for claims
by third parties including, without limitation, claims by vendors and prospective target businesses.
If
the proceeds in the trust account are reduced below (i) $10.10 per public share or (ii) such lesser amount per public share held
in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each
case net of the amount of interest which may be withdrawn to pay taxes as well as expenses relating to the administration of the trust
account, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations
related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce
its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against
our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business
judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high
relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked
our sponsor to reserve for such indemnification obligations and we cannot assure you that our sponsor would be able to satisfy those
obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will
not be less than $10.10 per public share.
We
will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by
endeavoring to have all vendors, service providers (other than our independent auditors), prospective target businesses or other
entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to
monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of
the IPO against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately
$600,000 from the proceeds of the IPO with which to pay any such potential claims (including costs and expenses incurred in
connection with our liquidation, currently estimated to be no more than approximately $100,000). If we liquidate, and it is
subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust
account could be liable for claims made by creditors. If our offering expenses exceeded our estimate of $900,000, we would fund such
excess with funds from the funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside
the trust account would decrease by a corresponding amount. Conversely, since the offering expenses of $576,438 are
less than our estimate of $900,000, the amount of funds we intend to be held outside the trust account will increase by a
corresponding amount.
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 our public
shares in the event we do not complete our business combination within 12 months (or within 18 months if we extend the period of time
to consummate our initial business combination in accordance with the terms described in the IPO’s registration statement) from
the closing of the IPO may be considered a liquidating 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 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.
Furthermore,
if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event
we do not complete our business combination within 12 months (or within 18 months if we extend the period of time to consummate our initial
business combination in accordance with the terms described in the IPO’s registration statement) from the closing of the IPO, is
not considered a liquidating 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 liquidating distribution. If we are unable to complete our business combination
within 12 months (or within 18 months if we extend the period of time to consummate our initial business combination in accordance with
the terms described in the IPO’s registration statement) from the closing of the IPO, we will: (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the
public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest
earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes as well as expenses
relating to the administration of the trust account (less up to $100,000 of interest released to us to pay dissolution expenses), divided
by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders
(including the right to receive further liquidating distributions, if any), 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, dissolve and liquidate,
subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 24th 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.
Because
we will not be complying with Section 280, 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 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. As described above, pursuant to the obligation contained
in our underwriting agreement, we will seek to have all vendors, service providers (other than our independent auditors), prospective
target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim
of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are
significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote.
Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below
(i) $10.10 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation
of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes
as well as expenses relating to the administration of the trust account and will not be liable as to any claims under our indemnity of
the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. If an executed waiver is deemed
to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If
we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that 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 $10.10 per share to our public stockholders. Additionally, if 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 some or all amounts received by our stockholders. Furthermore, our Board may be
viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company
to claims of punitive damages, by paying public stockholders from the trust account before addressing the claims of creditors. We cannot
assure you that claims will not be brought against us for these reasons.
Our
public stockholders will be entitled to receive funds from the trust account only (i) in the event of the redemption of our public
shares if we do not complete our business combination within 12 months (or within 18 months if we extend the period of time to consummate
our initial business combination in accordance with the terms described in the IPO’s registration statement) from the closing of
the IPO, subject to applicable law, (ii) in connection with a stockholder vote to approve an amendment to our amended and restated
certificate of incorporation (a) to modify the substance or timing of our obligation to redeem 100% of our public shares if we have not
consummated an initial business combination within 12 months (or within 18 months if we extend the period of time to consummate our initial
business combination in accordance with the terms described in the IPO’s registration statement) from the closing of the IPO or
(b) relating to any other provisions relating to stockholders’ rights or pre-initial business combination activity, or (iii) our
completion of an initial business combination, and then only in connection with those shares of our common stock that such stockholder
properly elected to redeem, subject to the limitations. In no other circumstances will a stockholder have any right or interest of any
kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s
voting in connection with the business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable
pro rata share of the trust account. Such stockholder must have also exercised its redemption rights as described above.
Competition
In
identifying, evaluating and selecting a target business for our business combination, we may encounter intense competition from other
entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout
funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience
identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial,
technical, human and other resources than we do. Our ability to acquire larger target businesses will be limited by our available financial
resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation
to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us
for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed
favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating
an initial business combination.
Facilities
Our shared executive offices are located at 4550 Post Oak Place Dr.,
Suite 300, Houston, Texas 77027, and our telephone number is (713) 820-6300. We consider our current office space adequate for our current
operations.
Employees
We currently have two officers. We have no paid
employees. Members of our management team are not obligated to devote any specific number of hours to our matters, but they intend to
devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount
of time that any such person will devote in any time period will vary based on whether a target business has been selected for our initial
business combination and the current stage of the business combination process.
Periodic Reporting and Financial Information
We
will register our units, Class A common stock and warrants 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 will 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 the tender offer materials
or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial
statements will need to be prepared in accordance with GAAP. We cannot assure you that any particular target business selected by us
as a potential acquisition candidate will have financial statements prepared in accordance with GAAP or that the potential target business
will be able to prepare its financial statements in accordance with GAAP. To the extent that this requirement cannot be met, we may not
be able to acquire the proposed target business. While this may limit the pool of potential acquisition 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, 2022 as required by the Sarbanes-Oxley
Act. Only if 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 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.
Item 1A. Risk Factors.
Summary Risk Factors
We
are a newly formed company that has conducted no operations and has generated no revenues. Until we complete our initial business combination,
we will have no operations and will generate no operating revenues. In making your decision whether to invest in our securities, you
should take into account not only the background of our management team, but also the special risks we face as a blank check company.
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors”
immediately following this summary. These risks include, among others, the following:
Risks Relating to a Business Combination and
Post Business Combination Risks
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We are a newly formed company with no operating history and no revenues. |
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Our public stockholders may not be afforded an opportunity to vote on our proposed business combination. |
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If we seek stockholder approval of our initial business combination, our sponsor and the anchor investors have agreed to vote any founder shares held by them in favor of such initial business combination. |
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Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash. |
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The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets. |
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The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination. |
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The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful. |
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The requirement that we
complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us. |
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We may not be able to complete
our initial business combination within the prescribed time frame. |
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we seek stockholder approval of our initial business combination, our sponsor, directors,
officers, advisors and their affiliates may elect to purchase shares or public warrants from
public stockholders. |
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have identified material weaknesses in our internal control over financial reporting. If
we are unable to develop and maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial results in a timely
manner, which may adversely affect investor confidence in us and materially and adversely
affect our business and operating results, and we may face litigation as a result. |
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If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our business combination, such shares may not be redeemed.
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You will not have any rights or interests in funds from the trust account. |
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NASDAQ may delist our securities from trading on its exchange. |
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Shareholders will not be entitled to protections normally afforded to investors of many other blank check companies. |
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If we seek stockholder approval of our initial business combination, you may lose the ability to redeem all such shares in excess of 15% of our Class A common stock. |
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As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer. |
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Changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination. |
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Our search for a business combination may be materially adversely affected by COVID-19. |
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Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. |
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Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. |
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We may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.10 per share. |
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We may depend on loans from our sponsor or management team to fund our search for a business combination. |
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After the completion of our initial business combination, we may be required to take write-downs or write-offs. |
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If third parties bring claims against us, the proceeds held in the trust account could be reduced. |
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Our independent directors may decide not to enforce the indemnification obligations of our sponsor. |
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We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers. |
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We and our board may be exposed to claims of punitive damages. |
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Claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced. |
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We may be required to institute burdensome compliance requirements and our activities may be restricted. |
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Changes in laws or regulations may adversely affect our business. |
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Our stockholders may be held liable for claims by third parties against us . |
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We may not hold an annual meeting of stockholders until after the consummation of our initial business combination. |
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We are not registering the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act. |
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The grant of registration rights to our initial stockholders and the anchor investors may make it more difficult to complete our initial business combination. |
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We ratified certain action pursuant to Section 204 of the DGCL and filed a Certificate of Validation. |
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Because we are not limited to a particular industry, you will be unable to ascertain the merits or risks of any particular target business’ operations. |
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Because we intend to seek a business combination with a target business in the energy industry in North America, we expect our future operations to be subject to risks associated with this sector. |
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Past performance by our management team and members of our Board may not be indicative of future performance of an investment in us. |
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We may seek acquisition opportunities in industries or sectors which may or may not be outside of our management’s area of expertise. |
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We may enter into our initial business combination with a target that does not meet certain criteria and guidelines. |
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We may seek acquisition opportunities with an early stage company. |
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We are not required to obtain an opinion from an independent investment banking firm. |
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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.” |
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We may issue additional shares of common stock or preferred stock to complete our initial business combination and may issue shares of common stock or preferred stock under an employee incentive plan. |
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Resources could be wasted in researching acquisitions that are not completed. |
Risks Relating to our Sponsor and Management Team
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We are dependent upon our officers and directors, and their loss could adversely affect our ability to operate. We are dependent upon the efforts of members of our management team. |
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Members of our management team may negotiate employment or consulting agreements with a target business in connection with a particular business combination. |
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We may have a limited ability to assess the management of a prospective target business. |
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Our officers and directors may allocate their time to other businesses, thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. |
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Certain of our officers and directors may in become affiliated with entities engaged in business activities similar to those intended to be conducted by us. |
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Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests. |
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We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers, directors or existing holders. |
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We may not have an audit committee consisting entirely of independent directors for up to a year following our initial public offering. |
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A conflict of interest may arise in determining whether a particular business combination target is appropriate. |
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Our officers and directors could potentially make a substantial profit even if we acquire a target business that subsequently declines in value. |
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We may issue notes or other debt securities, or otherwise incur substantial debt. |
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We may only be able to complete one business combination with the proceeds of the IPO and the sale of the private placement warrants, which will cause us to be solely dependent on a single business. |
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We may attempt to simultaneously complete business combinations with multiple prospective targets. |
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We may attempt to complete our initial business combination with a private company about which little information is available. |
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Our management may not be able to maintain control of a target business after our initial business combination. |
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We do not have a specified maximum redemption threshold. |
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Unlike many blank check companies, our balance sheet reflects negative stockholders’ equity. |
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We may seek to amend our amended and restated certificate of incorporation in a manner that will make it easier for us to complete our initial business combination but that our stockholders may not support. |
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The provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity may be amended with the approval of holders of 65% of our common stock. |
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We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business. |
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Our initial stockholders may exert a substantial influence on actions requiring a stockholder vote,. |
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We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of the then outstanding public warrants. |
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We may redeem your unexpired warrants before their exercise at a time that is disadvantageous to you. |
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Our warrants and founder shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to complete our business combination. |
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The units may be worth less than units of other special purpose acquisition companies, or SPACs. |
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Our warrant agreement may make it more difficult for us to consummate an initial business combination. |
Risks Relating to our Securities
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We may lose the ability to complete an otherwise advantageous initial business combination. |
| ● | There is increasing scrutiny and changing expectations from investors, lenders, customers and other market
participants with respect to our Environmental, Social and Governance, or ESG |
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We are an emerging growth company and a smaller reporting company. |
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Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to complete our initial business combination. |
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Our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us. |
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Our amended and restated certificate of incorporation could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents. |
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Cyber incidents could result in information theft, data corruption, operational disruption and/or loss. |
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An investment may result in uncertain or adverse United States federal income tax consequences. |
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If we complete our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional risks. |
Risk
Factors
Our
business involves significant risks, some of which are described below. You should carefully consider these risks, in addition to the
other information contained in this Annual Report on Form 10-K, including our financial statements and related notes and the section
of this Annual Report on Form 10-K titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The occurrence of any of the events or developments described in the following risk factors and the risks described elsewhere in this
Annual Report could harm our business, financial condition, results of operations, cash flows, and the trading price of our securities.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could
differ materially from those anticipated in the forward-looking statements as a result of factors that are described in the following
risk factors and the risks described elsewhere in this Annual Report on Form 10-K.
Risks Relating to our
Search for, Consummation of, or Inability to Consummate, a Business Combination and Post Business Combination Risks
We are a newly formed
company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We
are a newly formed company with no operating results. Because we lack an operating history, you have no basis upon which to evaluate
our ability to achieve our business objective of completing our initial business combination with one or more target businesses. We have
no plans, arrangements or understandings with any prospective target business concerning a business combination and may be unable to
complete our business combination. If we fail to complete our business combination, we will never generate any operating revenues.
Our public stockholders
may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination
even though holders of a majority of our common stock do not support such a combination.
We
may not hold a stockholder vote to approve our initial business combination unless the business combination would require stockholder
approval under applicable law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or other
legal reasons. Except as required by law, 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. Accordingly, we may complete our initial business combination even if holders of a majority of our common
stock do not approve of the business combination we complete.
If we seek stockholder
approval of our initial business combination, our sponsor and the anchor investors have agreed to vote any founder shares held by them
in favor of such initial business combination, regardless of how our public stockholders vote.
Unlike many other blank check companies in which the
initial stockholders agree to vote their founder shares in accordance with the majority of the votes cast by the public stockholders in
connection with an initial business combination, our sponsor has agreed to vote its founder shares, as well as any public shares purchased
during or after the IPO, and the anchor investors have agreed to vote any founder shares held by them, in favor of our initial business
combination. Our sponsor owns shares representing 20% of our outstanding shares of common stock. Accordingly, if we seek stockholder approval
of our initial business combination, it is more likely that the necessary stockholder approval will be received than would be the case
if our sponsor agreed to vote its founder shares in accordance with the majority of the votes cast by our public stockholders.
We have identified material weaknesses in
our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence
in us and materially and adversely affect our business and operating results, and we may face litigation as a result.
In connection with the
preparation of our financial statements as of September 30, 2021, we reevaluated the classification of the Class A common stock subject
to possible redemption. This revaluation was due to a recent notification from the SEC that SPAC’s must not report possible redemption
of stock as permanent equity. After consultation with the chairman of our audit committee, our management concluded that the previously
issued audited balance sheet dated as of August 17, 2021 related to the consummation of our initial public offering, which should be restated
to report all Class A common stock subject to possible redemption as temporary equity. As part of such process, we identified a material
weakness in our internal control over financial reporting related to the lack of ability to account for complex financial instruments.
During the quarter ended December 31, 2021, management identified a material weakness in internal control relating to the over-allotment
option. 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 and corrected, on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and
prevent fraud, and material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could
result in a material misstatement of our annual or interim financial statements. In such a case, we may be unable to maintain compliance
with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements,
investors may lose confidence in our financial reporting, our securities price may decline and we may face litigation as a result. We
continue to evaluate steps to remediate the material weaknesses. These remediation measures may be time consuming and costly and there
is no assurance that these initiatives will ultimately have the intended effects. However, we cannot assure you that the measures we have
taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
Your only opportunity
to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem
your shares from us for cash, unless we seek stockholder approval of the business combination.
At
the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of one or more
target businesses. Since our Board may complete a business combination without seeking stockholder approval, public stockholders may
not have the right or opportunity to vote on the business combination, unless we seek such stockholder vote. Accordingly, if we do not
seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be
limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender
offer documents mailed to our public stockholders in which we describe our initial business combination.
The ability of our
public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets,
which may make it difficult for us to enter into a business combination with a target.
We
may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that
we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not
be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. Furthermore, in
no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon completion
of our initial business combination (so that we are not subject to the SEC’s “penny stock” rules) or any greater net
tangible asset or cash requirement that may be contained in the agreement relating to our initial business combination. Consequently,
if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 upon completion
of our initial business combination or such greater amount necessary to satisfy a closing condition as described above, we would not
proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective
targets will be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us.
The ability of our
public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most
desirable business combination or optimize our capital structure.
At
the time we enter into an agreement for our initial business combination, we will not know how many public stockholders may exercise
their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that
will be submitted for redemption. If our business combination agreement requires us to use a portion of the cash in the trust account
to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash
in the trust account to meet such requirements, or arrange for third party financing. In addition, if a larger number of shares are submitted
for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the
trust account or arrange for third party financing. Raising additional third-party financing may involve dilutive equity issuances or
the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable
business combination available to us or optimize our capital structure. The amount of the deferred underwriting commissions payable to
the underwriters will not be adjusted for any shares that are redeemed in connection with a business combination. The per-share amount
we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commission
and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred
underwriting commissions.
The ability of our
public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our
initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If
our business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price or requires
us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased.
If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate
the trust account. If you need immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our
stock may trade at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss
on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate, or you are able to sell
your stock in the open market.
The requirement that
we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in
negotiating a business combination and may decrease our ability to conduct due diligence on potential business combination targets as
we approach our dissolution deadline, which could undermine our ability to complete our business combination on terms that would produce
value for our stockholders.
Any
potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete
our initial business combination within 12 months (or within 18 months if we extend the period of time to consummate our initial business
combination in accordance with the terms described in the IPO’s registration statement) from the closing of the IPO. Consequently,
such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial
business combination with that particular target business, we may be unable to complete our initial business combination with any target
business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct
due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
We may not be able
to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for
the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive
$10.10 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our
amended and restated certificate of incorporation provides that we must complete our initial business combination within 12 months (or
within 18 months if we extend the period of time to consummate our initial business combination in accordance with the terms described
in the IPO’s registration statement) from the closing of the IPO. We may not be able to find a suitable target business and complete
our initial business combination within such time period. Our ability to complete our initial business combination may be negatively
impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. For example,
the coronavirus (“COVID-19”) outbreak continues to grow both in the U.S. and globally and, while the extent of the impact
of the outbreak on us will depend on future developments, it could limit our ability to complete our initial business combination, including
as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable
to us or at all. Additionally, the outbreak of COVID-19 may negatively impact businesses we may seek to acquire. If we have not completed
our initial business combination within such time period, 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 the public shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held
in the trust account and not previously released to us to pay our franchise and income taxes as well as expenses relating to the administration
of the trust account (less up to $100,000 of interest released to us to pay dissolution expenses), divided by the number of then outstanding
public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to
receive further liquidating distributions, if any), 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, dissolve and liquidate, subject in each case to
our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our
public stockholders may only receive $10.10 per share, and our warrants will expire worthless. In certain circumstances, our public stockholders
may receive less than $10.10 per share on the redemption of their shares. See “— If third parties bring claims against
us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less
than $10.10 per share” and other risk factors in this section.
If we seek stockholder
approval of our initial business combination, our sponsor, directors, officers, advisors and their affiliates may elect to purchase shares
or public warrants from public stockholders or public warrant holders, which may influence a vote on a proposed business combination
and reduce the public “float” of our Class A common stock.
If
we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our business combination
pursuant to the tender offer rules, our sponsor, directors, officers, advisors or their affiliates may purchase shares or public warrants
or a combination thereof in privately negotiated transactions or in the open market either before or after the completion of our initial
business combination, although they are under no obligation to do so. 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. There is no limit on the number of shares our sponsor, directors, officers, advisors or their affiliates
may purchase in such transactions, subject to compliance with applicable law and the rules of NASDAQ. However, other than as expressly
stated herein, 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. None of the funds in the trust account will be used to purchase shares or public warrants in
such transactions. If our sponsor, directors, officers, advisors or their 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. The purpose of such purchases could be to vote such shares in favor of the business
combination and thereby increase the likelihood of obtaining stockholder approval of the business combination, or to satisfy a closing
condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our
business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of shares
could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval
of the business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth
or a certain amount of cash at the closing of our business combination, where it appears that such requirement would otherwise not be
met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such
warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases
of our securities may result in the completion of our business combination that may not otherwise have been possible. Any such purchases
will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent the purchasers are subject to such
reporting requirements.
In
addition, if such purchases are made, the public “float” of our Class A common stock and the number of beneficial holders
of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities
on a national securities exchange.
If a stockholder
fails to receive notice of our offer to redeem our public shares in connection with our business combination or fails to comply with
the procedures for tendering its shares, such shares may not be redeemed.
We
will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our business combination.
Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder
may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable,
that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures
that must be complied with in order to validly tender or redeem public shares. For example, we may require our public stockholders seeking
to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender
their certificates to our transfer agent before the date set forth in the tender offer documents or proxy materials mailed to such holders,
or up to two business days before the vote on the proposal to approve the business combination in the event we distribute proxy materials,
or to deliver their shares to the transfer agent electronically. If a stockholder fails to comply with these or any other procedures,
its shares may not be redeemed.
You will not have
any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore,
you may be forced to sell your public shares or warrants, potentially at a loss.
Our
public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) our completion
of an initial business combination, and then only in connection with those shares of our common stock that such stockholder properly
elected to redeem, subject to limitations, (ii) the redemption of any public shares properly submitted in connection with a stockholder
vote to amend our amended and restated certificate of incorporation (a) to modify the substance or timing of our obligation to redeem
100% of our public shares if we do not complete our initial business combination within 12 months (or within 18 months if we extend the
period of time to consummate our initial business combination in accordance with the terms described in the IPO’s registration
statement) from the closing of the IPO or (b) relating to any other provision relating to stockholders’ rights or pre-initial business
combination activity, and (iii) the redemption of our public shares if we are unable to complete an initial business combination
within 12 months (or within 18 months if we extend the period of time to consummate our initial business combination in accordance with
the terms described in the IPO’s registration statement) from the closing of the IPO, subject to applicable law and as further
described herein. In addition, if we are unable to complete an initial business combination within 12 months (or within 18 months if
we extend the period of time to consummate our initial business combination in accordance with the terms described in the IPO’s
registration statement) from the closing of the IPO for any reason, compliance with Delaware law may require that we submit a plan of
dissolution to our then-existing stockholders for approval before the distribution of the proceeds held in our trust account. In that
case, public stockholders may be forced to wait beyond 12 months (or 18 months) from the closing of the IPO before they receive funds
from our trust account. In no other circumstances will a public stockholder have any right or interest of any kind in the trust account.
Holders of warrants will not have any right to the proceeds held in the trust account with respect to the warrants. Accordingly, to liquidate
your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
NASDAQ may delist
our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject
us to additional trading restrictions.
We
cannot assure you that our securities will continue to be listed on NASDAQ in the future or before our initial business combination.
In order to continue listing our securities on NASDAQ before our initial business combination, we must maintain certain financial, distribution
and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity and a minimum number of holders of
our securities.
Additionally,
in connection with our initial business combination, we will be required to demonstrate compliance with NASDAQ’s initial listing
requirements, which are more rigorous than NASDAQ’s continued listing requirements, in order to continue to maintain the listing
of our securities on NASDAQ. For instance, our stock price would generally be required to be at least $4.00 per share. We cannot assure
you that we will be able to meet those initial listing requirements at that time.
If
NASDAQ delists our securities from trading on its exchange and we are not able to list our securities on another national securities
exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material
adverse consequences, including:
| ● | a limited availability
of market quotations for our securities; |
| ● | reduced liquidity
for our securities; |
| ● | a determination
that our Class A common stock is a “penny stock” which will require brokers
trading in our Class A common stock to adhere to more stringent rules and possibly result
in a reduced level of trading activity in the secondary trading market for our securities; |
| ● | a limited amount
of news and analyst coverage; 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.” Our units, Class A common stock and warrants
are 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, other than the State of Idaho, 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.
You will not be entitled
to protections normally afforded to investors of many other blank check companies.
Since the net proceeds of the IPO and the sale of the private placement
warrants are intended to be used to complete an initial business combination with a target business that has not been selected, we may
be deemed to be a “blank check” company under the United States securities laws. However, because we did not have net
tangible assets in excess of $5,000,001 upon the successful completion of the offering and the sale of the private placement warrants
and we 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 in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits
or protections of those rules. Among other things, this means our units will be immediately tradable and we will have a longer period
of time to complete our business combination than do companies subject to Rule 419. Moreover, if the IPO was subject to Rule 419,
that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the
trust account were released to us in connection with our completion of an initial business combination.
If we seek stockholder
approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group”
of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares
in excess of 15% of our Class A common stock.
If
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 amended and restated certificate of incorporation provides that a public stockholder,
together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an
aggregate of 15% of the shares sold in the IPO, which we refer to as the “Excess Shares.” However, our amended and restated
certificate of incorporation does not restrict our stockholders’ ability to vote all of their shares (including Excess Shares)
for or against our business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete
our business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions.
Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our business combination.
As a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required
to sell your stock in open market transactions, potentially at a loss.
As the number of
special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more competition
for attractive targets. This could increase the cost of our initial business combination and could even result in our inability to find
a target or to consummate an initial business combination.
In
recent years, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets
for special purpose acquisition companies have already entered into an initial business combination, and there are still many special
purpose acquisition companies preparing for an initial public offering, as well as many such companies currently in registration. As
a result, at times, fewer attractive targets may be available to consummate an initial business combination.
In addition, because there are more special
purpose acquisition companies seeking to enter into an initial business combination with available targets, the competition for available
targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial
terms.
Changes in the market for directors
and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business
combination.
In recent months, the market for directors
and officers liability insurance for special purpose acquisition companies has changed. The premiums charged for such policies have generally
increased and the terms of such policies have generally become less favorable. There can be no assurance that these trends will not continue.
The increased cost and decreased availability
of directors and officers liability insurance could make it more difficult and more expensive for us to negotiate an initial business
combination. In order to obtain directors and officers liability insurance or modify its coverage as a result of becoming a public company,
the post-business combination entity might need to incur greater expense, accept less favorable terms or both. However, any failure to
obtain adequate directors and officers liability insurance could have an adverse impact on the post-business combination’s ability
to attract and retain qualified officers and directors.
In addition, even after we were to complete
an initial business combination, our directors and officers could still be subject to potential liability from claims arising from conduct
alleged to have occurred prior to the initial business combination. As a result, in order to protect our directors and officers, the post-business
combination entity will likely need to purchase additional run-off insurance with respect to any such claims. The need for run-off insurance
would be an added expense for the post-business combination entity, and could interfere with or frustrate our ability to consummate an
initial business combination on terms favorable to our investors.
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
COVID-19 outbreak and the status of debt and equity markets.
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 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, and on March 11,
2020 the World Health Organization characterized the outbreak as a “pandemic”. A significant outbreak of COVID-19 and other
infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide,
and 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 restrict travel, limit the
ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable
to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination
will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning
the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or
other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations
of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
In addition, our ability to consummate
a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by COVID-19 and other related events
could have a material adverse effect on our ability to raise adequate financing, including as a result of increased market volatility,
decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all.
Because of our limited resources
and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business
combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10
per share on our redemption of our public shares, or less than such amount in certain circumstances, and our warrants will expire worthless.
We expect to encounter intense competition
from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships),
other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire.
Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly,
acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical,
human and other resources or more local industry knowledge than we do, and our financial resources will be relatively limited when contrasted
with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net
proceeds of the IPO and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain
target businesses that are sizable 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, because we are obligated
to pay cash for the shares of Class A common stock that our public stockholders redeem in connection with our initial business combination,
target companies will be aware that this may reduce the resources available to us for our initial business combination. This may place
us at a competitive disadvantage in successfully negotiating a business combination. If we are unable to complete our initial business
combination, our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust account and our warrants
will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share upon our liquidation.
See “If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption
amount received by stockholders may be less than $10.10 per share” and other risk factors in this section.
If the net proceeds of the IPO
and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate for at least
the next 12 months, we may be unable to complete our initial business combination, in which case our public stockholders may only receive
$10.10 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
The funds available to us outside of
the trust account may not be sufficient to allow us to operate for at least the next 12 months, assuming that our initial business combination
is not completed during that time. We believe that, upon the closing of the IPO, the funds available to us outside of the trust account
will be sufficient to allow us to operate for at least the next 12 months; however, we cannot assure you that our estimate is accurate.
Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search
for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision
in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with
other companies on terms more favorable to such target businesses) with respect to a particular proposed business combination, although
we do not have any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to
receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or
otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business.
If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share
on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may
receive less than $10.10 per share upon our liquidation. See “-If third parties bring claims against us, the proceeds held in the
trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and
other risk factors in this section.
If the net proceeds of the IPO and the sale
of the private placement warrants not being held in the trust account are insufficient, it could limit the amount available to fund our
search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor
or management team to fund our search for a business combination, to pay our franchise and income taxes as well as expenses relating to
the administration of the trust account and to complete our initial business combination. If we are unable to obtain these loans, we may
be unable to complete our initial business combination.
Of
the net proceeds of the IPO and the sale of the private placement warrants, only approximately $600,000 was available to us
initially outside the trust account to fund our working capital requirements. Our offering expenses of $576,438 did not exceed our
estimate of $900,000. If the offering expenses had exceeded our estimate, we would fund such excess with funds not to be held in the trust account. In such case, the amount of funds we
intend to be held outside the trust account would decrease by a corresponding amount. Conversely, since the offering expenses were less
than our estimate of $900,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding
amount. If we are required to seek additional capital, we would need to withdraw interest from the trust account as described
elsewhere in this Annual Report and/or borrow funds from our sponsor, management team or other third parties to operate, or we may
be forced to liquidate. None of our sponsor, members of our management team, nor any of their affiliates is under any obligation to
advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from
funds released to us upon completion of our initial business combination. We do not expect to seek loans from parties other than our
sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver
against any and all rights to seek access to funds in our trust account. If we are unable to obtain these loans, we may be unable to
complete our initial business combination. If we are unable to complete our initial business combination because we do not have
sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. Consequently, our public
stockholders may only receive approximately $10.10 per share on our redemption of our public shares, and our warrants will expire
worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share on the redemption of their
shares. See “If third parties bring claims against us, the proceeds held in the trust account could be reduced and the
per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk factors in this
section.
After the completion of our initial
business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have
a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some
or all of your investment.
Even if we conduct extensive due diligence
on a target business with which we combine, we cannot assure you that this diligence will surface all material issues that may be present
inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence,
or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be
forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in
our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise, and previously known
risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and
not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions
about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be
subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing.
Accordingly, any stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value
of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
If third parties bring claims against
us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than
$10.10 per share.
Our placing of funds in the trust account
may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than
our independent auditors), prospective target businesses or other entities with which we do business 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,
such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against
the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as
well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our
assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies
held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement
with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly
more beneficial to us than any alternative. Making such a request of potential target businesses may make our acquisition proposal less
attractive to them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential
target businesses that we might pursue.
Examples of possible instances where
we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise
or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or
in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such
entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or
agreements with us and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are
unable to complete our business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection
with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought
against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders
could be less than the $10.10 per share initially held in the trust account, due to claims of such creditors. Our sponsor has agreed that
it will be 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
(i) $10.10 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation
of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay
taxes as well as expenses relating to administration of the trust account. This liability will not apply with respect 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 our indemnity
of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, if an executed waiver
is deemed to be unenforceable against a third party, then our sponsor will not be responsible to the extent of any liability for such
third-party claims. Our sponsor does not have sufficient funds to satisfy its indemnity obligations and our sponsor’s only assets
are securities of our company. We have not asked our sponsor to reserve for such indemnification obligations. Therefore, we cannot assure
you that our sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the trust
account, the funds available for our initial business combination and redemptions could be reduced to less than $10.10 per public share.
In such event, we may not be able to complete our initial business combination, and you would receive such lesser amount per share in
connection with any redemption of your public shares. None of our officers will indemnify us for claims by third parties including, without
limitation, claims by vendors and prospective target businesses.
Our independent directors may decide
not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available
for distribution to our public stockholders.
If the proceeds in the trust account
are reduced below the lesser of (i) $10.10 per public share or (ii) such lesser amount per share held in the trust account as of
the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest
which may be withdrawn to pay taxes as well as expenses relating to administration of the trust account, and our sponsor asserts that
it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors
would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
While we currently expect that our independent
directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that
our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action
is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that
a favorable outcome is not likely. 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 $10.10 per share.
We may not have sufficient funds
to satisfy indemnification claims of our directors and executive officers.
We have agreed to indemnify our directors
and executive officers to the fullest extent permitted by law. However, our directors and executive officers have agreed to waive any
right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account
for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if: (i) we have sufficient
funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our directors
and executive officers may discourage stockholders from bringing a lawsuit against our directors, directors and executive officers for
breach of their fiduciary duties. These provisions also may have the effect of reducing the likelihood of derivative litigation against
our directors and executive officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore,
a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our
directors and executive officers pursuant to these indemnification provisions.
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, a bankruptcy court may seek to recover such proceeds, and we and our board may be exposed to claims of punitive
damages.
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 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 before addressing the claims of creditors.
If, before distributing 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, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share
amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing 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, 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 amount that would otherwise be received by our stockholders in connection with
our liquidation may be reduced.
If we are deemed to be an investment
company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be
restricted, which may make it difficult for us to complete our business combination.
If we are deemed to be an investment
company under the Investment Company Act, our activities may be restricted, including:
| ● | restrictions on the nature of our investments; and |
| ● | restrictions on the issuance of securities, each of which may
make it difficult for us to complete our business combination. |
In addition, we may have imposed upon
us burdensome requirements, including:
| ● | registration as an investment company; |
| ● | adoption of a specific form of corporate structure; and |
| ● | reporting, record keeping, voting, proxy and disclosure requirements
and other rules and regulations. |
In order not to be regulated as an investment
company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business
other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding
or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities
and cash items) on an unconsolidated basis. Our business will be to identify and complete a business combination and thereafter to operate
the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit
from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
We do not believe that our anticipated
principal activities will subject us to the Investment Company Act. To this end, the proceeds held in the trust account may only be invested
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 that invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee will not be
permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a
business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner
of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of
the Investment Company Act. Investing in our securities is not intended for persons who are seeking a return on investments in government
securities or investment securities. The trust account is intended as a holding place for funds pending the earliest to occur of: (i) the
completion of our primary business objective, which is a business combination; (ii) the redemption of any public shares properly
submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (a) to modify the substance
or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 12 months
(or within 18 months if we extend the period of time to consummate our initial business combination in accordance with the terms described
in the IPO’s registration statement) from the closing of the IPO or (b) relating to any other provisions relating to stockholders’
rights or pre-initial business combination activity; or (iii) absent a business combination, our return of the funds held in the
trust account to our public stockholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed
above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance
with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability
to complete a business combination. If we are unable to complete our initial business combination, our public stockholders may receive
only approximately $10.10 per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances,
our public stockholders may receive less than $10.10 per share on the redemption of their shares. See “-If third parties bring claims
against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be
less than $10.10 per share” and other risk factors in this section.
Changes in laws or regulations,
or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete
our initial business combination, 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, including our ability to negotiate and complete our initial business combination, investments
and results of operations.
Our stockholders may be held liable
for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
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 our public shares in the event we do not complete
our initial business combination within the prescribed time period may be considered a liquidating distribution under Delaware law. If
a 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 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. However, it is our intention to redeem our public shares as soon as reasonably
possible following the 24th month from the closing of the IPO in the event we do not complete our business combination and,
therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with
Section 280, 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 10 years following
our dissolution. 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. If our plan of distribution complies with Section 281(b) of the DGCL, 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 likely be barred after the third anniversary
of the dissolution. 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 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 our public shares in the event we do not complete our initial business combination within
the prescribed time frame is not considered a liquidating 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 liquidating distribution.
We may not hold an annual meeting
of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders
to elect directors.
In accordance with NASDAQ corporate governance
requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our
listing on NASDAQ. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the
purposes of electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting.
We may not hold an annual meeting of stockholders to elect new directors before the consummation of our initial business combination,
and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders
want us to hold an annual meeting before the consummation of our initial business combination, they may attempt to force us to hold one
by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
We are not registering the shares
of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time,
and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able
to exercise its warrants except on a cashless basis and potentially causing such warrants to expire worthless.
We are not registering the shares of
Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However,
under the terms of the warrant agreement, we will use our reasonable best efforts to file, and within 60 business days following our initial
business combination to have declared effective, a registration statement under the Securities Act covering such shares and maintain a
current prospectus relating to the Class A common stock issuable upon exercise of the warrants, until the expiration of the warrants
in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts
or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial
statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable
upon exercise of the warrants are not registered under the Securities Act within the required period, holders will be permitted to exercise
their warrants on a cashless basis until such time as there is an effective registration statement and during any period when we shall
have failed to maintain an effective registration statement. However, no warrant will be exercisable for cash or on a cashless basis,
and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon
such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration
is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not listed on a
national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of
the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless
basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file
or maintain in effect a registration statement, but we will be required to use our best efforts to register or qualify the shares under
applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant.
If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification,
the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In
such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for
the shares of Class A common stock included in the units. 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 shares of Class A common stock for sale under all applicable state
securities laws.
The grant of registration rights
to our initial stockholders and the anchor investors may make it more difficult to complete our initial business combination, and the
future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to an agreement to be entered
into concurrently with the issuance and sale of the securities in the IPO, our initial stockholders, the anchor investors, and their permitted
transferees can demand that we register their founder shares, after those shares convert to our Class A common stock at the time
of our initial business combination. In addition, holders of our private placement warrants and their permitted transferees can demand
that we register the private placement warrants and the Class A common stock issuable upon exercise of the private placement warrants,
and holders of warrants that may be issued upon conversion of working capital loans may demand that we register such warrants or the Class A
common stock issuable upon exercise of such warrants. In addition, the existence of the registration rights may make our initial business
combination more costly or difficult to conclude. This is because the shareholders of the target business may increase the equity stake
they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A
common stock that is expected when the common stock owned by our initial stockholders, holders of our private placement warrants, or holders
of our working capital loans or their respective permitted transferees are registered.
We ratified certain action pursuant
to Section 204 of the DGCL and filed a Certificate of Validation.
As
part of our preparation for the IPO, on February 10, 2021, our Board and sole stockholder ratified certain actions pursuant to
Section 204 of the DGCL (“Section 204”), which allows a Delaware corporation to ratify a defective corporate act
retroactive to the date the corporate act was originally taken. The Section 204 ratification (the “Ratification”) was
taken out as a purely technical matter in order to correct certain failures of authorization and thereby remove any uncertainty and
confirm the valid issuance of the founder shares effective December 31, 2020. To effect the Ratification, the Board identified and
ratified: (1) the issuance of the founder shares on or as of December 31, 2020, because (a) the Amended and Restated Certificate of
Incorporation (the “A&R Certificate”) that authorized the founder shares was filed on January 26, 2021, and (b) the
unanimous written consent of the Board approving the issuance of the founder shares, which was intended to be effective as of
December 31, 2020, was not executed until January 21, 2021; (2) the effectiveness the A&R Certificate as of December 31, 2020,
because (a) the A&R Certificate recited that it was approved pursuant to Sections 228 and 242 of the DGCL, but the A&R
Certificate should have instead recited that it was approved pursuant to Sections 241 and 245 of the DGCL; and (b) the A&R
Certificate was not effective on December 31, 2020, because the Board authorization approving its filing was on January 21, 2021 and
the A&R Certificate was filed on January 26, 2021. Consequently, in accordance with Section 204, the Board ratified the filing
of the A&R Certificate effective as of December 31, 2020, and the issuance of the founder shares immediately thereafter
effective as of December 31, 2020 (the effectiveness of the A&R Certificate and the issuance of the founder shares, as of
December 31, 2020, collectively, the “Corporate Acts”). Thereafter, in accordance with Section 204 we gave prompt
written notice of the Ratification to all the holders of putative and valid stock as of the date of the Corporate Acts and as of the
record date of the consent, which was our sole stockholder, the Sponsor, which was the sole owner of valid and putative stock. Our
sole stockholder consented to the Ratification of all the Corporate Acts on February 10, 2021. Accordingly, on February 24, 2021,
the Certificate of Validation was filed giving retroactive effect to the Corporate Acts effective as of December 31, 2020, thereby
eliminating any question as to the validity of the Corporate Acts as of December 31, 2020.
Under Section 205 of the DGCL any claim
that any corporate act described above is void or voidable due to the failure of authorization, or that the Delaware Court of Chancery
should declare in its discretion that the ratification thereof in accordance with Section 204 of the DGCL not be effective or be effective
only on certain conditions, must be brought within 120 days from the validation effective time (which in this case is February 24, 2021).
The Board and the Sponsor have both consented to the ratification and the effectiveness of the Corporate Acts and have treated the issuance
of the founder shares as effective as of December 31, 2020. While Section 205 does not expressly state that a plaintiff seeking to challenge
a ratification under Section 204 or the corporate acts ratified under Section 204 must have been a record or beneficial holder as of the
validation effective time, we interpret the reference in Section 205 to “any record or beneficial holder of valid stock or
putative” stock to confer standing only on persons who were record or beneficial holders as of the ratification effective time.
But even if this language were deemed to give a right of action to purchasers of stock after the filing of the Certificate of Validation,
we believe that no purchaser who acquires a record or beneficial interest in shares of our company after the ratification of the issuance
of the founder shares will be able to show any injury sufficient to challenge the ratification under Section 205 of the DGCL. We also
believe that no subsequent purchaser would have the standing required under Section 327 of the DGCL to bring a derivative action on behalf
of the company challenging the Ratification or the Corporate Acts, because DGCL Section 327 requires a derivative plaintiff to allege
that it was a stockholder of the company at the time of the ratification (or thereafter succeeded to shares by operation of law). Last,
in these circumstances, we believe that a person challenging the Ratification, or the Corporate Acts, would have a difficult time establishing
an equitable basis to invalidate or limit the Ratification or the Corporate Acts. Nonetheless, there is a possibility that a court could
uphold a challenge to the Ratification or to the Corporate Acts and if it did, it could adversely affect our ability to complete a business
combination.
Because we are not limited to a
particular industry, sector 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 expect to focus our search
for a target business in the energy industry in North America, we may seek to complete a business combination with an operating company
in any industry or sector. However, we will not, under our amended and restated certificate of incorporation, be permitted to complete
our business combination with another blank check company or similar company with nominal operations. Because we have not yet selected any specific target business with respect to a 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 complete our 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 revenues 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 cannot assure you
that we will properly ascertain or assess all the significant risk factors or that we will 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. We also cannot assure you that an investment in our units will ultimately prove to be more
favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any
stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value of their shares.
Such stockholders are unlikely to have a remedy for such reduction in value.
Because we intend to seek a business
combination with a target business in the energy industry in North America, we expect our future operations to be subject to risks associated
with this sector.
We intend to focus our search for a
target business in the energy industry in North America. Because we have not yet identified or approached any specific target business,
we cannot provide specific risks of any business combination. However, risks inherent in investments in the energy industry include,
but are not limited to, the following:
| |
● |
volatility of oil, natural gas and product prices. For instance, escalating tensions resulting from the Russian invasion of Ukraine could lead to increased volatility in global oil and gas prices, including due to increases in oil production by Russia to finance its activities in Ukraine or to destabilize global oil and gas prices; |
| ● | price and availability of alternative or renewable fuels, such
as solar, coal, nuclear and wind energy; |
| ● | significant federal, state and local regulation, taxation and
regulatory approval processes as well as changes in applicable laws and regulations; |
| ● | denial or delay of receiving requisite regulatory approvals
and/or permits; |
| ● | the speculative nature of and high degree of risk involved in
investments in the upstream, midstream, energy services and energy transition sectors, including relying on estimates of oil and gas
reserves and the impacts of regulatory and tax changes; |
| ● | exploration and development risks, which could lead to environmental
damage, injury and loss of life or the destruction of property; |
| ● | drilling, exploration and development risks, including encountering
unexpected formations or pressures, premature declines of reservoirs, blow-outs, equipment failures and other accidents, cratering, sour
gas releases, uncontrollable flows of oil, natural gas or well fluids, adverse weather conditions, pollution, fires, spills and other
environmental risks, any of which could lead to environmental damage, injury and loss of life or the destruction of property; |
| ● | proximity and capacity of oil, natural gas and other transportation
and support infrastructure to production facilities; |
| ● | availability of key inputs, such as strategic consumables and
raw materials and drilling and processing equipment; |
| ● | available pipeline, storage, feedstock and offtake, and other
transportation capacity; |
| ● | changes in global supply and demand and prices for commodities; |
| ● | impact of energy conservation efforts; |
| ● | technological advances affecting energy production and consumption; |
| ● | overall domestic and global economic conditions; |
| ● | availability of, and potential disputes with, independent contractors; |
| ● | adverse weather conditions, natural disasters or other events
(such as equipment malfunctions, explosions, fires or spills); |
| ● | value of U.S. dollar relative to the currencies of other countries;
and |
Past performance by our management
team and members of our Board may not be indicative of future performance of an investment in us.
Information regarding performance by,
or businesses associated with our management team and members of our Board is presented for informational purposes only. Past performance
by such individuals is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that
we will be able to locate a suitable candidate for our initial business combination. You should not rely on the historical record of
performance of our management team and members of our Board as indicative of our future performance of an investment in us or the returns
we will, or are likely to, generate going forward. Additionally, in the course of their respective careers, members of our management
team and Board have been involved in businesses and deals that were ultimately unsuccessful.
We may seek acquisition opportunities
in industries or sectors which may or may not be outside of our management’s area of expertise.
We will consider a business combination
outside of our management’s area 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. Although our management will endeavor to evaluate the risks inherent
in any particular business combination candidate, we cannot assure you that we will adequately ascertain or assess all the significant
risk factors. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to investors in
the IPO than a direct investment, if an opportunity were available, in a business combination candidate. 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 the significant risk factors. Accordingly, any stockholders who choose to remain stockholders following our business
combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction
in value.
Although we have 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 general 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 complete our initial business combination with a target that
does not meet some or all of these criteria and 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 a prospective 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 law, 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 receive only approximately $10.10 per share, or less in certain circumstances, on the liquidation of our trust
account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share
on the redemption of their shares. See “If third parties bring claims against us, the proceeds held in the trust account
could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk
factors in this section.
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, which
could subject us to volatile revenues or earnings or difficulty in retaining key personnel.
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 revenues
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 and
difficulties in obtaining and retaining key personnel. 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 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.
We are not required to obtain an
opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance
from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our business combination
with an affiliated entity or our board cannot independently determine the fair market value of the target business or businesses, we
are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting
firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders
will be relying on the judgment of our Board, who will determine fair market value based on standards generally accepted by the financial
community. Such standards used will be disclosed in our proxy solicitation or tender offer materials, as applicable, related to our initial
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, 2021, we had $505,518 in cash
and working capital of $487,083. Further, we have incurred and expect to continue to incur significant costs in pursuit of an initial
business combination.
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, which could impact our business plan. 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.
We may issue additional shares
of common stock or preferred stock to complete our initial business combination and may issue shares of common stock or preferred stock
under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common
stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination
as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. Any such issuances would
dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate
of incorporation authorizes the issuance of up to 200,000,000 shares of Class A common stock, par value $0.0001 per share, 20,000,000
shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share.
There are no shares of preferred stock
issued and outstanding. Shares of Class B common stock are convertible into shares of our Class A common stock initially at
a one-for-one ratio but subject to adjustment as set forth herein, including in certain circumstances in which we issue Class A common
stock or equity-linked securities related to our initial business combination.
We may issue a substantial number of
additional shares of common or preferred stock to complete our initial business combination (including pursuant to a specified future
issuance). After the completion of our initial business combination, we may issue a substantial number of additional shares of common
stock or preferred stock under an employee incentive plan. We may also issue shares of Class A common stock upon conversion of the
Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution
provisions contained in our amended and restated certificate of incorporation. However, our amended and restated certificate of incorporation
provides, among other things, that before 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. The
issuance of additional shares of common or preferred stock:
| ● | may significantly dilute the equity interest of investors in
the IPO; |
| ● | may subordinate the rights of holders of common stock if preferred
stock is issued with rights senior to those afforded our common stock; |
| ● | could cause a change of control if a substantial number of shares
of our 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 units,
Class A common stock and/or warrants. |
Resources could be wasted in researching
acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another
business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10
per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
We anticipate 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 we decide not to
complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be
recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial 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. If we are unable
to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation
of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10
per share on the redemption of their shares. See “If third parties bring claims against us, the proceeds held in the
trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and
other risk factors in this section.
Risks Relating to our Sponsor and Management
Team
We are dependent upon our officers
and directors, and their loss could adversely affect our ability to operate.
Our operations are dependent upon a relatively
small group of individuals and, in particular, our officers and directors. We believe that our success depends on the continued service
of our officers and directors, at least until we have completed our initial business combination. In addition, our officers and directors
are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating
their time among various business activities, including identifying potential business combinations and monitoring the related due diligence.
We do not have an employment agreement
with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our
directors or officers could have a detrimental effect on us.
Our ability to successfully complete
our initial business combination and to be successful thereafter will be totally dependent upon the efforts of members of our management
team, some of whom may not join us following our initial business combination. The loss of such people could negatively impact the operations
and profitability of our post-combination business.
Our ability to successfully complete
our business combination is dependent upon the efforts of members of our management team. The role of members of our management team in
the target business, however, cannot presently be ascertained. Although some members of our management team may remain with the target
business in senior management or advisory positions following our business combination, it is likely that some or all of the management
of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our initial 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 company regulated by the SEC, which could cause us to have to expend time and resources helping them
become familiar with such requirements.
In addition, the officers and directors
of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s
key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s
key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that
certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our
initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Members of our management team
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 our 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.
Members of our management team may be
able to remain with the company after the completion of our business combination only if they are able to negotiate employment or consulting
agreements in connection with the business combination. Such negotiations could 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 us after the completion of the business combination. The personal and financial interests of such individuals
may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to
remain with us after the completion of our business combination will not be the determining factor in our decision as to whether or not
we will proceed with any potential business combination. There is no certainty, however, that any members of our management team will
remain with us after the completion of our business combination. We cannot assure you that any members of our management team will remain
in senior management or advisory positions with us. The determination as to whether any members of our management team will remain with
us will be made at the time of our initial business combination.
We may have a limited ability to
assess the management of a prospective target business and, as a result, may complete our initial business combination with a target business
whose management may not have the skills, qualifications or abilities to manage a public company, which could, in turn, negatively impact
the value of our stockholders’ investment in us.
When evaluating the desirability of effecting
our initial business combination with a prospective target business, our ability to assess the target business’s management may
be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore,
may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s
management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability
of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following
the business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such
reduction in value.
The officers and directors of an acquisition
candidate may resign upon completion of our initial business combination. The departure of a business combination target’s key personnel
could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s
key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that
certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our
initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
Our officers and directors may
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 conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required
to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our
operations and our search for a business combination and their other businesses. Each of our officers is engaged in several other business
endeavors for which he may be entitled to substantial compensation and our officers are not obligated to contribute any specific number
of hours per week to our affairs. If our officers’ and directors’ other business affairs require them to devote substantial
amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs
which may have a negative impact on our ability to complete our initial business combination.
Certain of our officers and directors
are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to
be conducted by us and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular
business opportunity should be presented.
Until we consummate our initial business
combination, we intend to engage in the business of identifying and combining with one or more businesses. Our sponsor and officers and
directors are, and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged
in a similar business.
Our officers and directors also may become
aware of business opportunities which may be appropriate for presentation to us and the other entities in the future to which they owe
certain fiduciary or contractual duties. 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 another entity before its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest
in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in
his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to
undertake and would otherwise be reasonable for us to pursue.
Our officers, directors, security
holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly
prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in
any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact (subject
to certain approvals and consents) we may enter into a business combination with a target business that is affiliated with our sponsor,
our directors or officers, although we do not intend to do so. We do not have a policy that expressly prohibits any such persons from
engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict
between their interests and ours.
We may engage in a business combination
with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers, directors
or existing holders which may raise potential conflicts of interest.
In light of the involvement of our sponsor,
officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsor, officers or
directors. Our sponsor, officers and directors are not currently aware of any specific opportunities for us to complete our business
combination with any entities with which they are affiliated, and there have been no preliminary substantive discussions concerning a
business combination with any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction
with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for a
business combination and such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain
an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, regarding the
fairness to our company from a financial point of view of a business combination with one or more domestic or international businesses
affiliated with our officers, directors or existing holders, potential conflicts of interest still may exist and, as a result, the terms
of the business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
We
may not have an audit committee consisting entirely of independent directors for up to a year following our initial public offering.
You may not know at this time the identities of all independent directors that may be responsible for evaluating an initial business
combination.
NASDAQ
listing standards require that a majority of our Board be independent. In conformity with NASDAQ’s “phase-in” rules,
within one year of our initial public offering, a majority of our Board will be independent. At the closing of the IPO, we had two independent
directors. Thus, upon our initial public offering, and for up to a year afterwards, we will have a majority of independent directors
and will have an audit committee consisting of a majority of independent directors.
Since our sponsor will lose its
entire investment in us if our business combination is not completed and our officers and directors may have differing personal and financial
interests than you, a conflict of interest may arise in determining whether a particular business combination target is appropriate for
our initial business combination.
In December 2020, our sponsor acquired
4,312,500 founder shares for an aggregate purchase price of $25,000. Before the initial investment in the company of $25,000 by our sponsor,
we had no assets, tangible or intangible. The number of founder shares issued was determined based on the expectation that such founder
shares would represent 20% of the outstanding shares after the IPO.
The founder shares will be worthless
if we do not complete an initial business combination. In addition, our sponsor and underwriters have committed to purchase 6,675,000
private placement warrants, each one identical to the public warrants, for a purchase price of $6,675,000, or $1.00 per whole warrant,
that will also be worthless if we do not complete a business combination. Our sponsor has agreed (A) to vote any shares owned by
it in favor of any proposed business combination and (B) not to redeem any founder shares in connection with a stockholder vote to
approve a proposed initial business combination. In addition, we may obtain loans from our sponsor, affiliates of our sponsor or an officer
or director. The personal and financial interests of our officers and directors may influence their motivation in identifying and selecting
a target business combination, completing an initial business combination and influencing the operation of the business following the
initial business combination.
Since our sponsor paid only approximately
$0.006 per share for the founder shares, our officers and directors could potentially make a substantial profit even if we acquire a target
business that subsequently declines in value.
In December 2020, our sponsor acquired
4,312,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share. Our officers and directors have
a significant economic interest in our sponsor. As a result, the low acquisition cost of the founder shares creates an economic incentive
whereby our officers and directors could potentially make a substantial profit even if we acquire a target business that subsequently
declines in value and is unprofitable for public investors.
We may issue notes or other debt
securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial
condition and thus negatively impact the value of our stockholders’ investment in us.
Although
we have no commitments as of December 31, 2021 to issue any notes or other debt securities, or to otherwise incur outstanding debt following
the IPO, we may choose to incur substantial debt to complete our business combination. We have agreed that we will not incur any indebtedness
unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust
account. As such, no issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless,
the incurrence of debt could have a variety of negative effects, including:
| ● | default and foreclosure on our assets if our operating revenues
after an initial 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; |
| ● | 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; |
| ● | our inability to pay dividends on our common stock; |
| ● | using a substantial portion of our cash flow to pay principal
and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses,
make capital expenditures and acquisitions, and fund other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting
to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for
expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
| ● | other disadvantages compared to our competitors who have less
debt. |
We may only be able to complete
one business combination with the proceeds of the IPO and the sale of the private placement warrants, which will cause us to be solely
dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact
our operations and profitability. The net proceeds from the IPO and the private placement of warrants provide us with $174,225,000 that
we may use to complete our initial business combination (after taking into account the $ $6,037,500 for the payment of deferred underwriting
commissions).
We may complete our business combination
with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able
to complete our business combination with more than one target business because of various factors, including the existence of complex
accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results
and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial
business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory
developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting
of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different
areas of a single industry. In addition, we intend to focus our search for an initial business combination in a single industry. Accordingly,
the prospects for our success may be:
| ● | solely dependent upon the performance of a single business,
property or asset; 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 after our business combination.
We may attempt to simultaneously
complete business combinations with multiple prospective targets, which may hinder our ability to complete our business combination and
give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire
several businesses that 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 our initial 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.
We may attempt to complete our
initial business combination with a private company about which little information is available, which may result in a business combination
with a company that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy,
we may seek to complete our initial business combination with a privately held company. Very little public information generally exists
about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on
the basis of limited information, which may result in a business combination with a company that is not as profitable as we suspected,
if at all.
Our management may not be able
to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control
of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure a business combination
so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets
of a target business, 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 an interest in the target sufficient for the post-transaction
company not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction
that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders
before 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 of Class A common stock in exchange for all of the outstanding capital stock of a target. In this case, we would
acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our
stockholders immediately before such transaction could own less than a majority of our outstanding shares of common stock after such transaction.
In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger
share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not
be able to maintain control of the target business. We cannot provide assurance that, upon loss of control of a target business, new management
will possess the skills, qualifications or abilities necessary to profitably operate such business.
We
do not have a specified maximum redemption threshold. The absence of such a redemption threshold will make it easier for us to consummate
a business combination with which a substantial number of our stockholders do not agree.
We may be able to consummate a business combination
even though a substantial number of our public stockholders do not agree with the transaction and have redeemed their shares or, if we
seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our business combination
pursuant to the tender offer rules, if our sponsor, officers, directors or their affiliates have entered into privately negotiated agreements
with public stockholders to acquire public shares. However, in no event will we redeem our public shares in an amount that would cause
our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination, and the amount that we redeem
may be further limited by the terms and conditions of our initial business combination. In such case, we would not proceed with the redemption
of our public shares and the related initial business combination, and instead may search for an alternate business combination.
Unlike many blank check companies, our
balance sheet reflects negative stockholders’ equity.
The financial statements in this annual report,
after collaboration with our independent registered public accounting firm, reflect that all of the public shares are subject to redemption,
even though we are prohibited under our amended and restated certificate of incorporation from redeeming all of the public shares since
such redemption would result in our failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange
Act) in excess of $5,000,000. As a result, all of the public shares are classified as temporary equity, presented outside of the stockholders’
deficit section of our balance sheet. This accounting presentation may not be consistent with that of other blank check companies and
may make comparison of our financial statements to that of other blank check companies more difficult.
In order to complete our initial
business combination, we may seek to amend our amended and restated certificate of incorporation or other governing instruments, including
our warrant agreement, in a manner that will make it easier for us to complete our initial business combination but that our stockholders
or warrant holders may not support.
In order to complete a business combination,
blank check companies have, in the recent past, amended various provisions of their charters and governing instruments, including their
warrant agreement. For example, blank check companies have amended the definition of business combination, increased redemption thresholds,
changed industry focus and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for
cash and/or other securities. We may even seek shareholder approval to extend the 12-month time period during which we may consummate
a business combination. We cannot assure you that we will not seek to amend our charter or other governing instruments or change our industry
focus in order to complete our initial business combination.
The provisions of our amended and
restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement
governing the release of funds from our trust account) may be amended with the approval of holders of 65% of our common stock, which is
a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and
restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some
of our stockholders may not support.
Some other blank check companies have a provision
in their charter that prohibits the amendment of certain of its provisions, including those which relate to a company’s pre-business
combination activity, without approval by a certain percentage of the company’s stockholders. In those companies, amendment of these
provisions requires approval by between 90% and 100% of the company’s public stockholders. Our amended and restated certificate
of incorporation provides that any of its provisions related to pre-business combination activity (including the requirement to deposit
proceeds of the IPO and the private placement of warrants into the trust account and not release such amounts except in specified circumstances,
and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of 65% of our common
stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account
may be amended if approved by holders of 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated
certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject
to applicable provisions of the DGCL or applicable stock exchange rules. We may not issue additional securities that can vote on amendments
to our amended and restated certificate of incorporation or in our initial business combination. Our initial stockholders, will collectively
beneficially own 20% of our common stock upon the closing of the IPO (assuming they did not purchase any units in the IPO), will participate
in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote
in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation
that govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability
to complete a business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our
amended and restated certificate of incorporation.
Our sponsor, officers and directors have
agreed, pursuant to a letter agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation
that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business
combination within 12 months (or within 18 months if we extend the period of time to consummate our initial business combination in accordance
with the terms described in the IPO’s registration statement) from the closing of the IPO, unless we provide our public stockholders
with the opportunity to redeem their shares of Class A 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 (which interest shall be net of amounts
released to us to pay taxes and expenses related to the administration of the trust), divided by the number of then outstanding public
shares. Our stockholders are not parties to, or third-party beneficiaries of, this letter agreement and, as a result, will not have the
ability to pursue remedies against our sponsor, officers or directors for any breach of the letter agreement. As a result, in the event
of a breach, our stockholders would need to pursue a stockholder derivative action, subject to applicable law.
We may be unable to obtain additional
financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us
to restructure or abandon a particular business combination.
Although we believe that the net proceeds
of the IPO and the sale of the private placement warrants will be sufficient to allow us to complete our initial business combination,
because we have not yet selected any prospective target business, we cannot ascertain the capital requirements for any particular transaction.
If the net proceeds of the IPO and the sale of the private placement warrants prove to be insufficient, either because of the size of
our initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to repurchase
for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination or
the terms of negotiated transactions to purchase shares in connection with our initial business combination, we may be required to seek
additional financing or to abandon the proposed business combination. We cannot assure you that such financing will be available on acceptable
terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination,
we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target
business candidate. If we are unable to complete our initial business combination, our public stockholders may receive only approximately
$10.10 per share plus any pro rata interest earned on the funds held in the trust account (and not previously released to us to pay our
franchise and income taxes as well as expenses relating to the administration of the trust account) on the liquidation of our trust account
and our warrants will expire worthless. In addition, even if we do not need additional financing to complete our business combination,
we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could
have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders
is required to provide any financing to us in connection with or after our initial business combination. If we are unable to complete
our initial business combination, our public stockholders may only receive approximately $10.10 per share on the liquidation of our trust
account, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share
on the redemption of their shares. See “-If third parties bring claims against us, the proceeds held in the trust account could
be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk factors
in this section.
Our initial stockholders may exert
a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Upon the closing of the IPO, our initial
stockholders own shares representing 20% of our issued and outstanding shares of common stock. Accordingly, they may exert a substantial
influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended
and restated certificate of incorporation and approval of major corporate transactions. If our initial stockholders purchase any additional
shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Factors that would
be considered in making such additional purchases would include consideration of the current trading price of our Class A common
stock. In addition, our Board, whose members were elected by our initial stockholders, is and will be 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. We may not hold an
annual meeting of stockholders to elect new directors before the completion of our business combination, in which case all of the current
directors will continue in office until at least the completion of the business combination. If there is an annual meeting, as a consequence
of our “staggered” Board, only a minority of the Board 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 completion of our business combination.
We may amend the terms of the warrants
in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of the then outstanding
public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number
of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants will be issued in registered
form under a warrant agreement between 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, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely
affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner
adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment. Although our ability
to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples
of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into
cash or stock, shorten the exercise period or decrease the number of shares of our Class A common stock purchasable upon exercise
of a warrant.
We may redeem your unexpired warrants
before their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants
for cash at any time after they become exercisable and before their expiration, at a price of $0.01 per warrant, provided that the last
reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day
prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants
become redeemable by us, we may 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 therefore 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.
In addition, we may redeem your warrants after they become exercisable for a number of shares of Class A common stock determined
based on the redemption date and the fair market value of our Class A common stock. Any such redemption may have similar consequences
to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,”
in which case you would lose any potential embedded value from a subsequent increase in the value of the Class A common stock had
your warrants remained outstanding.
Our warrants and founder shares
may have an adverse effect on the market price of our Class A common stock and make it more difficult to complete our business combination.
We
issued warrants to purchase 12,937,500 shares of Class A common stock, and in a private placement, an aggregate of 6,675,000
warrants, at $1.00 per warrant at the option of the lender. The private placement warrants are identical to the public warrants
including as to the exercise price, exercisability and exercise period. In addition, if the sponsor makes any working capital loans,
it may convert those loans into up to an additional 1,500,000 private placement warrants, at the price of $1.00 per warrant. We may
also issue shares of Class A common stock in connection with our redemption of our warrants.
To the extent we issue shares of Class A
common stock to complete a business combination, the potential for the issuance of a substantial number of additional shares of Class A
common stock upon exercise of these warrants and conversion rights could make us a less attractive acquisition vehicle to a target business.
Any such issuance will increase the number of issued and outstanding shares of our Class A common stock and reduce the value of the
shares of Class A common stock issued to complete the business combination. Therefore, our warrants and founder shares may make it
more difficult to complete a business combination or increase the cost of acquiring the target business.
Because each unit contains three-quarters
of one warrant and only a whole warrant may be exercised, the units may be worth less than units of other special purpose acquisition
companies, or SPACs.
Each unit contains three-quarters of
one warrant. Because, pursuant to the warrant agreement, the warrants may only be exercised for a whole number of shares, only a whole
warrant may be exercised at any given time. This is different from other offerings similar to ours whose units include one share of common
stock and one warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the
dilutive effect of the warrants upon completion of a business combination since the warrants will be exercisable in the aggregate for
three-quarters of the number of shares compared to units that each contain a warrant to purchase one whole share, thus making us, we believe,
a more attractive merger partner for target businesses. Nevertheless, this unit structure may cause our units to be worth less than if
they included a warrant to purchase one whole share.
A provision of our warrant agreement
may make it more difficult for us to consummate an initial business combination.
Unlike most blank check companies, if
(i) 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 a Newly Issued Price of less than $9.20 per share of common stock and (ii) 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 (iii) 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 Newly Issued Price, and the $18.00 per share redemption trigger prices will be adjusted (to the nearest cent) to
be equal to 180% of the higher of the Market Value or the Newly Issued Price, respectively. This may make it more difficult for us to
consummate an initial business combination with a target business.
Risks Relating to our Securities
Because we must furnish our stockholders
with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination
with some prospective target businesses.
The federal proxy rules require that
a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include target historical
and/or pro forma financial statement disclosure. We will include the same financial statement disclosure in connection with our tender
offer documents, whether or not they are required under the tender offer rules. 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 (“GAAP”)
or international financial reporting standards as issued 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 (United States) (the “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
prescribed time frame.
Increasing scrutiny and changing
expectations from investors, lenders, customers and other market participants with respect to our Environmental, Social and Governance,
or ESG, policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing
increasing scrutiny relating to their ESG policies. Investors, lenders and other market participants are increasingly focused on ESG practices
and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and
activism related to ESG may hinder our access to capital, as investors and lenders may reconsider their capital investment allocation
as a result of their assessment of our ESG practices. If we do not adapt to or comply with investor, lender or other industry shareholder
expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for
ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the future business,
financial condition and stock price could be materially and adversely affected.
We are an emerging growth company
and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure
requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to
investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company”
within the meaning of the Securities Act, as modified by the JOBS Act, and we may 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 nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result,
our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to
five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common
stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging
growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we
will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions,
the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities
and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the
JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides
that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth
companies but any such an election to opt out is irrevocable. We have elected to irrevocably opt out of such extended transition period,
which means that when a standard is issued or revised and it has different application dates for public or private companies, we will
adopt the new or revised standard at the time public companies adopt the new or revised standard. This may make comparison of our financial
statements with another emerging growth company that has not opted out of using the extended transition period difficult or impossible
because of the potential differences in accountant standards used.
Additionally, we are a “smaller
reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain
reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain
a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our common stock
held by non-affiliates did not exceed $250 million as of the prior June 30, or (2) our annual revenues did not exceed $100 million
during such completed fiscal year and the market value of our common stock held by non-affiliates did not exceed $700 million as of the
prior June 30.
Compliance obligations under the
Sarbanes-Oxley Act may make it more difficult for us to complete our initial business combination, require substantial financial and management
resources, and increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley
Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the
year ending December 31, 2021. Only if we are deemed to be a large accelerated filer or an accelerated filer will we be required to comply
with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further,
for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting
firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance
with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company
with which we seek to complete our business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding
adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley
Act may increase the time and costs necessary to complete any such acquisition.
Provisions in our amended and restated
certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to
pay in the future for our Class A common stock and could entrench management.
Our amended and restated certificate
of incorporation will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their
best interests. These provisions include a staggered Board and the ability of the Board to designate the terms of and issue new series
of preferred shares, which may make the removal of management more difficult and may discourage transactions that otherwise could involve
payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover
provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management
more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our
securities.
Our amended and restated certificate
of incorporation designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions
and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers, employees or agents.
Our amended and restated certificate
of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State
of Delaware (“Court of Chancery”) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum
for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary
duty owed by any of our directors, officers, employees or stockholders to us or our stockholders, (iii) any action asserting a claim
arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or bylaws or as to which the DGCL
confers jurisdiction on the Court of Chancery or (iv) any action asserting a claim against us, our directors, officers, or employees
that is governed by the internal affairs doctrine, in each such case except for such claims as to which (a) the Court of Chancery
determines that it does not have personal jurisdiction over an indispensable party, (b) exclusive jurisdiction is vested in a court
or forum other than the Court of Chancery, or (c) the Court of Chancery does not have subject matter jurisdiction. Any person or
entity purchasing or otherwise acquiring or holding any interest in shares of our common stock will be deemed to have notice of, and consented
to, the provisions of our amended and restated certificate of incorporation described in the preceding sentence. 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
our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. Alternatively, if a court
were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the
specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions,
which could adversely affect our business, financial condition or results of operations.
Our amended and restated certificate
of incorporation provides that the exclusive forum provision will be 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 and Section 22 of the Securities Act creates concurrent jurisdiction for federal and
state courts over all suits brought to enforce any duty or liability created by the Securities 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,
the Securities Act, or any other claim for which the federal courts have exclusive jurisdiction.
Cyber incidents or attacks directed
at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including
information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated
and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or
the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As
an early stage company without significant investments in data security protection, we may not be sufficiently protected against such
occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to,
cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business
and lead to financial loss.
An investment in CENAQ Common Stock may result
in uncertain or adverse United States federal income tax consequences.
An investment in CENAQ stock may result in
uncertain U.S. federal income tax consequences. For instance, because there are no authorities that directly address instruments similar
to the units we are issuing in the IPO, the allocation an investor makes with respect to the purchase price of a unit between the share
of Class A common stock and the three-quarters of one redeemable warrant to purchase Class A common stock included in each unit
could be challenged by the Internal Revenue Service (“IRS”) or the courts. Furthermore, the U.S. federal income tax consequences
of a cashless exercise of a warrant included in the units is unclear under current law. Finally, it is unclear whether the redemption
rights with respect to our shares of Class A common stock suspend the running of a U.S. holder’s holding period for purposes
of determining whether any gain or loss realized by such holder on the sale or exchange of Class A common stock is long-term capital
gain or loss and for determining whether any dividend we pay would be considered “qualified dividend income” for U.S. federal
income tax purposes. See “United States Federal Income Tax Considerations” below for a summary of the principal United States
federal income tax consequences of an investment in our securities. Prospective investors are urged to consult their tax advisors with
respect to these and other tax consequences when purchasing, holding or disposing of our securities.
If we complete our initial business
combination with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional
risks that may negatively impact our operations.
If we complete our initial business combination
with a company with operations or opportunities outside of the United States, we would be subject to any special considerations or
risks associated with companies operating in an international setting, including any of the following:
| ● | higher costs and difficulties inherent in managing cross-border
business operations and complying with different commercial and legal requirements of overseas markets; |
| ● | rules and regulations regarding currency redemption; |
| ● | complex corporate withholding taxes on individuals; |
| ● | laws governing the manner in which future business combinations
may be effected; |
| ● | tariffs and trade barriers; |
| ● | regulations related to customs and import/export matters; |
| ● | longer payment cycles and challenges in collecting accounts
receivable; |
| ● | tax issues, such as tax law changes and variations in tax laws
as compared to the United States; |
| ● | currency fluctuations and exchange controls; |
| ● | cultural and language differences; |
| ● | crime, strikes, riots, civil disturbances, terrorist attacks,
natural disasters and wars; |
| ● | deterioration of political relations with the United States;
and |
| ● | government appropriations of assets. |
We may not be able to adequately address
these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations
and financial condition.