ITEM 1. BUSINESS
Our Company
Global
System Dynamics, Inc. (formerly known as Gladstone Acquisition Corporation, which we refer to as "we", "us" or the
"Company") is a blank check company that was incorporated in January 2021 as a Delaware corporation 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” or “Business
Combination."
While
we may pursue an acquisition opportunity in any business, industry, sector or geographical location, we are focusing on industries that
complement our management team’s background, and we intend to capitalize on the ability of our management team to identify and acquire
a business, focusing on farming and national security sectors, including farming and national security related operations and businesses
that support the those industries, where our management team has extensive experience.
We
are a “shell company” as defined under the Exchange Act because we have no operations and nominal assets consisting almost
entirely of cash. We will not generate any operating revenues until after the completion of our Initial Business Combination, at the earliest.
We will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from our IPO,
described below. To date, we have been involved in organizational activities, activities related to our initial public offering, activities
related to finding a prospective business combination target, and activities related to our Initial Business Combination.
The
Company's sponsor is DarkPulse, Inc., a Delaware corporation (the "Sponsor"). In addition to being the Sponsor, DarkPulse is
also a party to the Merger Agreement as the target of Initial Business Combination.
Capitalization,
Initial Public Offering and Initial Business Combination
As
described further in the Notes to the Company's financial statements contained in this Annual Report, on January 25, 2021, Gladstone Sponsor,
LLC, a Delaware limited liability company, the original sponsor (the Original Sponsor”) paid $25,000, or approximately $0.009 per
share, to cover certain offering costs in consideration for 2,875,000 shares of Class B Common Stock, par value $0.0001 (the "Class
B Common Stock" or "founder shares".) Up to 375,000 shares of Class B Common Stock were subject to forfeiture to the extent
that the over-allotment option was not exercised in full by the underwriters. The forfeiture would be adjusted to the extent that the
over-allotment option was not exercised in full by the underwriters so that the Class B Common Stock would represent 20% of the Company's
issued and outstanding stock after the Company's IPO.
A
registration statement for the Company's IPO was declared effective on August 4, 2021 (the "Effective Date"). On August 9, 2021,
the Company consummated its IPO of 10,000,000 units (each, a "Unit" and collectively, the "Units") at $10.00 per Unit
and the sale of 4,200,000 warrants (the "Private Warrants") at a price of $1.00 per Private Warrant in a private placement to
the Original Sponsor that closed simultaneously with the IPO. Each Unit consists of one share of Class A Common Stock, par value $0.0001
per share (the "Class A Common Stock" or "public shares") and one-half of one redeemable warrant (the "Public
Warrants"). Each whole Public Warrant entitles the holder thereof to purchase one share of Class A Common Stock at a price of $11.50
per share, subject to adjustment. Only whole warrants are exercisable. On August 18, 2021, the underwriters partially exercised their
over-allotment option and purchased an additional 492,480 Units, generating an aggregate of gross proceeds of $4,924,800.
Simultaneously
with the exercise of the underwriters' over-allotment option, the Original Sponsor purchased an additional 98,496 Private Warrants, generating
aggregate gross proceeds of $98,496. On September 18, 2021, the underwriters' over-allotment option expired and as a result 251,880 shares
of Class B Common Stock were forfeited, resulting in outstanding Class B Common Stock of 2,623,120 shares.
As payment
for services, the underwriters received 209,850 shares of Class A Common Stock worth approximately $10.00 per share (the "Representative
Shares"). Transaction costs related to the IPO and partial over-allotment exercise amounted to $6,265,859 consisting of $3,672,368
of deferred underwriting commissions, $2,098,500 of fair value of the Representative Shares and $494,990 of other cash offering costs,
which were allocated among Class A Common Stock subject to possible redemption, the Public Warrants and Private Warrants, and stockholders'
deficit.
We
have broad discretion with respect to the specific application of the net proceeds of the IPO and the Private Warrants, although substantially
all of the net proceeds are intended to be applied generally toward consummating an Initial Business Combination. There is no assurance
that we will be able to complete an Initial Business Combination successfully. We must complete one or more Initial Business Combinations
having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (net of amounts disbursed
to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time
of the agreement to enter into the Initial Business Combination. However, we will only complete an Initial 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 it not to be required to register as an investment company under the Investment Company Act of 1940, as amended
(the "Investment Company Act").
Following
the closing of the IPO on August 9, 2021 and the partial over-allotment exercise on August 18, 2021, $107,023,296 ($10.20 per Unit) from
the net proceeds sold in the IPO and over-allotment, including a portion of the proceeds of the sale of the Private Warrants, was deposited
in a trust account (the "Trust Account") which is being invested only in U.S. government securities, with a maturity of 180
days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in
direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be
released to the Company to pay its tax obligations, the proceeds from the IPO will not be released from the Trust Account until the earliest
to occur of: (a) the completion of the Company's Initial Business Combination, (b) the redemption of any public shares properly submitted
in connection with a stockholder vote to amend the Company's amended and restated certificate of incorporation to (i) modify the substance
or timing of the Company's obligation to provide for the redemption of its public stock in connection with an Initial Business Combination
or to redeem 100% of its public stock if the Company does not complete its Initial Business Combination in the time period required by
its charter or (ii) with respect to any other material provisions relating to stockholders' rights or pre-Initial Business Combination
activity, and (c) the redemption of the Company's public shares if the Company is unable to complete its Initial Business Combination
in the timeframe required by its charter, subject to applicable law.
The
Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion
of the Initial Business Combination either (i) in connection with a stockholder meeting called to approve the Initial Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed Initial Business
Combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem
their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially approximately $10.20 per share, plus
any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The
Class A Common Stock subject to redemption was recorded at a redemption value and classified as temporary equity upon the completion of
the IPO, in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
Topic 480, "Distinguishing Liabilities from Equity." In such case, the Company will proceed with a Business Combination if the
Company’s Class A Common Stock are not a “penny share” upon such consummation of a Business Combination and, if the
Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
If a
stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons,
the Company will, pursuant to its Amended and Restated Certificate of Incorporation, conduct the redemptions pursuant to the tender offer
rules of the SEC and file tender offer documents with the SEC prior to completing a Business Combination.
If,
however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business
or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether
they vote for or against the proposed transaction, whether they participate in or abstain from voting or whether they were a stockholder
on the record date for the stockholder meeting held to approve the proposed transaction.
Notwithstanding
the foregoing redemption rights, if the Company seeks stockholder approval of its Initial Business Combination and the Company does not
conduct redemptions in connection with its Initial Business Combination pursuant to the tender offer rules, the 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
redeeming its shares with respect to more than an aggregate of 15% of the shares sold in the IPO, without the Company's prior consent.
The Sponsor, officers and directors (the "Initial Stockholders") have agreed not to propose any amendment to the Amended and
Restated Certificate of Incorporation (a) that would modify the substance or timing of the Company's obligation to provide for the redemption
of its public shares in connection with an Initial Business Combination or to redeem 100% of the public shares if the Company does not
complete its Initial Business Combination in the time period required by its charter or (b) with respect to any other material provisions
relating to stockholders' rights or pre-Initial Business Combination activity, unless the Company provides its public stockholders with
the opportunity to redeem their Class A Common Stock shares in conjunction with any such amendment.
If
the Company is unable to complete its Initial Business Combination in the time period required by its charter, the Company will: (i) cease
all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter,
redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company (less up to $100,000 of interest to
pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public
stockholders' rights as stockholders (including the right to receive further liquidating distributions, if any) and (iii) as promptly
as reasonably possible following such redemption, subject to the approval of the Company's remaining stockholders and the Company's board
of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii) to the Company's obligations under the law of the
state of Delaware to provide for claims of creditors and the requirements of other applicable law.
The
Company's Initial Stockholders, as well as holders of Representative Shares, agreed to waive their rights to liquidating distributions
from the Trust Account with respect to any Class B Common Stock and Class A Common Stock, respectively, held by them if the Company fails
to complete its Initial Business Combination in the time period required by its charter. However, if the Initial Stockholders 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 the Company fails to complete a Business Combination in the time period required by its charter.
Recent Developments
Change in Company Officers and Directors
On October 12, 2022, David Gladstone,
Terry L. Brubaker, Paul W. Adelgren, Michela A. English, John H. Outland, Anthony W. Parker, and Walter H. Wilkinson, Jr. tendered their
resignations as officers and directors of our company, Michael Malesardi, Michael LiCalsi, Bill Frisbie and Bill Reiman resigned as officers
of our company, and Geoff Mullins, Wayne Bale, and John Bartrum were appointed as members of the board of directors of our company. Finally,
Rick Iler was appointed as Principal Executive Officer, Chief Financial Officer and Secretary of our company.
Change in Company Sponsor
DarkPulse became the Sponsor of
GSD to take advantage of the popularity of Special Purpose Acquisition Companies to facilitate a listing on a major stock exchange like
Nasdaq. By consummating the business combination with GSD, DarkPulse can also benefit from GSD’s existing public market listing
and the investor base that comes with it. This can help DarkPulse access new sources of capital, increase liquidity for its shares, and
gain greater visibility in the marketplace. Landing on a major stock exchange like Nasdaq, DarkPulse can gain access to a larger pool
of institutional and retail investors who may be interested in investing in the company. This can help to increase the company's market
capitalization, improve its credibility with investors, and ultimately drive long-term growth and value creation for its shareholders.
Regardless of the number redemptions which will likely decrease the cash held in GSD’s Trust Account, these benefits significant
and a reason for DarkPulse to help GSD facilitate a business combination, including entering into the Support Agreement.
Purchase Agreement
On October 12, 2022, we entered
into and closed a Purchase Agreement (the “Purchase Agreement”) with our Original Sponsor, and our Sponsor, pursuant to which
the new Sponsor purchased from the Original Sponsor 2,623,120 shares of our Class B Common Stock, par value $0.0001 per share, and 4,298,496
Private Placement Warrants, each of which is exercisable to purchase one share of our Class A Common Stock, par value $0.0001 per share,
for an aggregate purchase price of $1,500,000 (the “Purchase Price”).
In addition to the payment of
the Purchase Price, the Sponsor also assumed the following obligations: (i) responsibility for all of our public company reporting obligations,
(ii) the right to provide an extension payment and extend the deadline of to complete an initial business combination from 15 months from
November 9, 2022 to 18 months at February 9, 2023, for an additional $1,150,000, and (iii) all other obligations and liabilities of the
Original Sponsor related to our company.
Pursuant to the Agreement, the
Sponsor has replaced our current directors and officers with directors and an officer selected in its sole discretion. In connection with
the closing of the Agreement, we have changed our name to “Global Systems Dynamics, Inc.”
In addition to the Agreement,
our Sponsor also entered into the Assignment, Assumption, Release and Waiver of the Letter Agreement pursuant to which the Original Sponsor
and each of the parties to the Letter Agreement (defined below) agreed that all rights, interests and obligations of the Original Sponsor
under the Letter Agreement (as defined below) were hereby assigned to the Sponsor and that the Original Sponsor will have no further rights,
interests or obligations under the Letter Agreement as of the Closing Date.
The letter agreement dated August
4, 2021 (the “Letter Agreement”), was by and among the Original Sponsor, et. al., and delivered to us in accordance with an
Underwriting Agreement, dated August 4, 2021 (the “Underwriting Agreement”), entered into by and among our company and EF
Hutton, division of Benchmark Investments, LLC, as representative of the underwriters, et. al.
Finally, in addition to the Agreement,
the Sponsor entered into the Joinder to the Registration Rights Agreement pursuant to which we agreed to become a party to the Registration
Rights Agreement dated as of August 4, 2021 by and among our company, the Original Sponsor, et. al.
Support Agreements
On October 12, 2022, in connection
with the Purchase Agreement, we and the Original Sponsor terminated the administrative support agreement dated August 4, 2021.
On October 12, 2022, we entered
into a letter agreement (the “Support Agreement”) with the Sponsor that commenced on the date the Original Sponsor sold all
of its securities in our company in connection with the aforementioned Purchase Agreement. Under the Sponsor Agreement, the new Sponsor
shall make available, or cause to be made available, to us, at 815 Walker Street, Suite 114, Houston, Texas 77002 (or any successor location
of Darkpulse), certain office space, utilities and secretarial and administrative support as may be reasonably required by us. In exchange,
we shall pay the new Sponsor the sum of $10,000 per month.
Additionally, our Compensation
Committee has agreed to compensate our sole executive officer and board members with $10,000 monthly for their services, commencing October
2022.
Further under the Support Agreement,
the Sponsor agreed to waive any and all claims to seek payment of any amounts due to it out of the trust account established for the benefit
of our public stockholders.
Indemnity Agreements
We have also entered into agreements
with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended
and restated certificate of incorporation. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee
for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have directors’
and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of
a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
These provisions may discourage
stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect
of reducing the likelihood of derivative litigation against officers and directors, 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 officers and directors pursuant to these indemnification provisions.
We believe that these provisions,
the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented
and experienced officers and directors.
Funding for Extension and Working Capital
On November 2, 2022, February
7, 2023, March 9, 2023, April 7, 2023 and May 5, 2023, we issued notes to our Sponsor in connection with the extension of the termination
date for our Business Combination from November 9, 2022 to February 9, 2023, from February 9, 2023 to March 9, 2023, from March 9, 2023
to April 9, 2023, from April 9, 2023 to May 9, 2023 and from May 9, 2023 to June 9, 2023, respectively.
Pursuant to the notes, the Sponsor
has agreed to loan to us $1,049,248, and $83,947.13, $83,947.13, $83,947.13 and $83,947.13, respectively, and deposited the funds into
our trust account. The notes bear no interest and are repayable in full upon the earlier of (i) the date on which we consummate a Business
Combination, and (ii) the date that our winding up is effective. At the election of the Sponsor and subject to certain conditions, all
of the unpaid principal amount of the $1,150,000 note may be converted into Conversion Units upon consummation of the Business Combination
with the total Conversion Units so issued shall be equal to: (x) the portion of the principal amount of the Note being converted divided
by (y) the conversion price of ten dollars ($10.00), rounded up to the nearest whole number of units. The four $83,947 Notes totaling
$335,788 are not convertible.
We have non-interest-bearing advances
due to our New Sponsor in the principal amount of $998,677 as of April 30, 2023.
Entry into Business Combination Agreement with
DarkPulse
On December 14, 2022, we entered
into a Business Combination Agreement (the “BCA”) by and among our company, Zilla Acquisition Corp, a Delaware corporation
and our wholly owned subsidiary (“Merger Sub”), and DarkPulse, Inc., a Delaware corporation (“Sponsor” or “DarkPulse”).
Pursuant to the terms of the BCA, a business combination between us and DarkPulse will be effected through the merger of Merger Sub with
and into DarkPulse, with DarkPulse surviving the merger as our wholly owned subsidiary (the “Merger”). Our board of directors
has (i) approved and declared advisable the BCA, the Merger and the other transactions contemplated thereby and (ii) resolved to recommend
approval of the BCA and related transactions by our stockholders.
Pursuant
to the BCA, “Merger Consideration” includes DarkPulse Common Stock and DarkPulse Common Stock that results from the conversion
of the DarkPulse Preferred Stock, a number of shares of GSD shares of Common Stock equal to the Exchange Ratio. “Exchange Ratio”
is (a) the Equity Value Per Share (as defined below), divided by (b) the GSD Share Value (as defined in the BCA). “Equity Value
Per Share” means (a) the Equity Value (as defined below), divided by (b) the Fully Diluted Company Capitalization (as defined in
the BCA). “Equity Value” is $116,518,357.65. Based on the values of the inputs in the aforementioned formula as of April 28,
2023, some of which are variable up until the day the BCA closes, DarkPulse shareholders will receive 1 share of GSD Common Stock for
every 722 shares of DarkPulse Common Stock. In sum, DarkPulse’s common stock has a market value of $0.0055 as of April 28, 2023,
thus, DarkPulse shareholders will receive 1 share of GSD Common Stock, valued at $10.00 pursuant to the BCA, for every 722 of their DarkPulse
common stock, valued at approximately $2.88.
The transactions contemplated
by the Business Combination Agreement, and the other transactions contemplated by the other transaction documents contemplated by the
Business Combination Agreement (collectively, the “Proposed Business Combination”) will constitute a “Business Combination”
as contemplated by the Company’s Amended and Restated Certificate of Incorporation. The Business Combination and the transactions
contemplated thereby were unanimously approved by the board of directors of the Company on December 14, 2022.
The Business Combination
The BCA
provides, among other things, that Merger Sub will merge with and into DarkPulse, with DarkPulse as the surviving company in the merger
and, after giving effect to such merger, the Company shall be a wholly-owned subsidiary of GSD. GSD will continue to be named “Global
System Dynamics, Inc.” and the combined entity will trade under the symbol “DARK.”
In accordance
with the terms and subject to the conditions of the BCA, at the Effective Time, among other things: (i) each GSD Class A Share and
each GSD Class B Share that is issued and outstanding immediately prior to the Merger will become one share of common stock, par value
$0.0001 per share, of GSD; (ii) by virtue of the Merger and without any action on the part of any Party or any other Person, each DarkPulse
Share (other than DarkPulse Shares cancelled and extinguished pursuant to Section 2.1(a)(viii) of the BCA) issued and outstanding as of
immediately prior to the Effective Time shall be automatically canceled and extinguished and converted into the right to receive that
number of GSD Class A Shares equal to the Merger Consideration; provided, however, that any DarkPulse shares that are Restricted Shares
shall be converted into restricted GSD Class A Shares, subject to the same vesting, transfer and other restrictions as the applicable
Restricted Shares; (iii) by virtue of the Merger and without any action on the part of any Party or any other Person, each share of capital
stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be automatically cancelled and extinguished and
converted into one share of common stock, par value $0.0001, of DarkPulse; (vi) Dennis O’Leary, Joseph Catalino, George Pappas,
Geoff Mullins, Wayne Bale and John Bartrum shall become the directors of GSD, Dennis O’Leary shall become the Chief Executive Officer
of GSD and of the Surviving Company, and J. Richard Iler shall become the Chief Financial Officer of GSD, each to hold office in accordance
with the Governing Documents of GSD until such director’s or officer’s successor is duly elected or appointed and qualified,
or until the earlier of their death, resignation or removal; (v) by virtue of the Merger and without any action on the part of any Party
or any other Person, each DarkPulse share held immediately prior to the Effective Time by DarkPulse as treasury stock shall be automatically
canceled and extinguished, and no consideration shall be paid with respect thereto.
The Business Combination is expected to close in the second calendar
quarter of 2023 but in no event later than August 9, 2023, following the receipt of the required approval by the stockholders of DarkPulse
and our company, approval by the Nasdaq Stock Market (“Nasdaq”) of our initial listing application filed in connection with
the Business Combination, the fulfillment of other customary closing conditions and the effectiveness of the Form S-4 registration statement
the Company filed with the SEC.
Representations and Warranties;
Covenants
The parties
to the BCA have agreed to customary representations and warranties for transactions of this type. In addition, the parties to the BCA
agreed to be bound by certain customary covenants for transactions of this type, including, among others, covenants with respect to the
conduct of the Company and its subsidiaries during the period between execution of the BCA and the Closing. Each of the parties to the
BCA has agreed to use its reasonable best efforts to cause all actions and things necessary to consummate and expeditiously implement
the Business Combination.
Conditions to Each Party’s Obligations
The Business
Combination is subject to several closing conditions, summarized below, and notably the requirement that Nasdaq approve GSD’s initial
listing application for listing of the common stock of the Combined Company on the Nasdaq Capital Market in connection with the Business
Combination.
Under
the BCA, the obligations of the parties to consummate the Merger are subject to the satisfaction or waiver of certain customary closing
conditions of the respective parties, including, without limitation: (i) the applicable waiting period, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder relating to the Business Combination having expired
or been terminated and any other required regulatory approvals applicable to the transactions contemplated by the BCA having been obtained
and remaining in full force and effect; (ii) all the DarkPulse Preferred Stock being converted to DarkPulse Common Stock prior to the
Effective Time; (iii) no order or law issued by any court of competent jurisdiction or other governmental entity or other legal restraint
or prohibition preventing the consummation of the transactions contemplated by the Business Combination being in effect; (iv) the registration
statement on Form S-4 containing the joint proxy statement/prospectus to be filed by DarkPulse and our company relating to the BCA and
the Merger (the “Registration Statement”) becoming effective in accordance with the provisions of the Securities Act of 1933,
as amended (the “Securities Act”), no stop order being issued by Securities and Exchange Commission (the “SEC”)
and remaining in effect with respect to the Registration Statement, and no proceeding seeking such a stop order being threatened or initiated
by the SEC and remaining pending; (v) our initial listing application with Nasdaq in connection with the Business Combination having been
approved; (vi) our Board consisting of the number of directors, and comprising the individuals, determined pursuant to the BCA; (vii)
the approval and adoption of the BCA and the transactions contemplated thereby by the requisite vote of the DarkPulse’s stockholders
(the “Required Company Stockholder Consent”); (viii) the approval and adoption of the BCA and the transactions contemplated
thereby by the requisite vote of our stockholders; (ix) after giving effect to the transactions contemplated (including the PIPE
Financing), we have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act
of 1934, as amended (the “Exchange Act”)) immediately after the Effective Time; (x) the absence of a DarkPulse
Material Adverse Effect since the date of the BCA that is continuing, and (xi) the absence of a GSD Material Adverse Effect since the
date of the BCA that is continuing.
Termination
The BCA
may be terminated under certain customary and limited circumstances at any time prior to the Closing, including, without limitation, (i)
by the mutual written consent of our company and DarkPulse; (ii) by our company, subject to certain exceptions, if any of the representations
or warranties made by DarkPulse are not true and correct or if DarkPulse fails to perform any of its covenants or agreements under the
BCA (including an obligation to consummate the Closing) such that certain conditions to the obligations of our company could not be satisfied
and the breach (or breaches) of such representations or warranties or failure (or failures) to perform such covenants or agreements is
(or are) not cured or cannot be cured within the earlier of (A) thirty (30) days after written notice thereof, and (B) August 9, 2023
(the “Termination Date”); (iii) by DarkPulse, subject to certain exceptions, if any of the representations or warranties made
by us are not true and correct or if we fail to perform any of our covenants or agreements under the BCA (including an obligation to consummate
the Closing) such that the condition to the obligations of DarkPulse could not be satisfied and the breach (or breaches) of such representations
or warranties or failure (or failures) to perform such covenants or agreements is (or are) not cured or cannot be cured within the earlier
of (A) thirty (30) days after written notice thereof, and (B) the Termination Date; (iv) by either us or DarkPulse, if the Closing does
not occur on or prior to the Termination Date, unless the breach of any covenants or obligations under the BCA by the party seeking to
terminate proximately caused the failure to consummate the transactions contemplated by the BCA; (v) by either us or DarkPulse, if (A)
any governmental entity shall have issued an order or taken any other action permanently enjoining, restraining or otherwise prohibiting
the transactions contemplated by the BCA and such order or other action shall have become final and non-appealable; or (B) if the required
DarkPulse or GSD stockholder consent is not obtained; (vi) by us, if (A) DarkPulse does not deliver, or cause to be delivered to us a
Transaction Support Agreement duly executed by certain DarkPulse stockholders or (B) the DarkPulse stockholders meeting has been held,
has concluded, Darkulse stockholders have duly voted, and DarkPulse stockholder approval was not obtained; (vii) by us should DarkPulse
not deposit into the Trust Account in a timely manner the funds necessary to extend the period for us to complete an initial business
combination for an additional period of six months from February 9, 2023, in accordance with, and as required pursuant to, the BCA; and
(x) by us should: (A) Nasdaq not approve the initial listing application for the combined company with Nasdaq in connection with the Business
Combination; (B) the combined company not have satisfied all applicable initial listing requirements of Nasdaq; or (C) the common stock
of the combined company not have been approved for listing on Nasdaq prior to the Closing Date.
In the
event of the termination of this BCA, the BCA will become void (and there will be no Liability or obligation on the part of the Parties
and their respective Non-Party Affiliates) with the exception of Section 5.3(a), this Section 7.2, Article VIII and Article
I (to the extent related to the termination), each of which will survive such termination and remain valid and binding obligations
of the Parties.
The Company Stockholder Transaction Support
Agreement
Concurrently
with, or with respect to a certain stockholder holding all of the shares of Series A Preferred Stock of DarkPulse, within a specified
time after the signing of the BCA, the “DarkPulse Stockholder” listed on Schedule I attached to the BCA (collectively,
the “Supporting Company Stockholder”) shall duly execute and deliver to GSD a transaction support agreement (the “The
Company Stockholder Transaction Support Agreement”), pursuant to which, among other things, such Supporting DarkPulse Stockholder
will agree to, support and vote in favor of the BCA, the Ancillary Documents to which DarkPulse is or will be a party and the transactions
contemplated thereby (including the Merger).
Extension of Date to Consummation a Business Combination
On January 31, 2023, at the Special
Meeting, a total of 10,079,383 (or 75.64%) of our issued and outstanding shares of Class A common stock and Class B common stock held
of record as of December 21, 2022, the record date for the Special Meeting, were present either in person or by proxy, which constituted
a quorum. Our stockholders voted at the Special Meeting to approve an Extension Amendment to our charter to extend the time to complete
a business combination, with more than 65% voting for approval.
On January 31, 2023, we filed
with the Secretary of State of the State of Delaware an amendment (the “Extension Amendment”) to our amended and restated
certificate of incorporation to extend the date by which we must consummate a Business Combination up to six times, each by an additional
month, for an aggregate of six additional months (i.e. from February 9, 2023 up to August 9, 2023) or such earlier date as determined
by the board of directors.
Our amended and restated certificate
of incorporation requires that we provide our public stockholders an opportunity to redeem their Public Shares in connection with an amendment
to our amended and restated certificate of incorporation to extend the time in which to consummate a Business Combination. The January
31, 2023 Special meeting requested shareholder approval of the Extension amendment, and thus triggered the requirement in our charter
to provide its public shareholders an opportunity to redeem their Public Shares. In connection with the Special Meeting to approve the
Extension Amendment, we afforded our stockholders an opportunity to redeem their Public Shares and stockholders holding 9,149,326 Public
Shares (approximately 87% of the outstanding Public Shares) properly exercised their right to redeem their shares (and did not withdraw
their redemption) for cash at a redemption price of approximately $10.39 per share, for an aggregate redemption amount of approximately
$95,061,497. Following such redemptions, approximately $14,038,481 was left in trust and 1,343,154 Public Shares remain outstanding.
Our Management Team
Our management team consists solely
of Rick Iler, our Principal Executive Officer and Chief Financial Officer.
J. Richard (Rick) Iler has spent
his professional career in the capital markets working in positions as corporate finance, chief financial officer of both public and private
companies, and institutional corporate bond salesman with leading wall street firms, e.g., BearStearns, Prudential, Kidder Peabody and
Smith Barney.
His operational experience began
working for an heir, (Shelton Ranch Corporation) of the legendary King Ranch working in budgeting, cash management and financing activities.
He worked with prominent joint ventures administering operating results with such notable companies as Shell, Prudential, Gulf & Western,
and the Pritzker family. He has overseen financial reporting to regulatory agencies for numerous microcap public companies as chief financial
officer where his duties evolved around facilitating various financings.
His treasury experience with SavingsBank,
a Texas savings bank, entailed chairing the asset/liability and investment committees, where he managed a several hundred million dollar
mortgage bond arbitrage guiding it through a period of an inverted yield curve returning an annualized 25% internal rate of return. His
experience entailed substantial hedging experience with exchanged traded derivatives.
Throughout his career, he has
been part of various investment classes of stock, debt and off balance sheet instruments in the aggregate eclipsing several hundred million
in equities and debt. He has been part of high net worth, venture capital firms and leading investment banking concerns.
He has a B.S. from Grand Valley
State University and attended South Texas College of Law completing nearly 2 of the 3 year JD program.
From 2018 to present, he has been
self-employed as an independent consultant for various public companies.
Business Strategy
If the Proposed Business Combination
with DarkPulse does not become effective, our acquisition and value creation strategy is to identify, acquire and, after our initial business
combination, to build a company in an industry or sector that complements the experience of our management team and can benefit from our
operational expertise. Our acquisition selection process will leverage our team’s network of potential transaction sources, ranging
from owners and directors of private and public companies, private equity funds, investment bankers, lenders, attorneys, accountants and
other trusted advisors across various sectors.
In addition, we intend to utilize
the networks and industry experience of each of directors in seeking an initial business combination. Over the course of their careers,
the members of our management team and board have developed a broad network of contacts and corporate relationships that we believe will
serve as a useful source of acquisition opportunities.
This network has been developed
through years of business experience, including in private equity and investment banking. We expect this network will provide our management
team and board with a robust and consistent flow of acquisition opportunities. In addition, we anticipate that target business candidates
will be brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment
banking firms, consultants, accounting firms and large business enterprises. Members of our management team and board will communicate
with their networks of relationships to articulate the parameters for our search for a target company and a potential business combination
and begin the process of pursuing and reviewing potentially interesting leads.
Acquisition Criteria
The Proposed Business
Combination is not guaranteed to occur, and in such event, we cannot assure you that we will be able to locate an appropriate target business
or that we will be able to engage in a business combination with target businesses on favorable terms. Consistent with our strategy, we
have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses.
We will use one or more of these criteria and guidelines in evaluating acquisition opportunities, but 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 seek to acquire companies
that we believe:
1. fitting
the farming and national securities industries criteria we were targeting;
2. having
a fair value in excess of the initial business combination minimum requirement of $82 million (80% of the IPO amount);
3. having
a management team with the desire and ability to run a public company; and,
4. being
ready (or able to get ready in short order) to meet the SEC’s merger prospectus requirements of such as having two years of audited
financial statements.
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.
Initial
Business Combination
Our
initial business combination, whether effectuated through the Proposed Business Combination as set forth above or another business combination
if the Proposed Business Combination does not occur, must comply with Nasdaq rules. Nasdaq rules require that we must complete one or
more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the Trust Account
(excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of our signing
a definitive agreement in connection with our Initial Business Combination. Our board of directors will make the determination as to the
fair market value of our Initial Business Combination. If our board of directors is not able to independently determine the fair market
value of our Initial Business Combination, we will obtain an opinion from an independent investment banking firm that is a member of the
Financial Industry Regulatory Authority (“FINRA”) or an independent accounting firm with respect to the satisfaction of such
criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair
market value of our Initial Business Combination, it may be unable to do so if it is less familiar or experienced with the business of
a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. Additionally,
pursuant to Nasdaq rules, any Initial Business Combination must be approved by a majority of our independent directors.
We
have until June 9, 2023 (which is 22 months from the closing of the initial public offering) to consummate an Initial Business Combination.
However, if we anticipate that we may not be able to consummate our Initial Business Combination within 22 months, we will, by resolution
of our board if requested by our Sponsor, extend the deadline to consummate a business combination up to two times, each by an additional
month for an aggregate of two months, or until August 9, 2023 (for a total of 24 months to complete a business combination), subject to
the Sponsor depositing additional funds into the Trust Account as set out below. In connection with any such extension, public stockholders
will not be offered the opportunity to vote on or redeem their shares. Pursuant to the terms of our amended and restated certificate of
incorporation, in order to extend the time available for us to consummate our Initial Business Combination for an additional month and
each month thereafter, our Sponsor or its affiliates or designees must deposit into the Trust Account $0.0625 per public share remaining
after redemptions on or prior to the date of the deadline. We will only be able to extend the period of time to consummate a business
combination one month at a time and no more than two months total from June 9, 2023. We will issue a press release announcing any extension,
at least three days prior to the deadline. In addition, we will issue a press release the day after the deadline, announcing whether the
funds have been timely deposited. Our Sponsor and its affiliates or designees are obligated to fund the Trust Account in order to extend
the time for us to complete our Initial Business Combination, but our Sponsor will not be obligated to extend such time.
We
anticipate structuring our Initial Business Combination either (i) in such a way so that the post-transaction company in which our public
stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses, or (ii) in such
a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order
to meet certain objectives of the target management team or stockholders, or for other reasons. However, we will only complete an Initial
Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or
otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under
the Investment Company Act of 1940, as amended (the “Investment Company Act”). Even if the post-transaction company owns or
acquires 50% or more of the voting securities of the target, our stockholders prior to the Initial Business Combination may collectively
own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the Initial Business
Combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the
outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result
of the issuance of a substantial number of new shares, our stockholders immediately prior to our Initial Business Combination could own
less than a majority of our outstanding shares subsequent to our Initial Business Combination. If less than 100% of the equity interests
or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses
that is owned or acquired is what will be taken into account for purposes of Nasdaq’s 80% of net assets test. If the Initial Business
Combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the transactions
and we will treat the target businesses together as the Initial Business Combination for purposes of a tender offer or for seeking stockholder
approval, as applicable.
To
the extent we effect our Initial Business Combination with a company or business that may be financially unstable or in its early stages
of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management will endeavor
to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant
risk factors.
Our Business
Combination Process
In
evaluating a prospective target business, we expect to conduct a thorough due diligence review which may encompass, among other things,
meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational,
legal and other information which will be made available to us. We will also utilize our operational and capital planning experience.
We
are not prohibited from pursuing an Initial Business Combination with a business that is affiliated with our Sponsor, officers or directors.
In the event we seek to complete our Initial Business Combination with a business that is affiliated with our Sponsor, officers or directors,
we, or a committee of independent and disinterested directors, will obtain an opinion from an independent investment banking firm that
is a member of the Financial Industry Regulatory Authority, or FINRA, or from an independent accounting firm, that our Initial Business
Combination is fair to our company from a financial point of view.
Members
of our management team may directly or indirectly own shares of our common stock and/or Private Warrants and, accordingly, may have a
conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our Initial
Business Combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular
business combination if the retention or resignation of any such officers and directors was included by a target business as a condition
to any agreement with respect to our Initial Business Combination.
Certain
of our officers and directors presently have, and any of them in the future may have additional, fiduciary or contractual obligations
to other entities, pursuant to which such officer or director is or will be required to present a business combination opportunity to
such entity. As a result, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for
an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor such fiduciary or contractual
obligations to present such business combination opportunity to such entity. We expect that if an opportunity is presented to one of our
officers or directors in his or her capacity as an officer or director of one of those other entities, such opportunity would be presented
to such other entity and not to us. Our amended and restated certificate of incorporation will provide 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 the company and such opportunity is one we are legally and contractually permitted to undertake
and would otherwise be reasonable for us to pursue. We do not believe, however, that the fiduciary duties or contractual obligations of
our officers or directors will materially affect our ability to complete our Initial Business Combination.
Sourcing and Efforts with
Potential Initial Business Combination Targets
Certain
members of our prior management team have spent significant portions of their careers working with businesses in the farming and agricultural
sectors, including farming related operations and businesses that support the farming industry, and have developed a wide network of professional
services contacts and business relationships in that industry. The members of our prior board of directors also have significant executive
management and public company experience with farming and agricultural related companies and brought additional relationships that further
broadened our industry network.
Our
Original Sponsor (a subsidiary of The Gladstone Companies, Inc., or “TGCI”) drew upon the management expertise of employees
of another of TGCI’s subsidiaries to identify potential targets. That subsidiary, Gladstone Management Corporation, had a team assigned
to identify, acquire and manage farmland assets on behalf of a company that it advises, Gladstone Land Corporation (a publicly-traded
farmland REIT) (“Land”). Since Land is restricted by REIT rules from owning operating assets, the investment hypothesis relating
to the original formation of GSD was that the Sponsor could draw on the expertise of the Land team in identifying businesses in farming
and agricultural sectors, including farming related operations and businesses that support the farming industry, that would be potential
investment targets for GLEE which Land was not itself interested in owning.
Over
the period from the closing of the IPO in August 2021 until our Sponsor sold its interests in our Company to DarkPulse in October 2022,
the team met at least weekly and evaluated over 50 potential target companies. The challenge was finding companies that fit the overall
criteria including:
1. fitting
the farm and farming-related asset criteria we were targeting;
2. having
a fair value in excess of the initial business combination minimum requirement of $82 million (80% of the IPO amount);
3. having
a management team with the desire and ability to run a public company; and,
4. being
ready (or able to get ready in short order) to meet the SEC’s merger prospectus requirements of such as having two years of audited
financial statements.
The
Company conducted due diligence to varying degrees on the potential targets, including review of the business’ management, balance
sheet, valuation, business model, stockholders, and historical and projected financials, in each case to the extent made available, among
other diligence reviews. Following such reviews, and at various points in time, the Company decided to discontinue discussions with the
potential targets other than DarkPulse, for one or several reasons, including preparedness for the public markets, growth potential, total
addressable market, end market focus, capital requirements, market position, defensibility of business strategy, valuation, and industry
trends among other reasons.
Discussion of Valuation
and Reasons for the Approval of the Proposed Business Combination
Soon after the change in our
Board of Directors in October of 2022, the new Board began holding regular Board meetings with key meetings, decision and events identified
below. The focus of the Board meetings was due diligence on a potential target company, DarkPulse. The following chronology does not purport
to catalogue every conversation or meeting among the Board, but instead is meant to provide a synopsis of events to better understand
why the Board approved the Proposed Business Combination.
A meeting was held November 29,
2022, at which our Board discussed the following:
|
· |
The Board held a lengthy discussion concerning its fiduciary responsibilities in connection with a SPAC company and business combination with a deadline of February 9, 2023, including the due diligence involved in what the prior sponsor and management had already accomplished since inception, due diligence of the current target company under a letter of intent at the time with DarkPulse, Inc., and finally whether another company would provide a better opportunity for stockholders. |
|
· |
The Board discussed the
time available to complete a business combination and the legal process and logistics involved in conducting a special meeting of
stockholders to consider whether to approve an extension of the deadline to complete a business combination. |
Following the discussion on the
points above, our Board resolved that management would prepare documents for a potential extension of the deadline to complete a business
combination from February 9, 2023 to August 9, 2023 with appropriate considerations as to why an extension is necessary for the Board
to consider at its next meeting.
Furthermore, our Board established
procedures for conducting due diligence including:
|
· |
The Board discussed procedurally how to engage in due diligence with respect to what the Original Sponsor and management of the Company had already accomplished along with completing a new due diligence checklist for DarkPulse to complete. |
|
· |
The Board resolved that our CFO shall take steps to obtain information on what the Original Sponsor and management had accomplished since inception of the Company to October 12, 2022, the date of the sponsor and management change. |
|
· |
The Board further resolved that outside counsel shall liaison with counsel for DarkPulse on outstanding due diligence items and to submit questions from the Board and management for follow up pertaining to the information received under the checklist. |
|
· |
The Board further resolved that the entire Board at the next meeting shall consider what additional professionals will be required, including a budget, to complete due diligence. |
A meeting was held December 2,
2022, at which our Board discussed the following:
|
· |
Approval of Board and Chief Financial Officer Compensation. |
|
· |
Examination and approval of GSD expenses and creation of a budget for due diligence. |
|
· |
A review and discussion of due diligence exercised by the previous board and criteria used with regard to past candidates. |
|
· |
Filing a Schedule 14A and holding a special meeting to extend the deadline for a business combination by two three month periods ending on August 9, 2023, with the Sponsor making deposits into the Trust Account at each three month extension. |
A meeting was held December 6,
2022, at which our Board discussed the following:
|
· |
The Board discussed company expenses and the restrictions on what the offering trust funds may be used for. Without trust funds, all due diligence, board and officer compensation will need to be paid from working capital loans from the target/sponsor. The Board discussed the limited availability of financing for DarkPulse, which had an equity line that may not be able to generate funds sufficient both for itself and to lend to our company, and how that may affect our company’s ability to pay vendors for services we would need performed. |
|
· |
The Board discussed developing a set of criteria based
on the current farming set of criteria but expanded to include national security industries. The current set of criteria is as follows: |
1. fitting
the farm and farming-related asset criteria we were targeting;
2. having
a fair value in excess of the initial business combination minimum requirement of $82 million (80% of the IPO amount);
3. having
a management team with the desire and ability to run a public company; and,
4. being
ready (or able to get ready in short order) to meet the SEC’s merger prospectus requirements of such as having two years of audited
financial statements.
|
· |
The Board approved developing a set of criteria based on the past farming set of criteria but expanded to include national security industries. |
|
|
|
|
· |
Discussion related to interfacing with DarkPulse on the company’s due diligence requests. Suggestion to invite DarkPulse to attend next meeting to have a presentation of due diligence on matters under the checklist. Also necessary is a timeline of events from counsel to meet the deadline that may be shared with DarkPulse. |
A meeting was held December 13,
2022, at which our Board discussed the following:
|
· |
The Board held discussion on the capital structure of DarkPulse, with emphasis on the classes of preferred stock designated and outstanding. The Board worked through questions on the reports for Series A Preferred Stock and Series D Preferred Stock, and was satisfied with the explanations provided by DarkPulse. |
|
· |
The Board held discussion on Dennis’ large conversion right under Series A Preferred stock at 25% of the outstanding on an as-diluted basis. The Board felt that the large amount could be a concern. The Board considered Dennis’ contributions to the company and was informed of the litigation involving the Series D Preferred Stock, all of which factors helped to alleviate the concern. |
|
· |
The Board held discussion on outstanding litigation and in particular the convertible note litigation. While these actions are a concern, the Board determined that these risks are existing and will be fully disclose as risk factors if the Board presents the deal for stockholder approval. |
|
· |
The Board held discussion on DarkPulse’s financials and projections. |
|
· |
The Board held discussion on Optilon and its cash drain to the company. GSD’s officer noted that the company is expected to make a turn next year. |
|
· |
The Board held a discussion on completing due diligence. A motion was made to conclude due diligence after receiving the various responses and submissions from DarkPulse, |
|
· |
The Board resolved to conclude due diligence of DarkPulse, to hold a meeting with Benchmark the following day to go over the financial analysis in connection with the fairness opinion, and to consider approving the BCA at the next Board meeting after the review of the financial analysis in connection with the fairness opinion and discussion with Benchmark. |
A meeting was held December 14,
2022, at which the GSD Board discussed the following:
|
· |
Representatives of Benchmark reviewed the financial analysis in connection with the fairness opinion and rendered an oral opinion to our Board, subsequently confirmed in writing on the same date by delivery of Benchmark’s written opinion addressed to our Board, to the effect that the consideration to be paid in the Business Combination pursuant to the Merger Agreement, as of that date and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, is fair from a financial point of view to the unaffiliated stockholders of the company. |
|
· |
Additionally, as part of their review of the financial analysis in connection with the fairness opinion, representatives of Benchmark also reviewed with the Board an analysis of the recent market valuations of DarkPulse, which Benchmark merely reviewed but did not rely upon in reaching the conclusion expressed in its Opinion. This review examined DarkPulse’s market valuations based on its closing stock price and 30-day VWAP (volume weighted average price) as of December 13, 2022, and compared the premiums to these market valuations implied by the merger consideration to the average and median premiums paid in the acquisition of OTC-traded technology companies over the last three years. DarkPulse’s market valuation was not a primary consideration for the Board since the Board did not view the market valuation of an OTC-traded stock to be efficient and necessarily reflective of the underlying fundamental value of DarkPulse. |
|
· |
The Board asked questions of the representatives of Benchmark at the meeting about the financial analysis in connection with the fairness opinion. The Board then dismissed Benchmark from the remainder of the meeting. |
|
· |
The Board further discussed the issue of DarkPulse’s financials and projections. The Board held discussion on the IP for DarkPulse, the various agreements, as well as pending agreements and the commercialization of the IP in the market. The Board noted that there has not been challenges to the DarkPulse IP. |
|
· |
The Board held discussion on the projections used in the financial analysis in connection with the fairness opinion and discussed pending contracts of DarkPulse and other matters related to financial performance. |
|
· |
The Board resolved to accept the fairness opinion, with notes to Benchmark to update the current amount of cash in trust and anticipated transaction expenses in its final analysis. |
Also at the December 14, 2022
board meeting, our Board noted that it is empowered with a wide mandate to not only consider the target for a Business Combination, but
also whether the proposed terms of the merger are advisable or whether the terms need to be negotiated and/or revised or whether the needs
of the stockholders of our Company would be better served by alternative transactions that are available to us.
The Board held discussion on past
efforts of the Original Sponsor and management team to secure a business combination with a company in the farming industry, with many
candidates interviewed and considered. The Board noted its change to the criteria used to locate a suitable merger candidate to include
the farming industry and the national security industry, with DarkPulse engaged in business operations designed to serve both industries.
The Board reviewed a timeline prepared by counsel to effectuate a Business Combination and considered proposed SEC rules on SPACS to complete
within 24 months. The Board concluded that the plan should be to complete a Business Combination, if warranted, within 24 months from
the IPO. The Board noted the time remaining to complete a business combination at February 9, 2023, and decided that it should focus on
whether DarkPulse is a suitable candidate as a target that would be in the best interests of stockholders.
The Board and counsel went over
the material terms of the Business Combination Agreement by, between, and among the Company, the Merger Sub and DarkPulse, pursuant to
which DarkPulse will merge with and into the Merger Sub with DarkPulse as the surviving company and DarkPulse shall become a wholly-owned
subsidiary of GSD.
The Board had considered, among
other things, the presentations and representations by the officers of the DarkPulse, the review by Benchmark of its financial analysis
and fairness opinion, the due diligence conducted by us on DarkPulse, the legal memos prepared by counsel, and such other factors as our
Board has deemed relevant in connection with making a decision on the matter.
After considering the foregoing
and holding a discussion on the terms of the Business Combination Agreement, our Board deemed it to be advisable and in the best interest
of the Company and our stockholders to enter into the Business Combination Agreement and to recommend it to stockholders.
Status as a Public Company
We
believe our structure makes us an attractive business combination partner to target businesses. As a public company, we offer a target
business an alternative to the traditional initial public offering through a merger or other business combination with us. Following an
Initial Business Combination, we believe the target business would have greater access to capital and additional means of creating management
incentives that are better aligned with stockholders’ interests than it would as a private company. A target business can further
benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination
transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our
shares of Class A Common Stock (or shares of a new holding company) or for a combination of our shares of Class A Common 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
expeditious and cost-effective method to becoming a public company than the typical initial public offering. The typical initial public
offering process takes a significantly longer period of time than the typical business combination transaction process, and there are
significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road show
efforts that may not be present to the same extent in connection with an Initial Business Combination with us.
Furthermore,
once a proposed Initial Business Combination is completed, the target business will have effectively become public, whereas an IPO is
always subject to the underwriters’ ability to complete the IPO, as well as general market conditions, which could delay or prevent
the IPO from occurring or could have negative valuation consequences. Following an Initial Business Combination, we believe the target
business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’
interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting
a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While
we believe that our structure and our management team’s backgrounds will make us an attractive business partner, some potential
target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder
approval of any proposed Initial Business Combination, negatively.
Financial Position
We
had funds available for an Initial Business Combination initially in the amount of approximately $108.8 million that was in the Trust
Account as of December 31, 2022. However, on January 31, 2023, we held a Special Meeting of the stockholders to vote upon an amendment
to our amended and restated certificate of incorporation to extend the time in which to consummate an Initial Business Combination, which
we refer to as the Extension Amendment.
In
connection with the Extension Amendment, stockholders holding 9,149,326 Public Shares (approximately 87% of the outstanding Public Shares)
properly exercised their right to redeem their shares (and did not withdraw their redemption) for cash at a redemption price of approximately
$10.39 per share, for an aggregate redemption amount of approximately $95,061,497. Following such redemptions, approximately $14,038,481
was left in trust and 1,343,154 Public Shares remain outstanding. As of May 5, 2023, there was $14,400,067 in the Trust Account with 1,343,154
Public Shares outstanding.
Despite
the redemptions, we believe that we still 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 Initial Business Combination using our cash, debt or equity securities, or a combination
of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid
to the target business to fit its needs and desires. However, 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. We intend to effectuate our
Initial Business Combination using cash from the proceeds held in the Trust Account from our IPO and the sale of the Private Warrants,
the proceeds of the sale of our shares in connection with our Initial Business Combination, shares issued to the owners of the target,
debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. 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 Initial 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 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, and we may effectuate our Initial Business Combination using the proceeds of such offering rather than using the
amounts held in the Trust Account. In addition, we intend to target businesses larger than we can acquire with the net proceeds of our
IPO and the sale of the Private Warrants, and may as a result be required to seek additional financing to complete such proposed Initial
Business Combination. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously
with the completion of our Initial Business Combination. In the case of an Initial Business Combination funded with assets other than
the Trust Account assets, our proxy materials or tender offer documents disclosing the Initial Business Combination would disclose the
terms of the financing and, only if required by applicable law or stock exchange requirements, we would seek stockholder approval of such
financing. There are no prohibitions on our ability to raise funds privately, 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.
Sources of Target Businesses
We
anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers
and investment professionals, as a result of being solicited by us by calls or mailings. Our officers and directors, as well as our Sponsor
and 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. In addition,
we expect to receive a number of deal flow opportunities that would not otherwise necessarily be available to us as a result of the business
relationships of our officers and directors and our Sponsor and their affiliates. While we do not presently anticipate engaging the services
of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or
other individuals in the future, in which event we may pay a finder’s fee, consulting fee, advisory fee or other compensation to
be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our
management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach
us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s
fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the Trust Account.
In no event, however, will our Sponsor or any of our existing officers or directors be paid any finder’s fee, reimbursement, consulting
fee, monies in respect of any payment of a loan or other compensation by the company prior to, or in connection with any services rendered
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). None of our Sponsor, executive officers or directors, or any of their respective affiliates, will be allowed to receive any
compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated
Initial Business Combination except as set forth herein. Some of our officers and 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 Initial Business Combination candidate.
Selection of a Target
Business and Structuring of our Initial Business Combination
Nasdaq
rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value
of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the
Trust Account) at the time of our signing a definitive agreement in connection with our Initial Business Combination. The fair market
value of our Initial Business Combination will be determined by our board of directors based upon one or more standards generally accepted
by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses
or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able
to independently determine the fair market value of our Initial Business Combination, we will obtain an opinion from an independent investment
banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria.
While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value
of our Initial Business Combination, it may be unable to do so if it is less familiar or experienced with the business of a particular
target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to
purchase multiple businesses in unrelated industries in conjunction with our Initial Business Combination. Subject to this requirement,
our management will virtually have unrestricted flexibility in identifying and selecting one or more prospective target businesses, although
we will not be permitted to effectuate our Initial Business Combination with another blank check company or a similar company with nominal
operations.
In
any case, we will only complete an Initial Business Combination in which we own or acquire 50% or more of the outstanding voting securities
of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or
businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken
into account for purposes of Nasdaq’s 80% fair market value test. There is no basis for investors in our IPO to evaluate the possible
merits or risks of any target business with which we may ultimately complete our Initial Business Combination.
To
the extent we effect our Initial Business Combination with a company or business that may be financially unstable or in its early stages
of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor
to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant
risk factors.
In
evaluating a prospective business target, we expect to conduct a thorough due diligence review, which may encompass, among other things,
meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as
well as a review of financial and other information that will be made available to us.
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 Initial 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.
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. In addition, we intend to focus our search for an Initial Business Combination in a single
industry. By completing our Initial Business Combination with only a single entity, our lack of diversification may:
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• |
subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our Initial Business Combination, and |
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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 Initial
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, if any, in the target business cannot presently be stated with any certainty. The determination
as to whether any of the members of our management team will remain with the combined company will be made at the time of our Initial
Business Combination. While it is possible that one or more of our directors will remain associated in some capacity with us following
our Initial Business Combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our Initial
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.
We
cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The
determination as to whether any of our key personnel will remain with the combined company will be made at the time of our Initial Business
Combination.
Following
an Initial Business Combination, we may seek to recruit additional managers to supplement the incumbent management 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 applicable law or applicable stock exchange listing requirements, 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:
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• |
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 (other than in a public offering); |
|
• |
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 stock 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. |
The format
for the Proposed Business Combination is merger of target into a subsidiary of the Company, and we have chosen to obtain shareholder approval.
Permitted Purchases of
our Securities
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 Initial Stockholders, directors, officers, advisors or their affiliates may purchase
Public Shares or Public Warrants in privately negotiated transactions or in the open market either prior to or following the completion
of our Initial Business Combination. There is no limit on the number of shares our Initial Stockholders, directors, officers or their
affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. 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.
If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information
not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. 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. 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. None of the
funds held in the Trust Account will be used to purchase shares or Public Warrants in such transactions prior to completion of our Initial
Business Combination.
The
purpose of any such purchases of shares could be to vote such shares in favor of the Initial Business Combination and thereby
increase the likelihood of obtaining stockholder approval of the Initial 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 Initial
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 Initial Business Combination that may not otherwise have been possible. In addition, if such purchases are
made, the public “float” of our shares of Class A Common Stock or warrants 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 and/or their affiliates anticipate that they may identify the stockholders with whom our Sponsor, officers,
directors 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 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 our Initial Business Combination, whether or not such stockholder has already submitted a proxy with respect to our Initial
Business Combination. Our Sponsor, officers, directors or their affiliates will only purchase Public 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 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 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. We expect that
any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchases 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 prior to 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 taxes, divided by the number of then outstanding Public Shares, subject
to the limitations described herein. The amount in the Trust Account was approximately $10.39 per public share as of January 31, 2023
and approximately $10.43 as of March 31, 2023. 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 shares of Class
B Common Stock and Class A Common Stock held by them in connection with the completion of our Initial Business Combination.
Our public
stockholders will retain their public warrants even if they redeem their Public Shares. If any of our public stockholders redeem their
public shares at closing in accordance with the our charter but continue to hold public warrants after the closing, the 5,239,244 retained
outstanding public Warrants would have an aggregate market value of approximately $360,450, based on the closing price on the Nasdaq of
$0.0688 per Warrant as of April 28, 2023, regardless of the number of shares redeemed by public stockholders. Following the Business Combination,
we may redeem outstanding warrants prior to their expiration at a time that is disadvantageous to the holder thereof, or the warrants
may never be in the money and may expire worthless. Please see “Risk Factors” — "Even if we consummate the Business
Combination, the Public Warrants may never be in the money, and they may expire worthless” and “We may redeem the unexpired
redeemable Public Warrants prior to their exercise at a time that is disadvantageous to Warrant holders, thereby making their Public Warrants
worthless” for more information.
Manner
of Conducting Redemptions
We
will provide our public stockholders with the opportunity to redeem all or a portion of their public 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 Initial Business
Combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed Initial 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. Under Nasdaq rules, 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
an Initial Business Combination 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 Initial Business Combination. We may 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
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:
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· |
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 |
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· |
file proxy materials with the SEC. |
In
the event that we seek stockholder approval of our Initial Business Combination, we will distribute proxy materials and, in connection
therewith, provide 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 present and entitled to vote at the meeting to approve the Initial Business Combination when a quorum is present are voted in favor
of the Initial 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 Initial Stockholders will count toward this quorum and pursuant to the letter agreements,
our Sponsor, officers and directors have agreed to vote any shares of Class B Common Stock held by them and any shares of Class A Common
Stock acquired during or after our IPO (including in open market and privately negotiated transactions) 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. As a result, with the 2,623,120 shares of Class
B Common stock held by our Initial Stockholders with their intention to vote in favor of the Business Combination , we would not need
any of the 1,343,154 public shares outstanding to be voted in favor of an Initial Business Combination (assuming only the minimum number
of shares representing a quorum are voted) in order to have our Initial Business Combination approved (assuming that the Initial Stockholders
do not purchase any Units or shares in the after-market after the date of this Annual Report). 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 agreements of our Initial Stockholders,
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, whether they participate in or abstain from voting or
whether they were a stockholder on the record date for the stockholder meeting held to approve the proposed transaction.
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 prior to completing our Initial Business Combination which 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 Initial 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.
In the
event 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, we will not redeem any public shares unless our net tangible assets will be at
least $5,000,001 either immediately prior to or upon consummation of our Initial Business Combination and after payment of underwriters’
fees and commissions (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 might withdraw the tender offer and not complete the Initial Business Combination.
Our amended
and restated certificate of incorporation provides that we may not redeem our public shares unless our net tangible assets are at least
$5,000,001 either immediately prior to or upon consummation of our Initial Business Combination and after payment of underwriters’
fees and commissions (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 Initial
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 Initial 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 Initial Business Combination exceed the aggregate amount of cash available to us, we might not complete the
Initial 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 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 our IPO, which we refer to as the “Excess Shares.” Such restriction
shall also be applicable to our affiliates. 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 Initial 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. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in our IPO without
our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability
to complete our Initial Business Combination, particularly in connection with an Initial 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, we would not be restricting our stockholders’
ability to vote all of their shares (including Excess Shares) for or against our Initial Business Combination.
Tendering Stock Certificates
in Connection with 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 up to two business days prior to the vote on the
proposal to approve the Initial Business Combination, 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 proxy materials 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 up to two days prior to the vote on the Initial Business
Combination 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 special purpose acquisition 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 Initial Business Combination and check a box on
the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the Initial 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 Initial 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 Initial Business Combination until the redeeming holder delivered its certificate. The requirement
for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once
the Initial Business Combination is approved.
Any
request to redeem such shares, once made, may be withdrawn at any time up to the date of the stockholder meeting. Furthermore, if a holder
of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to 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 Initial 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 Initial Business Combination is not completed, we may continue to try to complete an Initial Business Combination with
a different target until 22 months from the closing of our IPO (or 24 months from the closing of our IPO, if we extend the period of time
to consummate a business combination, subject to our Sponsor depositing additional funds into the Trust Account and our approving the
extensions).
Extension
of Time to Complete Business Combination
We have
until June 9, 2023, 22 months from the closing of our IPO to consummate an Initial Business Combination. However, if we anticipate that
we may not be able to consummate our Initial Business Combination within 22 months, we will, by resolution of our board if requested by
our Sponsor, extend the period of time to consummate a business combination by an additional four times, each for a month for an aggregate
of four months (for a total of 24 months to complete a business combination), subject to the Sponsor depositing additional funds into
the Trust Account as set out below. In connection with any such extension, public stockholders will not be offered the opportunity to
vote on or redeem their shares. Pursuant to the terms of our certificate of incorporation and the trust agreement entered into between
us and Continental Stock Transfer & Trust Company, in order to extend the time available for us to consummate our Initial Business
Combination for an additional month, our Sponsor or its affiliates or designees must deposit into the Trust Account $0.0625
per share of Class A Common Stock subject to possible redemption on or prior to the date of the deadline. We will only be able
to extend the period of time to consummate a business combination a month at a time, for an additional two months in the aggregate from
June 9, 2023 to August 9, 2023. We will issue a press release announcing any extension, at least three days prior to the deadline. In
addition, we will issue a press release the day after the deadline, announcing whether the funds have been timely deposited. Our Sponsor
and its affiliates or designees are obligated to fund the Trust Account in order to extend the time for us to complete our Initial Business
Combination, but our Sponsor will not be obligated to extend such time.
Redemption
of Public Shares and Liquidation if no Initial Business Combination
Our amended
and restated certificate of incorporation provides that we have only 24 months from the closing of our IPO (subject to our Sponsor depositing
additional funds into the Trust Account and our Board approving the extensions) to complete our Initial Business Combination. If we are
unable to complete our Initial Business Combination within such 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 income and franchise taxes (less up to $100,000 of interest to pay dissolution
expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors,
dissolve and liquidate, subject in the case of clauses (ii) and (iii) above 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 or rights, which will expire worthless if we fail to complete our Initial Business Combination within the 19-month time
period (subject to our Sponsor depositing additional funds into the Trust Account).
Our Sponsor,
Representative, officers and directors have entered into letter agreements with us, pursuant to which they have waived their rights to
liquidating distributions from the Trust Account with respect to any shares of Class B Common Stock held by them if we fail to complete
our Initial Business Combination within 22 months from the closing of our IPO (or 24 months from the closing of our IPO, subject to our
Sponsor depositing additional funds into the Trust Account). However, if our Sponsor, officers or directors acquire public shares in or
after our 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 22 months from the closing of our IPO (or 24 months from the closing of our IPO, if
subject to our Sponsor depositing additional funds into the Trust Account).
Our
Sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our
amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection
with our Initial Business Combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we
do not complete our Initial Business Combination within 24 months from the closing of our IPO (subject to our Sponsor depositing additional
funds into the Trust Account) or (ii) with respect to any other provision relating to stockholders’ rights or pre-Initial Business
Combination activity, 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 taxes divided by the number
of then outstanding public shares. However, we may not redeem our public shares unless our net tangible assets are at least $5,000,001
either immediately prior to or upon consummation of our Initial Business Combination and after payment of underwriters’ fees and
commissions (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 at such time.
We expect that all costs and expenses associated with implementing
our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the proceeds held outside
the Trust Account, although we cannot assure you that there will be sufficient funds for such purpose. We will depend on sufficient interest
being earned on the proceeds held in the Trust Account to pay any tax obligations we may owe. 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 income and franchise taxes, we may request the trustee to release to us an additional amount
of up to $100,000 of such accrued interest to pay those costs and expenses.
Initially,
if we were to expend all of the net proceeds of our IPO and the sale of the Private 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 $10.20. 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 $10.20. 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, 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, 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. Marcum LLP, our independent registered public
accounting firm, and the underwriters of our IPO, will not execute agreements with us waiving such claims to the monies held in the Trust
Account.
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 for services rendered or products sold to us,
or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business
combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.20 per public share and (ii) the
actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.20 per
share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims
by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether
or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our IPO against certain
liabilities, including liabilities under the Securities Act. However, we have not asked our Sponsor to reserve for such indemnification
obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe
that our Sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our Sponsor would be able to
satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation,
claims by vendors and prospective target businesses.
In the event that the proceeds in the Trust Account are reduced below (i) $10.20 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, 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 $10.20 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, 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 our IPO against certain liabilities, including liabilities under the Securities
Act. We will have access to the sale of the Private Warrants 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). In the event that 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. In the event that our IPO expenses exceed our estimate of $550,000, we may
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, in the event that the IPO expenses are less than our estimate
of $550,000, the amount of funds we intend to be held outside the Trust Account would 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 Initial Business Combination within 24 months from the closing of our IPO (subject to our Sponsor
depositing additional funds into the Trust Account) 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 Initial Business Combination within 24 months from the closing of our IPO (subject to our Sponsor depositing additional
funds into the Trust Account), is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed
to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently
unknown), 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
Initial Business Combination within 24 months from the closing of our IPO (subject to our Sponsor depositing additional funds into the
Trust Account), 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 taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares,
which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further
liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses
(ii) and (iii) above 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 (subject
to our Sponsor depositing additional funds into the Trust Account and Board approval of the extensions) 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, 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) $10.20 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 and will not be liable as to any claims under our indemnity of the underwriters of
our IPO against certain liabilities, including liabilities under the Securities Act. In the event that 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 $10.20 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 of directors
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 prior to 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 upon the earlier to occur of: (i) the completion of
our Initial Business Combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to
amend any provisions of our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation
to allow redemption in connection with our Initial Business Combination or certain amendments to our charter prior thereto or to redeem
100% of our public shares if we do not complete our Initial Business Combination within 24 months from the closing of our IPO (subject
to our Sponsor depositing additional funds into the Trust Account and out board approving the extensions) or (B) with respect to any other
provision relating to stockholders’ rights or pre-Initial Business Combination activity, and (iii) the redemption of all of our
public shares if we are unable to complete our business combination within 24 months from the closing of our IPO (subject to our Sponsor
depositing additional funds into the Trust Account), subject to applicable law. 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 Initial 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. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended
and restated certificate of incorporation, may be amended with a stockholder vote.
Our Amended and Restated
Certificate of Incorporation
Our
amended and restated certificate of incorporation contains certain requirements and restrictions relating to our IPO that will apply to
us until the completion of our Initial Business Combination. These provisions cannot be amended without the approval of the holders of
at least 65% of our common stock. Our Initial Stockholders (excluding holders of the representative shares), will participate in any vote
to amend our amended and restated certificate of incorporation and will have the discretion to vote in any manner they choose. Specifically,
our amended and restated certificate of incorporation provides, among other things, that:
|
· |
If we are unable to complete our Initial Business Combination within 22 months
from the closing of our IPO (or 24 months from the closing of our IPO, if we extend the period of time to consummate a business combination,
subject to our Sponsor depositing additional funds into the Trust Account and our Board approving the extension), 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
subject to lawfully available funds therefor, redeem 100% of 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 income and franchise our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then
outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the
right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in
the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law; |
|
· |
Prior to our Initial Business Combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the Trust Account or (ii) vote on any Initial Business Combination; |
|
· |
We have entered into an Initial Business Combination with a target business
that is affiliated with our Sponsor, our directors or our officers. We, or a committee of independent directors, obtained an opinion from
an independent investment banking firm that commonly renders valuation opinions that such an Initial Business Combination is fair to our
company from a financial point of view; |
|
· |
If a stockholder vote on our Initial Business Combination is not required by law and we do not decide to hold a stockholder vote for business or other legal reasons, we will offer to redeem our public shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, and will file tender offer documents with the SEC prior to completing our Initial Business Combination which contain substantially the same financial and other information about our Initial Business Combination and the redemption rights as is required under Regulation 14A of the Exchange Act; whether or not we maintain our registration under the Exchange Act or our listing on Nasdaq, we will provide our public stockholders with the opportunity to redeem their public shares by one of the two methods listed above; |
|
· |
So long as we obtain and maintain a listing for our securities on Nasdaq, Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time of our signing a definitive agreement in connection with our Initial Business Combination; |
|
· |
If our stockholders approve an amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our Initial Business Combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our Initial Business Combination within 24 months from the closing of our IPO (subject to our Sponsor depositing additional funds into the Trust Account) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, we will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A Common Stock upon such approval at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares; and |
|
· |
We will not effectuate our Initial Business Combination with another blank check company or a similar company with nominal operations. |
In
addition, our amended and restated certificate of incorporation provides that under no circumstances will we redeem our public shares
unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our Initial Business Combination
and after payment of underwriters’ fees and commissions. This may not be waived.
Competition
In
identifying, evaluating and selecting a target business for our Initial Business Combination, we may encounter 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 business combinations. 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 Initial Business Combination 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 rights, 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.
Employees
We
currently have one officer. This individual is not obligated to devote any specific number of hours to our matters but they intend to
devote as much of his time as he deems necessary, in the exercise of his business judgement, to our affairs until we have completed our
Initial Business Combination. The amount of time our officer will devote in any time period will vary based on whether a target business
has been selected for our Initial Business Combination and the stage of the Initial Business Combination process we are in. We do not
intend to have any full-time employees prior to the completion of our Initial Business Combination. We do not have an employment agreement
with any member of our management team.
We
have arranged for compensation to our sole officer and each of our directors of $10,000 per month commencing October 2022.
Periodic Reporting and
Financial Information
We
have registered our Units, Class A Common Stock and Public 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, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical
financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statements requirements
may limit the pool of potential targets we may conduct an Initial Business Combination with because some targets may be unable to provide
such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our Initial Business Combination
within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential business combination
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 the requirements outlined above. To the extent that these requirements cannot be met, we may
not be able to acquire the proposed target business. While this may limit the pool of potential business combination candidates, we do
not believe that this limitation will be material.
We
will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2022 as required by the Sarbanes-Oxley
Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth
company, 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 business combination. We
filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As
a result, we are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form
15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our Initial Business
Combination.
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 intend to take advantage of the benefits of this extended transition period.
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of
the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.235 billion (as adjusted for inflation pursuant
to SEC rules from time to time) or more during such fiscal year, or (c) in which we are deemed to be a large accelerated filer, which
means the market value of our shares of Class A Common Stock that are held by non-affiliates exceeds $700 million as of the prior June
30th, and (2) the date on which we have issued more than $1.0
billion in non-convertible debt during the prior three-year period. References herein to “emerging growth company” will have
the meaning associated with it in the JOBS Act.
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 the fiscal year in which (1) the market value of our common stock held by
non-affiliates equals or exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues equaled
or exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700
million as of the end of that year’s second fiscal quarter.
ITEM 1A. RISK FACTORS
An investment in our securities
involves a number of significant risks and other factors relating to our structure and investment objectives. As a result, we cannot assure
you that we will achieve our investment objectives. You should consider carefully the following information as an investor and/or prospective
investor in our securities. The risks described below may not be the only risks we face. Additional risks not presently known to us or
that we currently believe are immaterial may also significantly impact our business operations. If any of these risks occur, our business
prospects, financial condition or results of operations could suffer, the market price of our capital stock could decline and you could
lose all or part of your investment in our capital stock. All references in this section to "Class A Common Stock" refer to
our Class A common stock, par value $0.0001 per share and all references to "Class B Common Stock" refer to our Class B common
stock, par value $0.0001 per share.
For risk factors related to
DarkPulse and the Business Combination, please review the Registration Statement on Form S-4 filed by the Company, including the preliminary
proxy statement/prospectus of the Company included therein, and as further amended after the date hereof, and the definitive proxy statement/prospectus
to be filed by the Company.
Risks Relating to Our Search for,
and Consummation of or Inability to Consummate, a Business Combination
The Business Combination is subject to the satisfaction
of certain conditions, which may not be satisfied on a timely basis, if at all.
The consummation of the Proposed
Business Combination is subject to customary closing conditions for transactions involving special purpose acquisition companies, including,
among others:
| § | approval of several proposals
by the Company’s stockholders; |
| § | receipt of all required governmental
and regulatory approvals; |
| § | our initial listing application
with Nasdaq in connection with the Business Combination having been approved; |
| § | no order, statute, rule
or regulation enjoining or prohibiting the consummation of the Proposed Business Combination being in effect; |
| § | the Company having at least
$5,000,001 of net tangible assets as of the closing of the Proposed Business Combination, which may not be waived; |
| § | the Form S-4 having become effective
and no stop order being in effect; and |
| § | customary financing conditions. |
Specifically,
under the BCA, the obligations of the parties to consummate the Proposed Business Combination are subject to the satisfaction or waiver
of certain customary closing conditions of the respective parties, including, without limitation: (i) the applicable waiting period, if
any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder relating to the
Business Combination having expired or been terminated and any other required regulatory approvals applicable to the transactions contemplated
by the BCA having been obtained and remaining in full force and effect; (ii) all the DarkPulse Preferred Stock being converted to DarkPulse
Common Stock prior to the Effective Time; (iii) no order or law issued by any court of competent jurisdiction or other governmental entity
or other legal restraint or prohibition preventing the consummation of the transactions contemplated by the Business Combination being
in effect; (iv) the registration statement on Form S-4 containing the joint proxy statement/prospectus to be filed by DarkPulse and our
company relating to the BCA and the Merger (the “Registration Statement”) becoming effective in accordance with the provisions
of the Securities Act, no stop order being issued by Securities and Exchange Commission and remaining in effect with respect to the Registration
Statement, and no proceeding seeking such a stop order being threatened or initiated by the SEC and remaining pending; (v) our initial
listing application with Nasdaq in connection with the Business Combination having been approved; (vi) our Board consisting of the number
of directors, and comprising the individuals, determined pursuant to the BCA; (vii) the approval and adoption of the BCA and the transactions
contemplated thereby by the requisite vote of the DarkPulse’s stockholders; (viii) the approval and adoption of the BCA and the
transactions contemplated thereby by the requisite vote of our stockholders; (ix) after giving effect to the transactions contemplated
(including the PIPE Financing), we have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1)
of the Exchange Act of 1934), immediately after the Effective Time; (x) the absence of a DarkPulse Material Adverse Effect since
the date of the BCA that is continuing, and (xi) the absence of a GSD Material Adverse Effect since the date of the BCA that is continuing.
Because
of these conditions, which may not all be satisfied, we cannot assure you that we will be able to consummate the Proposed Business Combination.
We may waive one or
more of the conditions to the Business Combination without resoliciting stockholder approval for the Business Combination.
We may
agree to waive, in whole or in part, some of the conditions to our obligations to complete the Business Combination, to the extent permitted
by applicable laws. Our board of directors will evaluate the materiality of any waiver to determine whether amendment of this joint proxy
statement/prospectus and re-solicitation of proxies is warranted. In some instances, if our board of directors determines that a waiver
is not sufficiently material to warrant re-solicitation of stockholders, we have the discretion to complete the Business Combination without
seeking further stockholder approval. For example, it is a condition to our obligations to close the Business Combination that there be
no applicable law and no order prohibiting or preventing the consummation of the Business Combination, however, if the Board determines
that any such order is not material to the business of DarkPulse, then the board may elect to waive that condition without stockholder
approval and close the Business Combination. Notwithstanding the parties to the BCA cannot waive the required $5,000,001 in assets at
the time of the close of the transaction.
Unless extended, the BCA may be terminated at
any time in accordance with its terms, including by either us or DarkPulse after the Termination Date of August 9, 2023 (unless extended)
and you may not have the chance to vote on the Business Combination.
The BCA is subject to a number
of conditions which must be satisfied or waived in order to complete the Business Combination and the BCA may be terminated at any time,
even prior to any extensions, under certain customary and limited circumstances, including among other reasons, by the mutual written
consent of us and DarkPulse; (ii) by us, subject to certain exceptions, if any of the representations or warranties made by DarkPulse
are not true and correct or if DarkPulse fails to perform any of its covenants or agreements under the BCA (including an obligation to
consummate the Closing) such that certain conditions to the obligations of our company could not be satisfied and the breach (or breaches)
of such representations or warranties or failure (or failures) to perform such covenants or agreements is (or are) not cured or cannot
be cured within the earlier of (A) thirty (30) days after written notice thereof, and (B) August 9, 2023; (iii) by DarkPulse, subject
to certain exceptions, if any of the representations or warranties made by our company are not true and correct or if we fail to
perform any of our covenants or
agreements under the BCA (including an obligation to consummate the Closing) such that the condition to the obligations of DarkPulse could
not be satisfied and the breach (or breaches) of such representations or warranties or failure (or failures) to perform such covenants
or agreements is (or are) not cured or cannot be cured within the earlier of (A) thirty (30) days after written notice thereof, and (B)
the August 9, 2023; (iv) by either us or DarkPulse, if the Closing does not occur on or prior to August 9, 2023, unless the breach of
any covenants or obligations under the BCA by the party seeking to terminate proximately caused the failure to consummate the transactions
contemplated by the BCA; (v) by either us or DarkPulse, if (A) any governmental entity shall have issued an order or taken any other action
permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by the BCA and such order or other action shall
have become final and non-appealable; or (B) if the required DarkPulse or our stockholder consent is not obtained; (vi) by us, if (A)
DarkPulse does not deliver, or cause to be delivered to us a Transaction Support Agreement duly executed by certain DarkPulse stockholders
or (B) the DarkPulse stockholders meeting has been held, has concluded, the DarkPulse stockholders have duly voted, and the DarkPulse
stockholder approval was not obtained; (vii) by DarkPulse, should we not have timely taken such actions as are reasonably necessary to
extend the period of time for it to complete an initial business combination for an additional period of six months from February 9, 2023;
provided, that it shall be the obligation of DarkPulse to timely make the deposit into the Trust Account in connection with such extension,
and we shall not have a right to terminate the BCA as a result of DarkPulse’s failure to make such deposit; (ix) by us should DarkPulse
not deposit into the Trust Account in a timely manner the funds necessary to extend the period for us to complete an initial business
combination for an additional period of six months from February 9, 2023, in accordance with, and as required pursuant to, the BCA; and
(x) by us should: (A) Nasdaq not approve the initial listing application for the combined company with Nasdaq in connection with the Business
Combination; (B) the combined company not have satisfied all applicable initial listing requirements of Nasdaq; or (C) the common stock
of the combined company not have been approved for listing on Nasdaq prior to the Closing Date. As of the filing date of this Annual Report
on Form 10-K, all funding obligations have been met.
In the period leading up to the
Closing, other events may occur that, pursuant to the BCA, would require us to agree to amend the BCA to consent to certain actions or
to waive rights that we are entitled to under those agreements. Such events could arise because of changes in the course of DarkPulse’s
business, a request by DarkPulse to undertake actions that would otherwise be prohibited by the terms of the BCA or the occurrence of
other events that would have a material adverse effect on DarkPulse’s business and would entitle us to terminate the BCA, as applicable.
In any of such circumstances, it would be in the discretion of our company, acting through our Board, to grant its consent or waive our
rights. As of the date of this Annual Report, we do not believe there will be any changes or waivers that our directors and officer would
be likely to make after stockholder approval of the Business Combination has been obtained.
Moreover, in the event that the BCA is terminated,
or a special meeting of stockholders to approve the Business Combination is not held, you may not have the chance to vote on the Business
Combination.
During the pendency of the Proposed Business
Combination, we will not be able to enter into a business combination with another party because of restrictions in the BCA. Furthermore,
certain provisions of the BCA will discourage third parties from submitting alternative takeover proposals, including proposals that may
be superior to the arrangements contemplated by the BCA. There can be no assurance that we will find an alternative target if we are unable
to consummate the Business Combination with DarkPulse.
Covenants in the BCA impede the
ability of our company to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion
of the Proposed Business Combination. As a result, we may be at a disadvantage to our competitors during that period. In addition, while
the BCA is in effect, neither us nor DarkPulse may solicit, assist, facilitate the making, submission or announcement of, or intentionally
encourage any alternative acquisition proposal, such as a merger, material sale of assets or equity interests or other business combination,
with any third party, even though any such alternative acquisition could be favorable to our stockholders than the Proposed Business Combination
with DarkPulse. In addition, if the Proposed Business Combination is not completed, these provisions will make it more difficult to complete
an alternative business combination following the termination of the BCA due to the passage of time during which these provisions have
remained in effect.
We
may only be able to complete one business combination with the proceeds of our IPO and the sale of the Private 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
remaining net proceeds from our IPO and the private placement of warrants after redemptions was approximately $14 million, less deferred
underwriter fees, as of January 31, 2023, which may be used to complete our Initial Business Combination.
We
may effectuate our Initial Business Combination with a single target business or multiple target businesses simultaneously or within a
short period of time. However, we may not be able to effectuate our Initial Business Combination with more than one target business because
of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial
statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated
on a combined basis. By completing our Initial Business Combination with only a single entity, our lack of diversification may subject
us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit
from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business
combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may 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 risks, any or all of which may have a substantial
adverse impact upon the particular industry in which we may operate subsequent to our Initial Business Combination.
Our Sponsor has agreed
to vote in favor of the Business Combination, which vote will carry, regardless of how our public stockholders vote.
Our Sponsor
owns approximately 62% of our outstanding common stock. Our amended and restated certificate of incorporation provides that, if we seek
stockholder approval of an Initial Business Combination, such Initial Business Combination will be approved if we receive the affirmative
vote of a majority of the shares voted at such meeting, including the founder shares. As a result, we would not need any of the 1,343,154
Public Shares to be voted in favor of an Initial Business Combination in order to have our Initial Business Combination approved. Accordingly,
the agreement by our Sponsor to vote in favor of our Initial Business Combination will ensure the likelihood that we will receive the
requisite stockholder approval for such Initial Business Combination.
We have incurred and expect to incur significant
costs associated with the Business Combination. Whether or not the Business Combination is completed, the incurrence of these costs will
reduce the amount of cash available to be used for other corporate purposes by us if the Business Combination is not completed.
We expect to incur significant
transaction and transition costs associated with the Business Combination and operating as a public company following the closing of the
Business Combination. We may also incur additional costs to retain key employees. Certain transaction expenses incurred in connection
with the BCA, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be paid by the
combined company following the closing of the Business Combination. Even if the Business Combination is not completed, the incurrence
of these costs will reduce the amount of cash available to be used for other corporate purposes by us if the Business Combination is not
completed.
We rely on loans
and advances from DarkPulse, our Sponsor, for working capital to complete the Business Combination, the shortage of which could prevent
closing of the Business Combination.
We are
a blank check company with limited resources. Since there are limits on use of the Trust Funds for our working capital in connection with
the Merger, we must rely on DarkPulse, our Sponsor, management or outside sources to pay for the various expenses associated with completing
a Business Combination.
For this purpose, DarkPulse has
advanced to GSD non-interest bearing working capital advances. We have non-interest-bearing advances due to our New Sponsor in the principal
amount of $998,677 as of April 30, 2023. If we are required to seek additional capital, we would need to continue to borrow funds from
DarkPulse, or the management team or other third parties to operate or we may be forced to liquidate. Neither the 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.
Up to $1,500,000 of such loans may be convertible into warrants of the post-business combination entity at a price of $1.00 per warrant
at the option of the lender. The warrants would be identical to the Private Warrants. None of the working capital loans are convertible.
Prior to the completion of the
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 the Trust Account. If we are unable to complete the 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 net of taxes payable. Consequently, our public stockholders
may only receive less than $10.20 per share on our redemption of our public shares, and our warrants will expire worthless.
A significant number
of shares of our Common Stock were redeemed in January 2023. The reduced liquidity and number of round-lot holders of our public shares
may make it more difficult for us to meet Nasdaq’s listing requirements and to consummate the Business Combination, and as a result,
our Common stock may not be very liquid following the Business Combination and we may have trouble listing and meeting the continued listing
requirements on Nasdaq.
In connection
with our Special Meeting of Stockholders on January 31, 2023, where the stockholders approved certain proposals giving us the right to
extend the date by which it has to complete a business combination six (6) times for an additional one (1) month each time, from February
9, 2023 to August 9, 2023, a total of 9,149,326 shares were tendered for redemption (approximately 87% of the outstanding Public Shares).
Approximately $95 million was withdrawn from our trust account to pay for the redemption, leaving approximately $14 million, less deferred
underwriter fees, in the trust account as of January 31, 2023. As a result of the redemptions, we now have less liquidity and fewer round-lot
holders of our public shares, which may make it more difficult to meet Nasdaq listing requirements. Since it is a condition to closing
to receive the approval for listing by Nasdaq of the shares of our Common Stock to be issued in connection with the transactions contemplated
by the Merger Agreement, our reduced public float may make it more difficult for us to meet the Nasdaq listing requirements, and to consummate
the Business Combination.
On April
5, 2022, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of Nasdaq notifying us that,
for the preceding 30 consecutive business days, our Market Value of Listed Securities (“MVLS”) was below the $35 million minimum
requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”).
In accordance
with Nasdaq rules, we have been provided an initial period of 180 calendar days, or until October 2, 2023 (the “Compliance Date”),
to regain compliance with the MVLS Requirement. If, at any time before the Compliance Date, our MVLS closes at $35 million or more for
a minimum of 10 consecutive business days, the Staff will provide us with written confirmation of compliance with the MVLS Requirement.
While we will continue to monitor our MVLS and consider available
options to regain compliance with the MVLS Requirement, which may include applying for an extension of the Compliance Date or appealing
to a Nasdaq Hearings Panel, there can be no assurance that we will be able to regain compliance with the MVLS Requirement or otherwise
maintain compliance with the other Nasdaq listing requirements.
Reduction
in our available public float will likely also reduce the trading volume and liquidity of our securities and increase the volatility of
our securities. With a significantly smaller number of stockholders, trading in the shares of the Combined Company may be limited and
your ability to sell your shares in the market could be adversely affected. The Combined Company intends to apply to list its shares on
the Nasdaq, and Nasdaq may not list the common stock on its exchange, which could limit investors’ ability to make transactions
in our securities and subject us to additional trading restrictions.
Furthermore,
additional shares may be redeemed in connection with the closing of the Business Combination, further reducing the Combined Company’s
public float and number of stockholders, again increasing the likelihood that we are unable to meet Nasdaq listing requirements and close
the Business Combination.
The Combined Company
will be required to meet the initial listing requirements to be listed on the Nasdaq Stock Market. However, the Combined Company may be
unable to maintain the listing of its securities in the future.
In connection
with our Special Meeting of Stockholders on January 31, 2023 where the stockholders approved certain proposals giving us the right to
extend the date by which we have to complete a business combination six (6) times for an additional one (1) month each time, from February
9, 2023 to August 9, 2023, a total of 9,149,326 shares were tendered for redemption (approximately 87% of the outstanding Public Shares).
Approximately $95 million was withdrawn from the Trust Account to pay for the redemption, leaving approximately $14 million, less deferred
underwriter fees, in the Trust Account as of January 31, 2023. As a result of the redemptions, we now have less liquidity and fewer round-lot
holders of our public shares, which may make it more difficult to meet Nasdaq listing requirements. If the Combined Company fails to meet
the continued listing requirements and Nasdaq delists our securities, we could face significant material adverse consequences, including:
|
§ |
a limited availability of market quotations for its securities; |
|
§ |
a limited amount of news and analyst coverage for the Combined Company; and |
|
§ |
a decreased ability to issue additional securities or obtain additional financing in the future. |
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 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 Initial 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, since a large number of shares was submitted for
redemption in connection with January 31, 2023 extension, we may need to restructure the transaction to 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 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 and such amount of deferred underwriting discount is not available for us to use as consideration
in an Initial Business Combination. If we are able to consummate an Initial Business Combination, the per-share value of shares held by
non-redeeming stockholders will reflect our obligation to pay and the payment of the deferred underwriting commissions. The above considerations
may limit our ability to complete the most desirable business combination available to us or optimize our capital structure.
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 shares.
If
our Initial 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 are in need of immediate liquidity, you could attempt to sell your shares in the open market; however, at such time our shares 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 your exercise of redemption rights until we liquidate, or you are
able to sell your shares in the open market.
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 our ithoutt our prior consent, which we refer to as the “Excess Shares.” However, we would not
be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our Initial Business
Combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our Initial 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 Initial Business Combination. And 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 shares in open market transactions, potentially at a loss.
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
their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants
will expire worthless.
We
expect to encounter 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 similar or greater technical, human and other resources to ours 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 a number of target businesses we could potentially acquire with the net proceeds of our IPO and the sale of the Private 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,
we are obligated to offer holders of our public shares the right to redeem their shares for cash at the time of our Initial Business Combination
in conjunction with a stockholder vote or via a tender offer. Target companies will be aware that this may reduce the resources available
to us for our Initial Business Combination. Any of these obligations 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 their
pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants will expire
worthless.
The
requirement that we complete our Initial Business Combination within 22 months from the closing of our IPO (or 24 months from the closing
of our IPO, if we extend the period of time to consummate a business combination, subject to our Sponsor depositing additional funds into
the Trust Account and our Board approving the extensions) may give potential target businesses leverage over us in negotiating a business
combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular
as we approach our dissolution deadline, which could undermine our ability to complete our Initial 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 by June 9, 2023 (which is 22 months from the closing of our IPO (or August 9, 2023, which is 24 months
from the closing of our IPO, if we extend the period of time to consummate a business combination, subject to our Sponsor depositing
additional funds into the Trust Account and our Board approving the extensions). Consequently, such target business may have leverage
over us in negotiating a business combination, both by being the Sponsor, and by 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 will be forced
to liquidate the Trust Account if we cannot consummate a business combination by June 9, 2023, with monthly extensions possible until
August 9, 2023, subject to our Sponsor depositing additional funds monthly into our Trust Account and our Board approving the extensions.
In the event of a liquidation, our public stockholders will receive approximately $10.72 per Class A Share and our Warrants will expire
worthless.
If we
are unable to complete a business combination by June 9, 2023, with monthly extensions possible until August 9, 2023, subject to our
Sponsor depositing additional funds monthly into our Trust Account and our Board approving the extensions, and is forced to liquidate,
the per-share liquidation distribution will be approximately $10.72 based on $14,400,067 in the Trust Account as of May 5, 2023. Furthermore,
public stockholders will forfeit the one-half Warrant included in the Units being redeemed. Accounting for the January 31, 2023 redemption
and assuming that the remaining 1,343,154 Class A Common Shares held by public stockholders are redeemed (i.e., the maximum redemption
scenario), the 5,239,244 retained outstanding public Warrants would have an aggregate market value of approximately $360,450, based on
the closing price on the Nasdaq of $0.0688 per Warrant as of April 28, 2023. If a substantial number of public stockholders exercise
their redemption rights, stockholders would experience dilution to the extent such Warrants are exercised for additional shares of the
Combined Company’s common stock.
If
we seek stockholder approval of our Initial Business Combination, our Sponsor, directors, executive officers and their affiliates may
elect to purchase shares or Public Warrants from public stockholders, which may influence a vote on a proposed Initial 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 Initial Business
Combination pursuant to the tender offer rules, our Sponsor, directors, executive officers or their affiliates may purchase shares or
Public Warrants in privately negotiated transactions or in the open market either prior to or following the completion of our Initial
Business Combination, although they are under no obligation to do so. There is no limit on the number of shares our Initial Stockholders,
directors, officers or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules.
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. Such purchases may include a contractual acknowledgment 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.
In
the event that our Sponsor, directors, executive officers 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 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 Initial 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 Initial Business Combination that may not otherwise have been possible. We expect 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.
In
addition, if such purchases are made, the public “float” of our Class A Common Stock or Public Warrants 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.
Our Sponsor, DarkPulse,
which owns shares of common stock and Private Warrants, will not participate in liquidation distributions and, therefore, they may have
a conflict of interest in determining whether the Business Combination is appropriate.
The Sponsor
owns an aggregate of 2,623,120 shares of our Class B Common Stock and 4,298,496 of our Private Placement Warrants, each of which is exercisable
to purchase one share of our Class A Common Stock which it purchased for $1,500,000. DarkPulse is currently the Sponsor of our company.
If an initial business combination, such as the Business Combination, is not completed by June 9, 2023, with extensions possible until
August 9, 2023, subject to our Sponsor depositing additional funds monthly into our trust account and the Board approving such extensions,
we will be required to dissolve and liquidate. In such event, the shares of our Class B Common Stock currently held by DarkPulse, which
were acquired from our Original Sponsor will be worthless because DarkPulse has agreed to waive its rights to any liquidation distributions.
Consequently, identifying and selecting DarkPulse as a suitable target business may result in a conflict of interest when determining
whether the terms, conditions and timing of the Business Combination are appropriate and in our public stockholders’ best interest.
Our Sponsor, members
of our Board and our officers have interests in the Business Combination that are different from or are in addition to other stockholders
in recommending that stockholders vote in favor of approval of the Business Combination.
When
considering our recommendation that our stockholders vote in favor of the approval of the Business Combination, our stockholders should
be aware that our Sponsor, directors and officers have interests in the Business Combination that may be different from, or in addition
to, the interests of our stockholders. These interests include:
|
· |
DarkPulse is currently the owner of 2,623,120 shares of Class B Common Stock
and 4,298,496 GSD Private Placement Warrants, each of which is exercisable to purchase one share of Class A Common Stock which it purchased
for $1,500,000. DarkPulse is currently the Sponsor of our Company. If an initial business combination, such as the Business Combination,
is not completed by June 9, 2023, with extensions possible until August 9, 2023, subject to GSD’s Sponsor depositing additional
funds monthly into our trust account and approval of our Board, we will be required to dissolve and liquidate. In such event, the shares
of Class B Common Stock currently held by DarkPulse, which were acquired from our Original Sponsor will be worthless because DarkPulse
has agreed to waive its rights to any liquidation distributions. |
|
· |
As of April 9, 2023,
DarkPulse has loaned us an aggregate amount of $1,301,089 in connection with the extensions from November 9, 2022 to February 9,
2023, from February 9, 2023 to March 9, 2023, from March 9, 2023 to April 9, 2023, and from April 9, 2023 to June 9, 2023, before we
are required to liquidate. Pursuant to the related promissory notes, DarkPulse will only be repaid from the proceeds of our Business
Combination, or if no business combination is consummated, from funds held outside the Trust Account. As a result, if GSD does not
consummate an initial business combination, DarkPulse is at risk of losing the entire amount. |
|
· |
We have non-interest-bearing working capital loans due to our Sponsor
in the principal amount of $998,677 as of April 30, 2023. If GSD completes a Business Combination, the loan would be an intercompany loan
between a parent and wholly owned subsidiary. In the event that a Business Combination does not close, GSD may use a portion of proceeds
held outside the Trust Account to repay the working capital loans but no proceeds held in the Trust Account would be used to repay the
working capital loans. |
|
· |
At the special meeting of stockholders held on January 31, 2023, our
stockholders voted in favor of an Extension Amendment Proposal, giving us the right to extend the deadline six times for an additional
one month each time by depositing into the Trust Account $0.0625 per public share remaining after redemptions in connection with the approval
for each one-month extension, up to August 9, 2023. We may now extend the deadline up to August 9, 2023, by depositing into the Trust
Account for the benefit of the public stockholders $83,947.13 for each one (1) month extension (or an aggregate of $503,682.78 if the
Combination Period is extended six times) in interest-free loans for the full extension of the Combination Period on an as-needed basis.
Since these loans will become payable only after Closing of the Business Combination, our Sponsor will lose repayment of an aggregate
$1,552,930.78 loan if the Business Combination is not completed after the full 6-month extension. If we complete a Business Combination,
the loan would be an intercompany loan between a parent and wholly owned subsidiary. In the event that a Business Combination does not
close, we may use a portion of proceeds held outside the Trust Account to repay the notes but no proceeds held in the Trust Account would
be used to repay the notes. |
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Our Sponsor is also the
target for acquisition by us as a result of BCA. The Sponsor, as the target, has an interest in completing the Business Combination
as its stockholders stand to benefit from the merger consideration as well seeing that the equity it owns in our company, and the
deposits made to the Trust Account, including recently to extend the date of the business combination to June 9, 2023, as well as
deposits required as a result of the Extension Amendment Proposal are put to use in the Business Combination, and not liquidated and
lost in a winding up of our Company. |
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If the Trust Account is liquidated, including in the event we are unable to consummate the Business Combination or an initial business combination within the required time period, the Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.20 per Public Share, or such lesser amount per Public Share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third-party vendors or service providers (other than our independent registered public accounting firm) for services rendered or products sold to us, but only if such target business, vendor or service provider has not executed a waiver of any and all of its rights to seek access to the Trust Account. |
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The beneficial ownership of DarkPulse’s board of directors and officers
of an aggregate of 73,529 shares of DarkPulse’s Series D Preferred Stock and 100 shares of DarkPulse’s Series A Preferred
Stock. The Series D Preferred Stock automatically converts into DarkPulse’s Common Stock at a ratio 1 share of preferred stock for
2 shares of common stock immediately prior to a change in control event, such as in the case of the Business Combination. The 100 shares
of Series A Preferred Stock automatically converts into 25% of the Combined Company on a fully diluted basis. |
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The anticipated continuation of Dennis O’Leary, Dr. Anthony Brown, and Carl Eckel, members of DarkPulse’s board of directors, as directors of DarkPulse following the Merger and Dennis O’Leary, Joseph Catalino (currently DarkPulse’s Chief Strategy Officer) as directors of GSD following the Merger. |
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Richard J. Iler, our Principal Executive Officer and Chief Financial Officer served as a consultant to DarkPulse from July, 2022 to October, 2022. |
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The exercise of our directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in its stockholders’ best interest. |
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If the Business Combination is completed, Geoff Mullins, Wayne Bale, and John Bartrum will continue as members of the Combined Company’s board of directors and will be entitled to receive compensation for serving on the Combined Company’s board of directors. |
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If the Business Combination is completed, J. Richard Iler will continue as Chief Financial Officer and will be entitled to receive compensation for serving as such in the Combined Company. |
If our due diligence
investigation of DarkPulse was inadequate, then stockholders following the Business Combination could lose some or all of their investment.
Even
though we conducted a due diligence investigation of DarkPulse, it cannot be sure that this diligence uncovered all material issues that
may be present inside DarkPulse or its business, or that it would be possible to uncover all material issues through a customary amount
of due diligence, or that factors outside of DarkPulse and its business and outside of our control will not later arise.
As a
result, 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 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
may not have an immediate impact on our liquidity, the fact that we reported charges of this nature could contribute to negative market
perceptions about us following the completion of the Business Combination or our securities. In addition, charges of this nature may cause
us to be unable to obtain future financing on favorable terms or at all. Accordingly, any stockholders who choose to remain stockholders
following the Business Combination could suffer a reduction in the value of their securities or a total loss to their investment.
Stockholder litigation
and regulatory inquiries and investigations are expensive and could harm our business, financial condition and operating results and could
divert management attention.
In the
past, securities class action litigation and/or stockholder derivative litigation and inquiries or investigations by regulatory authorities
have often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction,
such as the Business Combination. Any stockholder litigation and/or regulatory investigations against us, whether or not resolved in our
favor, could result in substantial costs and divert our management’s attention from other business concerns, which could adversely
affect our business and cash resources and the ultimate value our stockholders receive as a result of the Business Combination.
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 22 months from the closing of our IPO (or
24 months from the closing of our IPO, if we extend the period of time to consummate a business combination, subject to our Sponsor
depositing additional funds into the Trust Account) 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 20th month from the closing of our IPO (or 24th
month from the closing of our IPO, if we extend the period of time to consummate a business combination, subject to our Sponsor
depositing additional funds into the Trust Account) in the event we do not complete our Initial 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 22 months from the closing of our IPO
(or 24 months from the closing of our IPO, if we extend the period of time to consummate a business combination, subject to our
Sponsor depositing additional funds into the Trust Account) not considered a liquidating distribution under Delaware law and such
redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or
due to other circumstances that are currently unknown), 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
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 $10.20 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 registered public accounting firm), prospective target businesses and 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 consider whether competitive
alternatives are reasonably available to us and will only enter into an agreement with such third party if management believes that such
third party’s engagement would be in the best interests of the company under the circumstances. The underwriters of our IPO as well
as our registered independent public accounting firm will not execute agreements with us waiving such claims to the monies held in the
Trust Account.
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 Initial Business Combination within the prescribed timeframe, or upon the exercise
of a redemption right in connection with our Initial 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 $10.20 per public share initially held in the Trust Account, due to claims of such
creditors. Pursuant to the letter agreement, our Sponsor has agreed that it will be liable to us if and to the extent any claims by a
third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter
of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account
to below the lesser of (i) $10.20 per public share and (ii) the actual amount per public share held in the Trust Account as of the date
of the liquidation of the Trust Account, if less than $10.20 per public share due to reductions in the value of the trust assets, less
taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed
a waiver of any and all rights to the monies held in the Trust Account(whether or not such waiver is enforceable) nor will it apply to
any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities
Act. However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether
our Sponsor has sufficient funds to satisfy its indemnity obligations and we believe that our Sponsor’s only assets are securities
of our company. 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 $10.20 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 or directors
will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
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 the members of our board of directors may
be viewed as having breached their fiduciary duties to creditors, thereby exposing the members of our board of directors and us 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 some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having
breached its fiduciary duty to creditors and/or having acted in bad faith, by paying public stockholders from the Trust Account prior
to addressing the claims of creditors, thereby exposing itself and us to claims of punitive damages.
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 its 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.
The securities in which
we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held
in trust such that the per-share redemption amount received by public stockholders may be less than $10.20 per share.
The proceeds held in the Trust Account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7
under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term government treasury
obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks
in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled
out the possibility that it may in the future adopt similar policies in the United States. In the event that GSD is unable to complete
our Initial Business Combination or make certain amendments to its amended and restated certificate of incorporation, GSD public stockholders
are entitled to receive their pro-rata share of the proceeds held in the Trust Account, plus any interest income, net of income and franchise
taxes paid or payable (less, in the case GSD is unable to complete its Initial Business Combination, $100,000 of interest). Negative interest
rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may
be less than $10.20 per share.
Any distributions received
by our stockholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution
was made, we were unable to pay our debts as they fell due in the ordinary course of business.
Our Amended
and Restated Certificate of Incorporation provides that, as a result of extensions made to date, it will continue in existence only until
June 9, 2023, with monthly extensions possible until August 9, 2023, subject to our Sponsor depositing additional funds monthly into our
trust account. If we are unable to consummate a transaction within the required time period, upon notice from us, the trustee of the Trust
Account will distribute the amount in its Trust Account to our public stockholders. Concurrently, we must pay, or reserve for payment,
from funds not held in trust, our liabilities and obligations, although we cannot assure our stockholders that there will be sufficient
funds for such purpose.
We expect
that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded
from amounts held outside the Trust Account as of December 31, 2022, although we cannot assure public stockholders that there will be
sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in the Trust Account to pay
any tax obligations we may owe.
However,
we may not 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 stockholders may extend well beyond
the third anniversary of the date of distribution. Accordingly, third parties may seek to recover from stockholders amounts owed to them
by us.
If, after
we distribute the proceeds in the Trust Account to our public stockholders, a liquidator is appointed in respect of our company, 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 liquidator could seek to recover all amounts received by stockholders. In addition,
our board of directors may be viewed as having breached its fiduciary duty to creditors and/or having acted in bad faith, thereby exposing
itself to claims of damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
Conducting the Business
Combination through a merger rather than an underwritten offering presents risks to unaffiliated investors. Subsequent to completion of
the Business Combination, the Combined Company may be required to take write-downs or write-offs, restructure its operations, or take
impairment or other charges, any of which that could have a significant negative effect on the Combined Company’s financial condition,
results of operations and the Common Stock price, which could cause our stockholders to lose some or all of their investment.
Conducting
the Business Combination through a merger rather than an underwritten offering presents risks to unaffiliated investors. Such risks include
the absence of a due diligence investigation conducted by an underwriter that would be subject to liability for any material misstatements
or omissions in a registration statement. Due diligence reviews typically include an independent investigation of the background of the
company, any advisors and their respective affiliates, review of the offering documents and independent analysis of the business plan
and any underlying financial assumptions. In this transaction there is no independent third-party underwriter selling the shares of Common
Stock of the Combined Company, and, accordingly, the Combined Company’s stockholders (including GSD’s public stockholders)
will not have the benefit of an independent review and due diligence investigation of the type normally performed by an unaffiliated,
independent underwriter in a public securities offering.
Although
we have conducted due diligence on DarkPulse’s business, we cannot assure our stockholders that this due diligence has identified
all material issues that may be present in DarkPulse’s business, that it would be possible to uncover all material issues through
a customary amount of due diligence, or that factors outside of DarkPulse’s business and outside of our and DarkPulse’s control
will not later arise. As a result of these factors, the Combined Company may be forced to later write down or write off assets, restructure
operations, or incur impairment or other charges that could result in reporting losses. Further, although we performed a due diligence
review and investigation of DarkPulse in connection with the Business Combination, we have different incentives and objectives in the
Business Combination than an underwriter would in a traditional initial public offering, and therefore our due diligence review and investigation
should not be viewed as equivalent to the review and investigation that an underwriter would be expected to conduct. 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 the Combined Company’s
liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the Combined Company or
its 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 its obtaining debt financing thereafter. Accordingly,
any of our stockholders or warrant holders who choose to remain stockholders or warrant holders of the Combined Company following the
business combination could suffer a reduction in the value of their securities. These stockholders or warrant holders are unlikely to
have a remedy for the reduction in value.
In addition,
because the Combined Company is not conducting a traditional underwritten initial public offering, security or industry analysts may not
provide, or may be less likely to provide, coverage of the Combined Company. Investment banks may also be less likely to agree to underwrite
securities offerings on behalf of the Combined Company than they might if the Combined Company conducted a traditional underwritten initial
public offering, because they may be less familiar with the Combined Company as a result of more limited coverage by analysts and the
media. The failure to receive research coverage or support in the market for the Combined Company’s Common Stock could have an adverse
effect on the Combined Company’s ability to develop a liquid market for the Common Stock.
Our stockholders
who wish to redeem their public shares in connection with a proposed business combination must comply with specific requirements for redemption
that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.
We are
requiring stockholders who wish to redeem their Class A Common Shares to either tender their certificates to Continental or to deliver
their GSD Class A Common Shares to Continental electronically using the DTC’s DWAC (Deposit/Withdrawal At Custodian) System as of
two business days before any special meeting of the shareholders to approve the BCA. The requirement for physical or electronic delivery
ensures that a redeeming holder’s election to redeem is irrevocable once the Business Combination is consummated. Any failure to
observe these procedures will result in a loss of redemption rights in connection with the vote on the Business Combination.
Stockholders
who wish to redeem their GSD Class A Common Shares for a pro rata portion of the Trust Account must comply with specific requirements
for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline.
In order
to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and our transfer agent will need to act
to facilitate this request. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates
from the transfer agent. However, because we do not have any control over this process or over the brokers, it may take significantly
longer than two weeks to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders
who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their redemption rights and
thus will be unable to redeem their shares.
In addition,
holders of outstanding units of Global System must separate the underlying public shares and public warrants prior to exercising redemption
rights with respect to the public shares. If you hold units registered in your own name, you must deliver the certificate for such units
or deliver such units electronically to Continental Stock Transfer & Trust Company with written instructions to separate such units
into public shares and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates
or electronic delivery of the public shares back to you so that you may then exercise your redemption rights with respect to the public
shares following the separation of such public shares from the units.
If a
broker, dealer, commercial bank, trust company or other nominee holds your units, you must instruct such nominee to separate your units.
Your nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company. Such written instructions
must include the number of units to be split and the nominee holding such units. Your nominee must also initiate electronically, using
DTC’s DWAC system, a withdrawal of the relevant units and a deposit of the corresponding number of public shares and public warrants.
This must be completed far enough in advance to permit your nominee to exercise your redemption rights with respect to the public shares
following the separation of such public shares from the units. While this is typically done electronically on the same business day, you
should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a
timely manner, you will likely not be able to exercise your redemption rights.
We will require our
public stockholders who wish to redeem their public shares in connection with the Business Combination to comply with specific requirements
for redemption, described above, such redeeming stockholders may be unable to sell their securities when they wish to in the event that
the Business Combination is not consummated.
If we
require public stockholders who wish to redeem their public shares in connection with the proposed Business Combination to comply with
specific requirements for redemption, as described above, and the Business Combination is not consummated, we will promptly return such
certificates to our public stockholders. Accordingly, investors who attempted to redeem their public shares in such a circumstance will
be unable to sell their securities after the failed acquisition until we have returned their securities to them. The market price for
shares of our Class A common stock may decline during this time and you may not be able to sell your securities when you wish to, even
while other stockholders that did not seek redemption may be able to sell their securities.
If
a stockholder fails to receive notice of our offer to redeem our public shares in connection with our Initial Business Combination, or
fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
We
will comply with the proxy rules or tender offer rules, as applicable, when conducting redemptions in connection with our Initial Business
Combination. Despite our compliance with these rules, if a stockholder fails to receive our proxy materials or tender offer documents,
as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, proxy materials or tender offer
documents, 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 submit public shares for redemption. For example,
we intend to require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their
shares in “street name,” to, at the holder’s option, either deliver their stock certificates to our transfer agent,
or to deliver their shares to our transfer agent electronically prior to the date set forth in the proxy materials or tender offer documents,
as applicable. In the case of proxy materials, this date may be up to two business days prior to the vote on the proposal to approve the
Initial Business Combination. In addition, if we conduct redemptions in connection with a stockholder vote, we intend to require a public
stockholder seeking redemption of its public shares to also submit a written request for redemption to our transfer agent two business
days prior to the vote in which the name of the beneficial owner of such shares is included. In the event that a stockholder fails to
comply with these or any other procedures disclosed in the proxy or tender offer materials, as applicable, its shares may not be redeemed.
There is no guarantee
that a stockholder’s decision whether to redeem its shares for a pro rata portion of the Trust Account will put the stockholder
in a better future economic position.
We can
give no assurance as to the price at which a stockholder may be able to sell its public shares in the future following the completion
of the Business Combination or any alternative business combination. Certain events following the consummation of the Business Combination
may cause an increase in our share price and may result in a lower value realized now than a stockholder might realize in the future had
the stockholder redeemed their shares. Similarly, if a stockholder does not redeem their shares, the stockholder will bear the risk of
ownership of the public shares after the consummation of the Business Combination, and there can be no assurance that a stockholder can
sell its shares in the future for a greater amount than the redemption price. A stockholder should consult, and rely solely upon, the
stockholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.
Even if we consummate
the Business Combination, the Public Warrants may never be in the money, and they may expire worthless.
The exercise
price for Public Warrants is $11.50 per share. There can be no assurance that the Public Warrants will be in the money prior to their
expiration and, as such, the warrants may expire worthless. The terms of Public Warrants may be amended in a manner that may be adverse
to the holders. The warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and GSD, dated on or about
August 4, 2021 (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 a majority of the then-outstanding
Public Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, GSD may amend the terms
of the warrants in a manner adverse to a holder if holders of at least a majority of the then-outstanding Public Warrants approve of such
amendment. GSD’s ability to amend the terms of the warrants with the consent of a majority of the then-outstanding Public Warrants
is unlimited. Examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten
the exercise period or decrease the number of Common Stock purchasable upon exercise of a warrant.
We may redeem the unexpired
redeemable Public Warrants prior to their exercise at a time that is disadvantageous to Warrant holders, thereby making their Public Warrants
worthless.
We have
the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01
per warrant, provided that the reported last sale price of our Class A Common Stock equals or exceeds $18.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period
commencing once the warrants become exercisable and ending on the third trading day prior to the date on which we give 30 days’
prior written notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us,
it may not exercise its redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration
or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use its best
efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which
the warrants were offered by us. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise
price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price
when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding
warrants are called for redemption, is likely to be substantially less than the market value of your warrants.
You will not be permitted
to exercise your warrants unless we register and qualify the underlying Class A Common Stock or certain exemptions are available.
If the
issuance of the Class A Common Stock upon exercise of the warrants is not registered, qualified or exempt from registration or qualification
under the Securities Act and applicable state securities laws, holders of warrants will not be entitled to exercise such warrants and
such warrants 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 Class A Common Stock included in the Units.
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, GSD has agreed that as soon as practicable, but in no event later
than 15 business days after the closing of our Initial Business Combination, GSD will use its best efforts to file with the SEC a registration
statement for the registration under the Securities Act of the issuance of the shares of Class A Common Stock issuable upon exercise of
the warrants and thereafter will use its best efforts to cause the same to become effective within 60 business days following GSD’s
Initial Business Combination and to 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. GSD cannot assure you that it 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, complete or correct
or the SEC issues a stop order.
If the
shares of Class A Common Stock issuable upon exercise of the warrants are not registered under the Securities Act, we will be required
to permit holders to exercise their warrants on a cashless basis. 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 foregoing, if a registration statement covering the issuance of the Class A Common Stock issuable upon
exercise of the warrants is not effective within a specified period following the consummation of our Initial Business Combination, warrant
holders may, 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, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the
Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not
be able to exercise their warrants on a cashless basis. We will use its 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, or issue securities or other compensation in exchange for the warrants in the
event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws and there is
no exemption available. 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 will 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, it may not exercise its redemption right if the issuance of shares of common stock upon exercise
of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such
registration or qualification.
If you exercise your
Public Warrants on a “cashless basis,” you may receive fewer shares of Class A Common Stock from such exercise than if you
were to exercise such warrants for cash.
There
are circumstances in which the exercise of the Public Warrants may be required or permitted to be made on a cashless basis. First, if
a registration statement covering the issuance of the shares of Class A Common Stock issuable upon exercise of the warrants is not effective
by the 60th business day after the closing of our Initial Business Combination, warrant holders may, until such time as there is an effective
registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Second, if a registration statement covering the Class A Common Stock issuable upon exercise of the warrants is not effective within a
specified period following the consummation of our Initial Business Combination, warrant holders may, 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, exercise warrants
on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available;
if that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. Third,
if we call the Public Warrants for redemption, our management will have the option to require all holders that wish to exercise warrants
to do so on a cashless basis. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering
the warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number
of shares of Class A Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and
the “fair market value” (as defined in the next sentence) by (y) the fair market value. The “fair market value”
for this purpose shall mean the average reported last sale price of the Class A Common Stock for the 10 trading days ending on the third
trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is
sent to the holders of warrants, as applicable. As a result, you would receive fewer shares of Class A Common Stock from such exercise
than if you were to exercise such warrants for cash.
Our stockholders will
experience immediate dilution as a consequence of the issuance of common stock as consideration in the Business Combination. Having a
minority share position may reduce the influence that our current stockholders have on the management of the Combined Company.
It is
anticipated that upon completion of the Business Combination, the existing DarkPulse stockholders will own approximately 11,651,836 shares
of the Combined Company, GSD’s public stockholders (other than PIPE Investors) will own approximately 1,343,154 shares of the Combined
Company, the DarkPulse CEO is expected to hold a large number of the 11,651,836 DarkPulse shares of the Combined Company, the PIPE Investors,
if included, will own shares of the Combined Company, and the Representative will own shares of the Combined Company.
The ownership
percentage with respect to the Combined Company does not take into account (i) the redemption of any public Class A Common Shares by GSD’s
public stockholders (other than the redemptions recently completed in connection with the Extension Amendment), (ii) shares obtainable
upon exercise of the conversion features of notes issued by GSD, (iii) the issuance of any additional shares upon the closing of the Business
Combination under the Incentive Plan, or the shares issuable to noteholders of DarkPulse under the Merger Agreement. If the actual facts
are different from these assumptions (which they are likely to be), the percentage ownership retained by GSD’s stockholders in the
Combined Company will be different.
The table
below presents possible sources of dilution and the extent of such dilution that non-redeeming public holders of GSD Class A Common Shares
could experience in connection with the Closing across a range of varying redemption scenarios. In an effort to illustrate the extent
of such dilution, the table below does not assume the exercise of public GSD Warrants, private GSD Warrants, or issuance of any equity
awards under the Incentive Plan. Future shares issued under equity compensation plans and existing DarkPulse convertible notes are not
included in any of the scenarios below.
| |
Scenario 1 Assuming No
Redemptions | |
Scenario 2 Assuming 25%
Redemptions |
Equity Capitalization Summary | |
| Shares | | |
| % | | |
| Shares | | |
| % | |
DarkPulse Stockholders | |
| 11,651,836 | | |
| 89.66 | % | |
| 11,651,836 | | |
| 92.04 | % |
GSD Public Stockholders(1) | |
| 1,343,154 | | |
| 10.34 | % | |
| 1,007,366 | | |
| 7.96 | % |
Total common stock | |
| 12,994,990 | | |
| 100.0 | % | |
| 12,659,201 | | |
| 100.0 | % |
| |
Scenario 3 Assuming 50%
Redemptions | |
Scenario 2 Assuming 75%
Redemptions |
Equity Capitalization Summary | |
| Shares | | |
| % | | |
| Shares | | |
| % | |
DarkPulse Stockholders | |
| 11,651,836 | | |
| 94.55 | % | |
| 11,651,836 | | |
| 97.20 | % |
GSD Public Stockholders(1) | |
| 671,577 | | |
| 5.45 | % | |
| 335,789 | | |
| 2.80 | % |
Total common stock | |
| 12,323,413 | | |
| 100.0 | % | |
| 11,987,624 | | |
| 100.0 | % |
| |
Scenario 5 Assuming Maximum
Redemptions |
Equity Capitalization Summary | |
| Shares | | |
| % | |
DarkPulse Stockholders | |
| 11,651,836 | | |
| 100 | % |
GSD Public Stockholders(1) | |
| 0 | | |
| 0 | % |
Total common stock | |
| 11,651,836 | | |
| 100.0 | % |
|
(1) |
Under Scenario 5, assumes
redemptions of 1,343,154 GSD Class A Common Shares for aggregate redemption payments of $14,038,481 million
using a per-share redemption price of $10.45 as of December 31, 2022 |
The grant of registration
rights to our Initial Stockholders (including the holders of representative shares) and holders of our Private Warrants 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 shares of Class A Common Stock.
Pursuant
to an agreement entered into concurrently with the issuance and sale of the securities in the IPO, GSD’s Initial Stockholders and
their permitted transferees can demand that GSD register the shares of Class A Common Stock into which founder shares are convertible,
holders of our Private Warrants and their permitted transferees can demand that GSD register the Private Warrants and the Class A Common
Stock issuable upon exercise of the Private Warrants, holders of warrants that may be issued upon conversion of working capital loans
may demand that GSD register such warrants or the Class A Common Stock issuable upon conversion of such warrants, and holders of the representative
shares may demand that GSD register such representative shares. The registration rights will be exercisable with respect to the founder
shares and the Private Warrants and the Class A Common Stock issuable upon exercise of such Private Warrants.
GSD will
bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading
in the public market may have an adverse effect on the market price of our Class A Common Stock. In addition, the existence of the registration
rights may make the Initial Business Combination more costly or difficult to conclude. This is because the stockholders 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 GSD’s Class A Common Stock that is expected when the shares of common stock owned by GSD’s Initial
Stockholders, holders of GSD Private Warrants or holders of GSD working capital loans or their respective permitted transferees are registered.
The unaudited pro forma
condensed combined financial information included in our joint proxy statement may not be indicative of what the Combined Company’s
actual financial position or results of operations would have been.
The unaudited
pro forma condensed combined financial information in our joint proxy statement is presented for illustrative purposes only and is not
necessarily indicative of what Combined Company’s actual financial position or results of operations would have been had the Business
Combination been completed on the dates indicated.
The
representative may have a conflict of interest if they render services to us in connection with our Initial Business Combination.
We
may elect to engage EF Hutton, division of Benchmark Investments, LLC (who is the representative of the underwriters of our IPO) to assist
us in connection with our Initial Business Combination. The representative shares held by the representative and its designees of the
representative will also be worthless if we do not consummate an Initial Business Combination, in addition to their deferred fees. Therefore,
if the representative provides services to us in connection with our Initial Business Combination, these financial interests may result
in the representative having a conflict of interest when providing such services to us.
You
will not be entitled to protections normally afforded to investors of many other blank check companies.
Since
the net proceeds of our IPO and the sale of the Private 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 had net tangible assets in excess of $5,000,000 upon the completion of our IPO and the sale of the Private 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 were immediately tradable and we have a longer period of time to
complete our Initial Business Combination than do companies subject to Rule 419. Moreover, if our IPO were 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.
We
may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete
our Initial 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 business combination strategy, we may seek to effectuate 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.
We
may issue our shares to investors in connection with our Initial Business Combination at a price that is less than the prevailing market
price of our shares at that time.
In
connection with our Initial Business Combination, we may issue shares to investors in private placement transactions (so-called PIPE transactions)
at a price of $10.20 per share or a price which approximates the per-share amounts in our Trust Account at such time, which is generally
approximately $10.20. The purpose of such issuances will be to enable us to provide sufficient liquidity to the post-business combination
entity. The price of the shares we issue may therefore be less, and potentially significantly less, than the market price for our shares
at such time.
Risks Related to Combined
Company’s Common Stock and the Securities Market
The Combined Company
will be required to meet the initial listing requirements to be listed on the Nasdaq Stock Market. However, the Combined Company may be
unable to maintain the listing of its securities in the future.
If the
Combined Company fails to meet the continued listing requirements and Nasdaq delists its securities, the Combined Company could face significant
material adverse consequences, including:
|
· |
a limited availability of market quotations for its securities; |
|
· |
a limited amount of news and analyst coverage for the Combined Company; and |
|
· |
a decreased ability to issue additional securities or obtain additional financing in the future |
If the Business Combination’s
benefits do not meet the expectations of financial or industry analysts, the market price of the Combined Company’s securities may
decline.
The market
price of the Combined Company’s securities may decline as a result of the Business Combination if:
|
· |
the Combined Company does not achieve the perceived benefits of the acquisition as rapidly as, or to the extent anticipated by, financial or industry analysts; or |
|
· |
the effect of the Business Combination on the financial statements is not consistent with the expectations of financial or industry analysts. |
Accordingly,
investors may experience a loss as a result of decreasing stock prices.
The Combined Company’s
stock price may fluctuate significantly.
The market price of the Combined
Company’s common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including:
|
· |
actual or anticipated fluctuations in the Combined Company’s results of operations due to factors related to its business; |
|
· |
success or failure of the Combined Company’s business strategies; |
|
· |
competition and industry capacity; |
|
· |
changes in interest rates and other factors that affect earnings and cash flow; |
|
· |
the Combined Company’s level of indebtedness, ability to make payments on or service indebtedness and the Combined Company’s ability to obtain financing as needed; |
|
· |
the Combined Company’s ability to retain and recruit qualified personnel; |
|
· |
the Combined Company’s quarterly or annual earnings, or those of other companies in the industry; |
|
· |
announcements by us or the Combined Company’s competitors of significant acquisitions or dispositions; |
|
· |
changes in accounting standards, policies, guidance, interpretations or principles; |
|
· |
the failure of securities analysts to cover, or positively cover, the Combined Company’s common stock after the Business Combination; |
|
· |
changes in earnings estimates by securities analysts or the Combined Company’s ability to meet those estimates; |
|
· |
the operating and stock price performance of other comparable companies; |
|
· |
investor perception of the Combined Company and its industry; |
|
· |
overall market fluctuations unrelated to the Combined Company’s operating performance; |
|
· |
results from any material litigation or government investigation; |
|
· |
changes in laws and regulations (including tax laws and regulations) affecting the Combined Company’s business; |
|
· |
changes in capital gains taxes and taxes on dividends affecting stockholders; and |
|
· |
general economic conditions and other external factors. |
Low trading
volume for the Combined Company’s common stock, which may occur if an active trading market does not develop, among other reasons,
would amplify the effect of the above factors on the Combined Company’s stock price volatility.
Should
the market price of the Combined Company’s shares drop significantly, stockholders may institute securities class action lawsuits
against the Combined Company. A lawsuit against the Combined Company could cause it to incur substantial costs and could divert the time
and attention of management and other resources.
Because the Combined
Company does not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source
of gain.
The Combined
Company currently anticipates that it will retain future earnings for the development, operation and expansion of its business and does
not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of the Combined
Company’s securities would be your sole source of gain on an investment in such securities for the foreseeable future.
Your percentage ownership
in the Combined Company may be diluted in the future.
Stockholders’
percentage ownership in the Combined Company may be diluted in the future because of equity issuances for acquisitions, capital market
transactions or otherwise, including equity awards that the Combined Company will be granting to directors, officers and other employees.
The Combined Company’s board of directors has adopted the incentive plan for the benefit of certain of its current and future employees,
service providers and non-employee directors. Such awards will have a dilutive effect on our earnings per share, which could adversely
affect the market price of the common stock.
From
time-to-time, the Combined Company may opportunistically evaluate and pursue acquisition opportunities, including acquisitions for which
the consideration thereof may consist partially or entirely of newly-issued shares of Combined Company common stock and, therefore, such
transactions, if consummated, would dilute the voting power and/or reduce the value of its common stock.
Issuing
additional shares of the Combined Company’s capital stock, other equity securities, or securities convertible into equity may dilute
the economic and voting rights of our existing stockholders, reduce the market price of the Combined Company’s common stock, or
both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events
may increase the number of equity securities issuable upon conversion. Preferred stock, if issued, could have a preference with respect
to liquidating distributions or a preference with respect to dividend payments that could limit the Combined Company’s ability to
pay dividends to the holders of its common stock. The Combined Company’s decision to issue securities in any future offering will
depend on market conditions and other factors beyond the Combined Company’s control, which may adversely affect the amount, timing,
or nature of future offerings. As a result, current stockholders bear the risk that future offerings may reduce the market price of the
Combined Company’s common stock and dilute their percentage ownership.
Nasdaq may delist the
Combined Company’s securities from trading on its exchange, which could limit investors’ ability to make transactions in its
securities and subject it to additional trading restrictions.
The Combined
Company has applied to have its Common Stock and warrants to acquire the Combined Company’s Common Stock listed on Nasdaq. The Combined
Company expects that its securities will be listed on Nasdaq at or promptly after the consummation of the Business Combination. Following
the date the shares of the Combined Company’s Common Stock and warrants are eligible to trade separately, the Combined Company anticipates
that the shares of its Common Stock and warrants will be separately listed on Nasdaq. The Combined Company cannot guarantee that its securities
will be approved for listing on Nasdaq. Although the Combined Company expects to meet, on a pro forma basis, the minimum initial listing
standards set forth in the Nasdaq listing standards, it cannot assure you that its securities will be, or will continue to be, listed
on Nasdaq in the future or prior to our Initial Business combination. In order to continue listing the Combined Company’s securities
on Nasdaq prior to our Initial Business combination, it must maintain certain financial, distribution and stock price levels. Generally,
the Combined Company must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders
of its securities (generally 300 public holders). Additionally, in connection with the Business Combination, the Combined Company 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 its securities on Nasdaq. For instance, the Combined Company’s
stock price would generally be required to be at least $4.00 per share, its stockholders’ equity would generally be required to
be at least $5.0 million and it would be required to have a minimum of 300 round lot holders (with at least 50% of such round lot holders
holding securities with a market value of at least $2,500) of its securities. The Combined Company’s cannot assure you that it will
be able to meet those initial listing requirements at that time.
Once
listed on Nasdaq, an active trading market for the Combined Company’s securities may never develop or, if developed, it may not
be sustained. You may be unable to sell your securities unless a market can be established and sustained. If Nasdaq delists any of the
Combined Company’s securities from trading on its exchange and the Combined Company is not able to list such securities on another
national securities exchange, the Combined Company’s Common Stock may have to be listed on OTC Pink Sheets, an inter-dealer automated
quotation system for equity securities not listed on a national exchange. If the Combined Company’s securities become delisted from
Nasdaq for any reason, and are quoted on the OTC Pink Sheets, the liquidity and price of its securities may be more limited than if it
were listed on Nasdaq or another national exchange. In such event, the Combined Company could face significant material adverse consequences,
including:
|
· |
a limited availability of market quotations for its securities; |
|
· |
more limited liquidity for its securities; |
|
· |
a determination that the Combined Company’s Common Stock is a “penny stock” which will require brokers trading in the Combined Company’s Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for its securities; |
|
· |
a limited amount of news and analyst coverage; and |
|
· |
a decreased ability to issue additional securities or obtain additional financing in the future. |
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, and results of operations.
We
are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be 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, and results of operations. In addition, we are subject to tax laws and regulations
enacted by national, regional and local governments, those laws and regulations and their interpretation and application may also change
from time to time and those changes or our failure to comply with any applicable laws or regulations, as interpreted or applied, could
have a material adverse impact on our business, including our ability to negotiate and complete our Initial Business Combination, investments
and results of operations.
We
may issue additional shares of Class A Common Stock or shares of preferred stock to complete our Initial Business Combination or 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 founder shares 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. Immediately after our IPO, there was 189,297,670 and 17,376,880 authorized but unissued shares of Class A Common
Stock and Class B Common Stock, respectively, available for issuance which amount does not take into account shares reserved for issuance
upon exercise of outstanding warrants or shares issuable upon conversion of the Class B Common Stock. The Class B Common Stock is automatically
convertible into Class A Common Stock upon the consummation of our Initial Business Combination, initially at a one-for-one ratio but
subject to adjustment as set forth herein and in our amended and restated certificate of incorporation. There are no shares of preferred
stock issued and outstanding.
We
may issue a substantial number of additional shares of common or preferred stock to complete our Initial Business Combination or under
an employee incentive plan after completion of our Initial Business Combination (although our amended and restated certificate of incorporation
will provide that we may not issue securities that can vote with common stockholders on matters related to our pre-Initial Business Combination
activity). 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 the consummation 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 will provide, among other things,
that prior to our Initial Business Combination, we may not issue additional shares of capital stock that would entitle the holders thereof
to receive funds from the Trust Account or (ii) vote on any Initial Business Combination. These provisions of our amended and restated
certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with the approval
of our stockholders. However, our executive officers, directors and director nominees have agreed, pursuant to a written agreement with
us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing
of our obligation to allow redemption in connection with our Initial Business Combination or certain amendments to our charter prior thereto
or to redeem 100% of our public shares if we do not complete our Initial Business Combination within 22 months from the closing of our
IPO (or 24 months from the closing of our IPO, if we extend the period of time to consummate a business combination, subject to our Sponsor
depositing additional funds into the Trust Account) or (B) with respect to any other provision relating to stockholders’ rights
or pre-Initial Business Combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of
common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public
shares. The issuance of additional shares of common stock or shares of preferred stock:
| · | may significantly
dilute the equity interest of investors in our securities; |
| · | may subordinate
the rights of holders of Class A Common Stock if shares of preferred stock are issued with rights senior to those afforded our Class A
Common Stock; |
| · | could cause
a change in control if a substantial number of shares of Class A Common Stock is 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. |
Unlike
some other similarly structured special purpose acquisition companies, our Initial Stockholders will receive additional shares of Class
A Common Stock if we issue certain shares to consummate an Initial Business Combination.
The
founder shares will automatically convert into shares of Class A Common Stock upon the consummation of our Initial Business Combination
on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and
subject to further adjustment as provided herein. In the case that additional shares of Class A Common Stock or equity-linked securities
are issued or deemed issued in connection with our Initial Business Combination, the number of shares of Class A Common Stock issuable
upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class
A Common Stock outstanding after such conversion (excluding the representative shares and the Private Warrants and underlying securities),
including the total number of shares of Class A Common Stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked
securities or rights issued or deemed issued, by the company in connection with or in relation to the consummation of the Initial Business
Combination, excluding any shares of Class A Common Stock or equity-linked securities or rights exercisable for or convertible into shares
of Class A Common Stock issued, or to be issued, to any seller in the Initial Business Combination and any Private Warrants issued to
our Sponsor, officers or directors upon conversion of working capital loans, provided that such conversion of founder shares will never
occur on a less than one-for-one basis. This is different than some other similarly structured special purpose acquisition companies in
which the Initial Stockholders will only be issued an aggregate of 20% of the total number of shares to be outstanding prior to our Initial
Business Combination.
Resources
could be wasted in researching business combinations 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 only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders,
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 only receive
their pro rata portion of the funds in the Trust Account that are available for distribution to public stockholders, and our warrants
will expire worthless.
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.
Although
we expect to meet the minimum initial listing standards set forth in Nasdaq listing standards, we cannot assure you that our securities
will continue to be, listed on Nasdaq in the future or prior to our Initial Business Combination. In order to continue listing our securities
on Nasdaq prior to our Initial Business Combination, we must maintain certain financial, distribution and stock price levels. Generally,
we must maintain a minimum average global market capitalization 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, our stockholders’ equity would
generally be required to be at least $5.0 million, and we would be required to have a minimum of 300 round lot holders (with at least
50% of such round lot holders holding securities with a market value of at least $2,500) of our securities. 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.” Because our Units are and eventually our Class A Common
Stock and warrants will be listed on Nasdaq, our Units, Class A Common Stock and warrants will be covered securities. Although the states
are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there
is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities
in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued
by blank check companies, 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, including in connection with our Initial Business Combination.
Our
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.
In
the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.20 per share and the actual amount per public
share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.20 per public share due to reductions
in the value of the trust assets, in each case less taxes payable, 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 and subject to their fiduciary duties may choose not to do so in any particular instance.
If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available
for distribution to our public stockholders may be reduced below $10.20 per share.
Risks
Relating to Our Management Team
We
may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We
have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed
to waive any right, title, interest or claim of any kind in or to any monies in the Trust Account and to not seek recourse against the
Trust Account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have
sufficient funds outside of the Trust Account or (ii) we consummate an Initial Business Combination. Our obligation to indemnify our officers
and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty.
These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even
though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may
be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these
indemnification provisions.
We
are dependent upon our executive officer 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 executive officer and directors. We believe
that our success depends on the continued service of our officer and directors, at least until we have completed our Initial Business
Combination. In addition, our executive officer 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 executive officers. The unexpected loss of the services of one or more of our directors or executive
officers could have a detrimental effect on us.
Neither
the Sponsor nor any of their affiliates has an obligation to provide us with potential investment opportunities or to devote any specified
amount of time or support to our company’s business.
Although
we expect we may benefit from our Sponsor of relationships and processes for sourcing and evaluating potential acquisition targets, neither
it nor any of its affiliates has any legal or contractual obligation to seek on our behalf or present to us investment opportunities that
might be suitable for our business, and they may allocate any such opportunities at their discretion to us or other parties. We have no
investment management, advisory, consulting or other agreement in place with our Sponsor or any of its affiliates that obligates them
to undertake efforts on our behalf or that govern the manner in which they will allocate investment opportunities. Moreover, even if our
Sponsor or one of its affiliates refers an opportunity to us, there can be no assurance that such an opportunity will result in an acquisition
agreement or a business combination.
Our
ability to successfully effect our Initial Business Combination and to be successful thereafter will be dependent upon the efforts of
our key personnel, some of whom may join us following our Initial Business Combination. The loss of key personnel could negatively impact
the operations and profitability of our post-combination business.
Our
ability to successfully effect our Initial Business Combination is dependent upon the efforts of our key personnel. The role of our key
personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target
business in senior management or advisory positions following our Initial 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.
Our
key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination,
and a particular business combination may be conditioned on the retention or resignation of such key personnel. These agreements may provide
for them to receive compensation following our Initial Business Combination and as a result, may cause them to have conflicts of interest
in determining whether a particular business combination is the most advantageous.
Our
key personnel may be able to remain with our company after the completion of our Initial Business Combination only if they are able to
negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously
with the negotiation of the business combination and could provide for 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. Such negotiations also could
make such key personnel’s retention or resignation a condition to any such agreement. The personal and financial interests of such
individuals may influence their motivation in identifying and selecting a target business, subject to their fiduciary duties under Delaware
law.
We
may have a limited ability to assess the management of a prospective target business and, as a result, may affect our Initial Business
Combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.
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 business’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications
or abilities we suspected. Should the target business’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 or warrant holders who choose to remain stockholders or warrant holders following the business combination could suffer
a reduction in the value of their securities.
The
officers and directors of an acquisition candidate may resign upon completion of our Initial Business Combination. The loss 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
executive officer and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination
as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our Initial
Business Combination.
Our
executive officer and directors are not required to, and will not, commit any period of 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. We do
not intend to have any full-time employees prior to the completion of our Initial Business Combination. Each of our executive officers
is engaged in several other business endeavors for which he may be entitled to substantial compensation, and our executive officers are
not obligated to contribute any specific number of hours per week to our affairs. Our independent directors also serve as officers and
board members for other entities. If our executive 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.
Our
officer and directors presently have, and any of them in the future may have additional, fiduciary, contractual or other obligations to
other entities and clients of other entities and, accordingly, may have conflicts of interest in 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.
Each of our officer and directors presently has, and any of them in the future may have additional fiduciary, contractual or other obligations
to other entities. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable
for an entity to which he or she has then current fiduciary, contractual or other obligations, he or she will honor his or her fiduciary,
contractual or other obligations to present such opportunity to such entity and only present it to us if such entity rejects the opportunity
and he or she determines to present the opportunity to us (including as described above). These conflicts may not be resolved in our favor
and a potential target business may be presented to another entity prior to its presentation to us. However, we do not believe that the
fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business combination.
In
the event we seek to complete our Initial Business Combination with a company that is affiliated with, or which there is a fiduciary,
contractual or other obligation by, our Sponsor, officers or directors, we, or a committee of independent directors, may obtain an opinion
from an independent investment banking firm which is a member of FINRA or an independent accounting firm that the consideration to be
paid by us in the Initial Business Combination is fair to our company from a financial point of view. 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
certificate of incorporation will provide 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 the company and
such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and
to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation without
violating another legal obligation.
In
addition, our Sponsor and our officer and directors may Sponsor or form other special purpose acquisition companies similar to ours or
may pursue other business or investment ventures, even prior to us entering into a definitive agreement for our Initial Business Combination.
Any such companies, businesses or investments may present additional conflicts of interest in pursuing an Initial Business Combination.
However, we do not believe that any such potential conflicts would materially affect our ability to complete our Initial Business Combination.
Our
executive 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, executive 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, we may enter into a business combination with a target business that is affiliated with our Sponsor,
our directors or executive officers, although we do not intend to do so. Nor do we 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.
The
personal and financial interests of our directors and officers may influence their motivation in timely identifying and selecting a target
business and completing a business combination. Consequently, our directors’ and officers’ discretion in identifying and selecting
a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of a particular
business combination are appropriate and in our stockholders’ best interest. If this were the case, it would be a breach of their
fiduciary duties to us as a matter of Delaware law and we or our stockholders might have a claim against such individuals for infringing
on our stockholders’ rights. However, we might not ultimately be successful in any claim we may make against them for such reason.
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, executive officers, directors or existing holders which may raise potential conflicts of interest.
In
light of the involvement of our Sponsor, executive officer and directors with other entities, we may decide to acquire one or more businesses
affiliated with our Sponsor, executive officers, directors or existing holders. Our directors also serve as officers and board members
for other entities, including, without limitation, those described under “Management — Conflicts of Interest.” Such
entities or clients of entities may compete with us for business combination opportunities. Aside from the Proposed Business Combination
with our Sponsor, our Sponsor, officer and directors are not currently aware of any specific opportunities for us to complete our Initial
Business Combination with any entities with which they are affiliated, and there have been no 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, other than the Sponsor in connection with the Proposed Business Combination, we would pursue such a transaction if
we determined that such affiliated entity met our criteria for a business combination as set forth in our criteria and such transaction
was approved by a majority of our independent and disinterested directors. Despite our choosing to obtain an opinion from an independent
investment banking firm which is a member of FINRA or a valuation or appraisal firm regarding the fairness to our company from a financial
point of view of the consideration to be paid by us in a business combination with one or more domestic or international businesses affiliated
with our Sponsor, executive officer, 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 engage our underwriter or one of its respective affiliates to provide additional services to us after our IPO, which may include acting
as financial advisor in connection with an Initial Business Combination or as placement agent in connection with a related financing transaction.
Our underwriter is entitled to receive deferred commissions that will released from the trust only on a completion of an Initial Business
Combination. These financial incentives may cause them to have potential conflicts of interest in rendering any such additional services
to us including, for example, in connection with the sourcing and consummation of an Initial Business Combination.
We
may engage our underwriter or one of its respective affiliates to provide additional services to us after our IPO, including, for example,
identifying potential targets, providing financial advisory services, acting as a placement agent in a private offering or arranging debt
financing. We may pay such underwriter or its affiliate fair and reasonable fees or other compensation that would be determined at that
time in an arm’s length negotiation, subject to certain restrictions. The underwriter is also entitled to receive deferred commissions
that are conditioned on the completion of an Initial Business Combination. The underwriter’s or its respective affiliates’
financial interests tied to the consummation of a business combination transaction may give rise to potential conflicts of interest in
providing any such additional services to us, including potential conflicts of interest in connection with the sourcing and consummation
of an Initial Business Combination.
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 our Initial 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 a controlling interest in
the target sufficient for us 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 prior to the business combination may collectively own a minority interest in the post business combination company,
depending on valuations ascribed to the target and us in the business combination. 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 Class A Common Stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding Class
A Common Stock subsequent to 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 shares 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.
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 in ways
adverse to us and our management team. Fewer insurance companies are offering quotes for directors and officers liability coverage, the
premiums charged for such policies have generally increased and the terms of such policies have generally become less favorable. These
trends are likely to continue into the future.
Past
performance by our management team and their affiliates may not be indicative of future performance of an investment in us.
Information
regarding performance by, or businesses associated with, our management team or businesses associated with them is presented for informational
purposes only. The past performance of our management team or their respective affiliates is not a guarantee of either: (i) success with
respect to any business combination we may consummate; or (ii) that we will be able to identify a suitable candidate for our Initial Business
Combination. No member of our management team has had significant management experience with special purpose acquisition companies in
the past. You should not rely on the historical record of our management team’s or their respective affiliates’ performance
as indicative of any future performance.
General
Risk Factors
We
are a blank check 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 blank check company incorporated under the laws of the State of Delaware with no operating results, and will have no operations
prior to our IPO. 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. We have no plans, arrangements or understandings with any prospective target business
concerning a business combination and may be unable to complete our Initial Business Combination. If we fail to complete our Initial Business
Combination, we will never generate any operating revenues.
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 seeking targets for their Initial Business Combination, as well as many such companies currently in registration.
As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify
a suitable target and to consummate an Initial Business Combination.
In
addition, because there are more 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 target
companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry
sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate
targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and
consummate an Initial Business Combination, and may result in our inability to consummate an Initial Business Combination on terms favorable
to our investors altogether.
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 may need to purchase additional insurance with respect to any
such claims (“run-off insurance”). 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.
We have identified
a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability
to report our results of operations and financial condition accurately and in a timely manner.
Our management
is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of its internal controls and to disclose
any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As described
below and elsewhere in this Annual Report, we identified a material weakness in our internal control over financial reporting relating
to the accounting for complex financial instruments. This material weakness resulted in a material misstatement of our additional paid-in
capital, accumulated deficit and related financial disclosures for the affected periods described below.
We previously
issued a balance sheet dated August 9, 2021 in Form 8-Ks that were filed on August 13, 2021 and August 19, 2021. In those previously issued
financial statements, a portion of the public shares were classified as permanent equity to maintain stockholders’ equity greater
than $5,000,000 on the basis that we will consummate our initial Business Combination only if we have net tangible assets of at least
$5,000,001. Thus, we can only complete a Business Combination and continue to exist as a public company if there is sufficient public
shares that do not redeem at the Business Combination and so we believed it was appropriate to classify the portion of our public shares
required to keep our stockholders’ equity above the $5,000,000 threshold as “shares not subject to redemption.”
However,
in light of recent comment letters issued by the SEC to several special purpose acquisition companies, management re-evaluated our application
of ASC 480-10-99 to its accounting classification of public shares. Upon re-evaluation, management determined that the public shares include
certain provisions that require classification of the public shares as temporary equity regardless of the minimum net tangible assets
required by us to complete our initial Business Combination.
In
accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC
Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements,” we evaluated
the changes and determined that the overall impacts were material to the previously
presented financial statements. We, in consultation with our Audit Committee, concluded that
our previously issued financial statements should be restated to report all public shares
as temporary equity. As such, we restated our previously issued balance sheet dated August
9, 2021 in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.
Additionally,
we currently only have one officer, and lack proper segregation of duties due to limited personnel. We also lack a formal review process
related to financial reporting that includes multiple levels of review. In addition, we have insufficient written policies and procedures
for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines, particularly
the process of recording due to related party and accrued expenses. We plan to remedy this weakness by enhancing access to accounting
literature, identifying third-party professionals with whom to consult regarding complex accounting applications and considering additional
staff with the requisite experience and training to supplement existing accounting professionals. Our management will need additional
time to monitor and assess the ultimate effectiveness of the remediation steps.
As
a result of the above, our management concluded that our internal control over financial reporting was not effective as of December 31,
2022. Our management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we have
implemented additional accounting and financial analyses related to the classification of our public shares as temporary equity versus
permanent equity and also consulting with subject matter experts.
Any failure
to maintain such internal control could adversely impact our ability to report our financial position and results of operations on a timely
and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise,
if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange
on which our securities are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect
on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which
could have a negative effect on the trading price of our stock.
We can
give no assurance that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure
to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if
we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent
or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
We may face litigation
and other risks as a result of the material weakness in our internal control over financial reporting.
As
a result of such material weakness, the restatement, the change in accounting for the temporary equity, the resulting material weakness
and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may
include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement
and material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date
of this Annual Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation
or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect
on our business, results of operations and financial condition or our ability to complete an 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.”
The
Company will continue to expend working capital for operating costs, which includes costs to close on the proposed Business Combination,
in addition to accounting, audit, legal, board, franchise and income tax and other expenses associated with operating the business during
the period through the mandatory date to consummate a Business Combination or liquidate the business. Such costs are likely to exceed
the amount of cash currently available. To finance working capital needs, our New Sponsor or an affiliate or certain of our officers
and directors may, but are not obligated to, provide us with working capital loans.
We have until June 9, 2023, with monthly extensions possible until
August 9, 2023, subject to GSD’s Sponsor depositing additional funds monthly into GSD’s trust account and our Board approving
the extensions, to consummate an Initial Business Combination. It is uncertain that we will be able consummate an Initial Business Combination
by either date. If an Initial Business Combination is not consummated by the required dates, there will be a mandatory liquidation and
subsequent dissolution. In connection with our assessment of going concern considerations in accordance with the authoritative guidance
in ASC Topic 205-40, "Presentation of Financial Statements - Going Concern", management has determined that the liquidity condition
mentioned above and mandatory liquidation, and subsequent dissolution, should we be unable to complete a business combination, raises
substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this report do not
include any adjustments that might result from our inability to continue as a going concern.
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 the date of this Annual Report to issue any notes or other debt securities, or to otherwise incur outstanding
debt, we may choose to incur substantial debt to complete our Initial Business Combination. We and our officers 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 is payable on
demand; |
| · | our
inability to obtain necessary additional financing if the debt contains covenants restricting
our ability to obtain such financing while the debt is outstanding; |
| · | our
inability to pay dividends on our Class A 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 Class A Common Stock if declared, expenses,
capital expenditures, acquisitions and 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; and |
| · | limitations
on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions,
debt service requirements, execution of our strategy and other purposes and other disadvantages
compared to our competitors who have less debt. |
We
do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete
our Initial Business Combination with which a substantial majority of our stockholders or warrant holders do not agree.
Our
amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except 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. In addition, our proposed
Initial Business Combination may impose a minimum cash requirement for: (i) cash consideration to be paid to the target or its owners,
(ii) cash for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions. As a result,
we may be able to complete our Initial Business Combination even though a substantial majority 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 Initial Business Combination pursuant to the tender offer rules, have entered into privately
negotiated agreements to sell their shares to our Sponsor, officers, directors or any of their affiliates. 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 in connection with such Initial Business Combination,
all shares of Class A Common Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an
alternate business combination.
In
connection with the Special Meeting held on January 31, 2023, stockholders holding 9,149,326 public shares properly exercised their right
to redeem their shares for cash at a redemption price of approximately $10.39 per share, for an aggregate redemption amount of approximately
$95,061,497. Following such redemptions, approximately $14,038,481 was left in the trust account and 1,343,154 public shares remain outstanding.
In
order to effectuate an Initial Business Combination, special purpose acquisition companies have, in the recent past, amended various provisions
of their charters and other governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend
our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us to complete
our Initial Business Combination that our stockholders may not support.
In
order to effectuate a business combination, special purpose acquisition companies have, in the recent past, amended various
provisions of their charters and governing instruments, including their warrant agreements. For example, special purpose acquisition
companies have amended the definition of business combination, increased redemption thresholds and extended the time to consummate
an Initial Business Combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be
exchanged for cash and/or other securities. Amending our amended and restated certificate of incorporation will require the approval
of holders of 65% of our common stock, and amending our warrant agreement will require a vote of holders of at least a majority of
the warrants. In addition, our amended and restated certificate of incorporation requires us to provide our public stockholders with
the opportunity to redeem their public shares for cash if we propose an amendment to our amended and restated certificate of
incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete an
Initial Business Combination within 22 months from the closing of our IPO (or 24 months from the closing of our IPO, if we extend
the period of time to consummate a business combination, subject to our Sponsor depositing additional funds into the Trust Account)
or with respect to any other material provisions relating to stockholders’ rights or pre-Initial Business Combination
activity. To the extent any of such amendments would be deemed to fundamentally change the nature of the securities offered through
this registration statement, we would register, or seek an exemption from registration for, the affected securities. We cannot
assure you that we will not seek to amend our charter or governing instruments or extend the time to consummate an Initial Business
Combination in order to effectuate 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), including an amendment to permit us to withdraw funds
from the Trust Account such that the per share amount investors will receive upon any redemption or liquidation is substantially reduced
or eliminated, 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 special purpose acquisition companies. It may be easier for us, therefore, to amend our amended and restated certificate
of incorporation to facilitate the completion of an Initial Business Combination that some of our stockholders may not support.
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 our 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
and including to permit us to withdraw funds from the Trust Account such that the per share amount investors will receive upon any
redemption or liquidation is substantially reduced or eliminated) 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. If we amend such provisions of our
amended and restated certificate of incorporation, we will provide our public stockholders with the opportunity to redeem their
public shares in connection with a stockholder meeting. 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. Our Initial Stockholders collectively beneficially own
approximately 62% of our common stock and may 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 which govern our pre-business combination behavior more easily
than some other special purpose acquisition 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, executive officer and directors have agreed, pursuant to written agreements with us, that they will not propose any
amendment to our amended and restated certificate of incorporation 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 22 months from the closing of our IPO (or 24
months from the closing of our IPO, if we extend the period of time to consummate a business combination, subject to our Sponsor
depositing additional funds into the Trust Account) or with respect to any other material provisions relating to stockholders’
rights or pre-Initial Business Combination activity, unless we provide our public stockholders with the opportunity to redeem their
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 (which interest shall be net of
taxes payable), divided by the number of then outstanding public shares. Our stockholders are not parties to, or third-party
beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our Sponsor, executive
officers, directors or director nominees for any breach of these agreements. As a result, in the event of a breach, our stockholders
would need to pursue a stockholder derivative action, subject to applicable law.
Certain
agreements related to our IPO may be amended without stockholder approval.
Each
of the agreements related to our IPO to which we are a party, other than the warrant agreement and the investment management trust agreement,
may be amended without stockholder approval. Such agreements are: the underwriting agreement; the letter agreements among us and our Initial
Stockholders, Sponsor, officers and directors; the registration rights agreement among us and our Initial Stockholders; the Private Warrants
purchase agreement between us and our Sponsor; and the administrative services agreement among us, our Sponsor and an affiliate of our
Sponsor. These agreements contain various provisions that our public stockholders might deem to be material. For example, our letter agreements
and the underwriting agreement contain certain lock-up provisions with respect to the founder shares, Private Warrants and other securities
held by our Initial Stockholders, Sponsor, officers and directors. Amendments to such agreements would require the consent of the applicable
parties thereto and would need to be approved by our board of directors, which may do so for a variety of reasons, including to facilitate
our Initial Business Combination. While we do not expect our board of directors to approve any amendment to any of these agreements prior
to our Initial Business Combination, it may be possible that our board of directors, in exercising its business judgment and subject to
its fiduciary duties, chooses to approve one or more amendments to any such agreement. Any amendment entered into in connection with the
consummation of our Initial Business Combination will be disclosed in our proxy materials or tender offer documents, as applicable, related
to such Initial Business Combination, and any other material amendment to any of our material agreements will be disclosed in a filing
with the SEC. Any such amendments would not require approval from our stockholders, may result in the completion of our Initial Business
Combination that may not otherwise have been possible, and may have an adverse effect on the value of an investment in our securities.
For example, amendments to the lock-up provision discussed above may result in our Initial Stockholders selling their securities earlier
than they would otherwise be permitted, which may have an adverse effect on the price of our securities.
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.
We
have not selected any specific business combination target, aside from the proposed Business Combination, but intend to target businesses
with enterprise values that are greater than we could acquire with the net proceeds of our IPO and the sale of the Private Warrants. As
a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy
any redemption by public stockholders, we may be required to seek additional financing to complete such proposed Initial 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. Further, we may be required to obtain
additional financing in connection with the closing of our Initial Business Combination for general corporate purposes, including for
maintenance or expansion of operations of the post-transaction businesses, the payment of principal or interest due on indebtedness incurred
in completing our Initial Business Combination, or to fund the purchase of other companies. If we are unable to complete our Initial Business
Combination, our public stockholders may only receive their pro rata portion of the funds in the Trust Account that are available for
distribution to public stockholders, and our warrants will expire worthless. In addition, even if we do not need additional financing
to complete our Initial 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.
We
may amend the terms of the warrants in a manner that may be adverse to holders of Public Warrants with the approval by the holders of
at least a majority of the then outstanding Public Warrants. As a result, the exercise price of your warrants could be increased, the
exercise period could be shortened and the number of shares of Class A Common Stock purchasable upon exercise of a warrant could be decreased,
all without your approval.
Our
warrants were 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 a majority of the then outstanding Public Warrants
to make any change that adversely affects the interests of the registered holders of Public Warrants. Accordingly, we may amend the terms
of the Public Warrants in a manner adverse to a holder if holders of at least a majority of the then outstanding Public Warrants approve
of such amendment. Although our ability to amend the terms of the Public Warrants with the consent of at least a majority of the then
outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise
price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period
or decrease the number of shares of Class A Common Stock purchasable upon exercise of a warrant.
Our
warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New
York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which
could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
Our
warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating
in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New
York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction,
which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum.
Notwithstanding
the foregoing, these provisions of the warrant agreement do not apply to suits brought to enforce any liability or duty created by the
Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum.
Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have
consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions
of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the
Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed
to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with
any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of
process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign
action as agent for such warrant holder.
This
choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for
disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement
inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs
associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition
and results of operations and result in a diversion of the time and resources of our management and board of directors.
We
may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We
have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of
$0.01 per warrant, provided that the reported last sale price of our Class A Common Stock equals or exceeds $18.00 per share (as adjusted
for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period
commencing once the warrants become exercisable and ending on the third trading day prior to the date on which we give proper notice of
such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may not exercise our
redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification
under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register
or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered
by us. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time
when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise
wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for
redemption, is likely to be substantially less than the market value of your warrants.
Our
warrants may have an adverse effect on the market price of our shares of Class A Common Stock and make it more difficult to effectuate
our Initial Business Combination.
We
issued warrants to purchase 5,246,240 shares of our Class A Common Stock as part of the Units issued in our IPO and, simultaneously with
the closing of our IPO and the partial exercise of the overallotment option, we issued in a private placement an aggregate of 4,298,496
Private Warrants, each exercisable to purchase one share of Class A Common Stock at $11.50 per share, at a price of $1.00 per warrant,
or $4,298,496. In addition, if our Sponsor or an affiliate of our Sponsor or certain of our officers and directors makes any working capital
loans, such lender may convert those loans into up to an additional 1,500,000 Private Warrants, at the price of $1.00 per warrant. To
the extent we issue common stock to effectuate a business transaction, the potential for the issuance of a substantial number of additional
shares of Class A Common Stock upon exercise of these warrants could make us a less attractive acquisition vehicle to a target business.
Such warrants, when exercised, will increase the number of issued and outstanding shares of Class A Common Stock and reduce the value
of the Class A Common Stock issued to complete the business transaction. Therefore, our warrants may make it more difficult to effectuate
a business transaction or increase the cost of acquiring the target business.
Because
each Unit contains one-half 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.
Each
unit contains one-half of one warrant. Pursuant to the warrant agreement, no fractional warrants will be issued upon separation of the
Units, and only whole Units will trade. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest
in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Class A Common Stock to be issued to
the warrant holder. This is different from other offerings similar to ours whose units include one common share 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 one-half of the number of shares compared
to units that each contain a whole warrant to purchase one 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 it 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
| · | we issue additional
shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection with the closing of our Initial
Business Combination at a Newly Issued Price of less than $9.20 per share; |
| · | the aggregate
gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding
of our Initial Business Combination on the date of the consummation of our Initial Business Combination (net of redemptions), and the
Market Value is below $9.20 per share, |
then
the exercise price of the warrants will be adjusted to be equal to 115% of the greater of the Market Value and the Newly Issued Price,
and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market
Value and the Newly Issued Price. This may make it more difficult for us to consummate an Initial Business Combination with a target business.
There
is currently a limited market for our securities and a market for our securities may not develop further or at all, which would adversely
affect the liquidity and price of our securities.
There
is currently a limited market for our securities. Stockholders therefore have limited access to information about prior market history
on which to base their investment decision. The price of our securities may vary significantly due to one or more potential business combinations
and general market or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed,
it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.
An
investment in our securities may result in uncertain or adverse U.S. federal income tax consequences.
An
investment in our securities 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, their treatment for U.S. federal income tax purposes is uncertain, and the allocation
an investor makes with respect to the purchase price of a unit between the share of Class A Common Stock and the one-half of one redeemable
warrant included in each unit could be challenged by the Internal Revenue Service (“IRS”) or the courts. In addition, if we
are determined to be a personal holding company for U.S. federal income tax purposes, our taxable income would be subjected to an additional
20% federal income tax, which would reduce the net after-tax amount of interest income earned on the funds placed in our Trust Account.
Furthermore, the U.S. federal income tax consequences of a cashless exercise of warrants included in the Units we issued in our IPO is
unclear under current law. Finally, it is unclear whether the redemption rights with respect to our shares suspend the running of a U.S.
holder’s holding period for purposes of determining whether (i) 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, (ii) any dividends we pay would be considered “qualified dividends”
for U.S. federal income tax purposes and (iii) any dividend we pay would be eligible for the corporate dividends-received deduction. 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.
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 the proxy statement with respect to the vote on an Initial Business Combination include historical and
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) (“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 statements in accordance with federal proxy rules and complete our Initial Business Combination within the prescribed time frame.
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 internal controls 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 30th before that time, in which
case we would no longer be an emerging growth company as of the following December 31st. 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 election to opt out is irrevocable. We have elected not to opt out of such extended transition
period which means that when a standard is issued or revised and it has different application dates for public or private companies, we,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging
growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting 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 the fiscal year in which (1) the market value of our common stock held by
non-affiliates exceeds $250 million as of the prior June 30th, and (2) our annual revenues exceeded $100 million during such completed
fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30th. To the extent
we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies
difficult or impossible.
Compliance
obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our Initial Business Combination, require substantial
financial and management resources, and increase the time and costs of completing an Initial Business Combination.
Section
404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with this Annual Report
on Form 10-K for the year ending December 31, 2022. Only in the event we are deemed to be a large accelerated filer or an accelerated
filer, and no longer qualify as an emerging growth company, 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 business with which we seek to complete our Initial
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 business combination.
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 shares of Class A Common Stock and could entrench management.
Our
amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders
may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors
to designate the terms of and issue new series of preferred stock, which may make more difficult the removal of management and may discourage
transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
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 requires, to the fullest extent permitted by law, that derivative actions brought
in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and certain other actions
may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the
suit will, subject to certain exceptions, be deemed to have consented to service of process on such stockholder’s counsel, which
may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.
Our
amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any
(1) derivative action or proceeding brought on behalf of our company, (2) action asserting a claim of breach of a fiduciary duty owed
by any director, officer, employee or agent of our company to our company or our stockholders, or any claim for aiding and abetting any
such alleged breach, (3) action asserting a claim against our company or any director, or officer or employee of our company arising pursuant
to any provision of the DGCL or our amended and restated certificate of incorporation or our bylaws, or (4) action asserting a claim against
us or any director, or officer or employee of our company governed by the internal affairs doctrine except for, as to each of through
(4) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction
of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten
days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery,
or (c) arising under the federal securities laws, including the Securities Act, as to which the Court of Chancery and the federal district
court for the District of Delaware shall concurrently be the sole and exclusive forums. Notwithstanding the foregoing, the provisions
of this paragraph will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for
which the federal district courts of the United States of America shall be the sole and exclusive forum. Any person or entity purchasing
or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the
forum provisions in our amended and restated certificate of incorporation. If any action the subject matter of which is within the scope
the forum provisions is filed in a court other than a court located within the State of Delaware (a “foreign action”) in the
name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal
courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an
“enforcement action”); and (y) having service of process made upon such stockholder in any such enforcement action by service
upon such stockholder’s counsel in the foreign action as agent for such stockholder.
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 our company or its directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court were to
find this provision of our amended and restated certificate of incorporation inapplicable or unenforceable with respect to one or more
of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions,
which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the
time and resources of our management and board of directors.
Global economic, political
and market conditions may adversely affect our business and our ability an attractive target business with which to consummate our initial
business combination.
Various
social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, including rising trade
tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the U.S. and foreign, trade,
economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes,
tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration
in the U.S. and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility, could adversely
affect global economic, political and market conditions and our ability to attract target businesses with which to consummate our initial
business combination. In response to the conflict between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other
restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental
actions, could have a material adverse effect on our business, and could cause the market value of our securities to decline. These market
and economic disruptions could also negatively impact our ability to identify and evaluate target businesses, perform business due diligence
on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their
representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate
and complete a business combination.
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.
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 continuing coronavirus (COVID-19) pandemic.
A
continued or resurgence of COVID-19 outbreaks 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 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 new variants and their severity and the actions to contain COVID-19 variants or treat its
impact, among others. If the disruptions posed by COVID-19 or other matters of global concern change or 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.
Although
we fully intend to effect our Initial Business Combination with a company in the United States, if we effect our Initial Business Combination
with a company located outside of the United States, we would be subject to a variety of additional risks that may adversely affect us.
Although
we fully intend to effect our Initial Business Combination with a company in the United States, if we pursue a target company with operations
or opportunities outside of the United States for our Initial Business Combination, we may face additional burdens in connection with
investigating, agreeing to and completing such Initial Business Combination, and if we effect such Initial Business Combination, we would
be subject to a variety of additional risks that may negatively impact our operations.
If
we pursue a target a company with operations or opportunities outside of the United States for our Initial Business Combination, we would
be subject to risks associated with cross-border business combinations, including in connection with investigating, agreeing to and completing
our Initial Business Combination, conducting due diligence in a foreign jurisdiction, having such transaction approved by any local governments,
regulators or agencies and changes in the purchase price based on fluctuations in foreign exchange rates.
If
we effect our Initial Business Combination with such a company, we would be subject to any special considerations or risks associated
with companies operating in an international setting, including any of the following:
| § | costs and difficulties
inherent in managing cross-border business operations; |
| § | rules and regulations
regarding currency redemption; |
| § | complex corporate
withholding taxes on individuals; |
| § | laws governing
the manner in which future business combinations may be effected; |
| § | exchange listing
and/or delisting requirements; |
| § | tariffs and
trade barriers; |
| § | regulations
related to customs and import/export matters; |
| § | local or regional
economic policies and market conditions; |
| § | unexpected changes
in regulatory requirements; |
| § | challenges in
managing and staffing international operations; |
| § | tax issues,
such as tax law changes and variations in tax laws as compared to the United States; |
| § | currency fluctuations
and exchange controls; |
| § | challenges in
collecting accounts receivable; |
| § | cultural and
language differences; |
| § | underdeveloped
or unpredictable legal or regulatory systems; |
| § | protection of
intellectual property; |
| § | social unrest,
crime, strikes, riots and civil disturbances; |
| § | regime changes
and political upheaval; |
| § | terrorist attacks
and wars; and |
| § | deterioration
of political relations with the United States. |
We
may not be able to adequately address these additional risks. If we were unable to do so, we may be unable to complete such Initial Business
Combination, or, if we complete such Initial Business Combination, our operations might suffer, either of which may adversely impact our
business, financial condition and results of operations.
There are no assurances that the extension recently
approved by our shareholders to complete a Business Combination before August 9, 2023, will enable us to complete a business combination
or any related financing.
Even though we recently extended
the date in which to complete a business combination until August 9, 2023, subject to four additional monthly deposits of funds by our
Sponsor, we can provide no assurances that the Business Combination will be consummated prior to the extended date. Our ability to consummate
any business combination is dependent on a variety of factors, many of which are beyond our control. We expect to seek shareholder approval
of the Business Combination following the SEC declaring an Form S-4 effective, which includes our preliminary proxy statement and prospectus
for the Business Combination. The Form S-4 has been filed but has not yet been declared effective by the SEC, and we cannot complete the
Business Combination unless the Form S-4 is declared effective. As of the date of this Annual Report, we cannot estimate when the S-4
will be filed, or when and if, the SEC will declare the Form S-4 effective. Additional extensions past the extension date may be required,
which may subject us and our stockholders to additional risks and contingencies that would make it more challenging for us to complete
the Business Combination or a transaction with an alternative target if we cannot complete the Proposed Business Combination with DarkPulse.
Unless extended, the BCA may be
terminated at any time in accordance with its terms, including by either us or DarkPulse after February 9, 2023 (or monthly thereafter
until August 9, 2023 if extended until then by our Sponsor depositing additional funds to the trust account), and you may not have the
chance to vote on the Business Combination if the BCA is terminated beforehand.
Under the terms of the BCA, DarkPulse
is not required to consummate the Business Combination if we do not have at least $5,000,001 in available cash (including proceeds in
connection with any private placement or any other alternative financing arrangement mutually agreed upon by the parties and prior to
giving effect to the payment of unpaid expenses and liabilities) immediately prior to the consummation of the Business Combination (after
taking into account payments required to satisfy redemptions by the Company’s stockholders) (the “Minimum Cash Condition”).
There can be no assurance that we can meet this Minimum Cash Condition or secure an alternative financing transaction to support the Business
Combination, or that we will find an alternative target if we are unable to consummate the Business Combination with DPLS.
We are required to offer stockholders
the opportunity to redeem shares in connection with any additional extensions, and we will be required to offer stockholders redemption
rights again in connection with any stockholder vote to approve the Business Combination. Even if such extension or the Business Combination
are approved by our stockholders, it is possible that redemptions will leave us with insufficient cash to meet the Minimum Cash Condition
or to consummate the Business Combination on commercially acceptable terms, or at all. The fact that we will have separate redemption
periods in connection with additional extensions and the Business Combination vote could exacerbate these risks. Other than in connection
with a redemption offer or liquidation, our stockholders may be unable to recover their investment except through sales of our shares
on the open market. The price of our shares may be volatile, and there can be no assurance that stockholders will be able to dispose of
our shares at favorable prices, or at all.
The SEC issued proposed rules to regulate special
purpose acquisition companies that, if adopted, may increase our costs and the time needed to complete our initial business combination.
With respect to the regulation
of special purpose acquisition companies like us (“SPACs”), on March 30, 2022, the SEC issued proposed rules (the “SPAC
Rule Proposals”) relating to, among other items, disclosures in business combination transactions involving SPACs and private operating
companies; the condensed financial statement requirements applicable to transactions involving shell companies; the use of projections
by SPACs in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants
in proposed business combination transactions; and to the extent to which SPACs could become subject to regulation under the Investment
Company Act of 1940, as amended (the “Investment Company Act”), including a proposed rule that would provide SPACs a safe
harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition,
business purpose and activities. These rules, if adopted, whether in the form proposed or in a revised form, may increase the costs of
and the time needed to negotiate and complete an initial business combination, and may constrain the circumstances under which we could
complete an initial business combination. Additional extensions past the August 9, 2023 may be required, which may subject us and our
stockholders to additional risks and contingencies that would make it more challenging for us to complete the Business Combination or
a transaction with an alternative target if we cannot complete the Business Combination with DPLS.
If we are deemed to be an investment company
for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would
be severely restricted. As a result, in such circumstances, unless we are able to modify our activities so that we would not be deemed
an investment company, we would expect to abandon our efforts to complete an initial business combination and instead to liquidate the
Company.
As described further above, the
SPAC Rule Proposals relate, among other matters, to the circumstances in which SPACs such as us could potentially be subject to the Investment
Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition
of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria,
including a limited time period to announce and complete a de-SPAC transaction. Specifically, to comply with the safe harbor, the SPAC
Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company
for a business combination no later than 22 months after the effective date of its registration statement for its initial public offering
(the “IPO Registration Statement”). The Company would then be required to complete our Initial Business combination no later
than 24 months after the effective date of the IPO Registration Statement.
Because the SPAC Rule Proposals
have not yet been adopted, there is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC, including
a company like ours, which may not complete its business combination within 24 months after the effective date of the IPO Registration
Statement. There are no assurances that the Extension will enable us to complete a business combination within 24 months. Given possible
delays, possible amendments to the BCA, and potential restructuring of the Business Combination, we may seek a further extension, past
the Extension Date, to a date beyond 24 months after the effective date of the IPO Registration Statement. As a result, it is possible
that a claim could be made that we have been operating as an unregistered investment company.
If we are deemed to be an investment
company under the Investment Company Act, our activities would be severely restricted. In addition, we would be subject to burdensome
compliance requirements. We do not believe that our principal activities will subject us to regulation as an investment company under
the Investment Company Act. However, if we are deemed to be an investment company and subject to compliance with and regulation under
the Investment Company Act, we would be subject to additional regulatory burdens and expenses for which we have not allotted funds. As
a result, unless we are able to modify our activities so that we would not be deemed an investment company, we would expect to abandon
our efforts to complete an initial business combination and instead to liquidate the Company.
To mitigate the risk that we might be deemed
to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the securities
held in the Trust Account and instead to hold the funds in the Trust Account in cash until the earlier of the consummation of our initial
business combination or our liquidation. As a result, following the liquidation of securities in the Trust Account, we would likely receive
minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount our public stockholders would receive
upon any redemption or liquidation of the Company.
The funds in the Trust Account
have, since our initial public offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or
in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the
Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the
subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act,
we may, at any time, and we expect that we will, on or prior to the 24-month anniversary of the effective date of the IPO Registration
Statement, instruct Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account, to liquidate the U.S.
government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account
in cash until the earlier of consummation of our initial business combination or liquidation of the Company. Following such liquidation,
we would likely receive minimal interest, if any, on the funds held in the Trust Account. However, interest previously earned on the funds
held in the Trust Account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result,
any decision to liquidate the securities held in the Trust Account and thereafter to hold all funds in the Trust Account in cash would
reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.
In addition, even prior to the
24-month anniversary of the effective date of the IPO Registration Statement, we may be deemed to be an investment company. The longer
that the funds in the Trust Account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively
in such securities, even prior to the 24-month anniversary, the greater the risk that we may be considered an unregistered investment
company, in which case we may be required to liquidate the Company. Accordingly, we may determine, in our discretion, to liquidate the
securities held in the Trust Account at any time, even prior to the 24-month anniversary, and instead hold all funds in the Trust Account
in cash, which would further reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the
Company.
Since the Sponsor will lose its entire investment
in us if an initial business combination is not completed, and since the Sponsor is also the target in the acquisition, it may have a
conflict of interest in the approval of the proposals at the Special Meeting.
There will be no distribution
from the Trust Account with respect to the Company’s warrants and convertible working capital loan and note issued to its Sponsor,
which will expire worthless in the event of our winding up. In the event of a liquidation, our Sponsor will not receive any monies held
in the Trust Account as a result of its ownership of 2,623,120 shares of Class B Common Stock and 4,298,496 Private Placement Warrants,
each of which is exercisable to purchase one share of Class A common stock that were purchased from the previous sponsor of the Company
on October 12, 2022. As a consequence, a liquidating distribution will be made only with respect to the public shares.
The Sponsor is also the target
for acquisition by our company as a result of the BCA. We are not prohibited from pursuing a business combination with a business that
is our Sponsor, or affiliated with our Sponsor, officers or directors. The Sponsor, as the target, however, may have an interest in completing
the business combination as its shareholders stand to benefit from the merger consideration as well seeing that the equity it owns in
our company, and the deposits made to the Trust Account, including recently to extend the date of the business combination to February
9, 2023, are put to use in the business combination, and not liquidated in a winding up of our company.
In addition, our Principal Executive
Officer and Chief Financial Officer, before becoming an officer for our company, worked for the Sponsor as a financial consultant and
was paid a monthly salary. In light of these concerns, we have obtained an opinion from an independent investment banking firm that is
a member of the Financial Industry Regulatory Authority, or FINRA, that our business combination is fair to our unaffiliated shareholders
from a financial point of view. Despite this, the personal and financial interests of our Sponsor may have influenced its motivation in
identifying and selecting the Sponsor as target for its target business combination and consummating the Business Combination in order
to close the Business Combination and therefore may have interests different from, or in addition to, your interests as a stockholder
in connection with the proposals at the Special Meeting.
A 1% U.S. federal excise tax may be imposed
on us in connection with our redemptions of shares in connection with the Business Combination or other stockholder vote pursuant to which
stockholders would have a right to submit their shares for redemption (a “Redemption Event”).
Pursuant to the Inflation Reduction
Act of 2022 (the “IR Act”), commencing in 2023, a 1% U.S. federal excise tax is imposed on certain repurchases (including
redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign
corporations. The excise tax is imposed on the repurchasing corporation and not on its stockholders. The amount of the excise tax is equal
to 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. The U.S. Department of the Treasury (the “Treasury Department”) has authority
to promulgate regulations and provide other guidance regarding the excise tax. In December 2022, the Treasury Department issued Notice
2023-2, indicating its intention to propose such regulations and issuing certain interim rules on which taxpayers may rely (the “Notice”).
Under the interim rules, liquidating distributions made by publicly traded domestic corporations are exempt from the excise tax. In addition,
any redemptions that occur in the same taxable year as a liquidation is completed will also be exempt from such tax. Accordingly, redemptions
of our public shares in connection with the Extension may subject us to the excise tax, unless one of the two exceptions above apply.
Redemptions would only occur if the Extension Amendment Proposal is approved by our stockholders and the Extension is implemented by the
Board.
If the deadline for us to complete
a Business Combination is extended beyond August 9, 2023, our public stockholders will have the right to require us to redeem their public
shares. Any redemption, such as the redemptions that took place in January 2023, or other repurchase may be subject to the excise tax.
The extent to which we would be subject to the excise tax in connection with a Redemption Event would depend on a number of factors, including:
(i) the fair market value of the redemptions and repurchases in connection with the Redemption Event, (ii) the nature and amount of any
“PIPE” or other equity issuances in connection with the Business Combination (or otherwise issued not in connection with the
Redemption Event but issued within the same taxable year of the Business Combination), (iii) if we fail to timely consummate a Business
Combination and liquidate in a taxable year following a Redemption Event and (iv) the content of any proposed or final regulations and
other guidance from the Treasury Department. In addition, because the excise tax would be payable by us and not by the redeeming holders,
the mechanics of any required payment of the excise tax remains to be determined. Any excise tax payable by us in connection with a Redemption
Event may cause a reduction in the cash available to us to complete a Business Combination and could affect our ability to complete a
Business Combination.
Were we considered to be a “foreign person,”
we might not be able to complete an initial Business Combination with a U.S. target company if such initial business combination is subject
to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee on Foreign Investment in the United
States (“CFIUS”), or ultimately prohibited.
Certain federally licensed businesses
in the United States, such as broadcasters and airlines, may be subject to rules or regulations that limit foreign ownership. In addition,
CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign
persons in order to determine the effect of such transactions on the national security of the United States. Were we considered to be
a “foreign person” under such rules and regulations, any proposed Business Combination between us and a U.S. business engaged
in a regulated industry or which may affect national security could be subject to such foreign ownership restrictions and/or CFIUS review.
The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain
non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S.
business.
FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings.
If our potential initial Business Combination with a U.S. business falls within the scope of foreign ownership restrictions, we may be
unable to consummate an initial Business Combination with such business. In addition, if our potential Business Combination falls within
CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed
with the initial Business Combination without notifying CFIUS and risk CFIUS intervention, before or after closing the initial Business
Combination. Our Sponsor is a U.S. entity, and the officers and directors of our Sponsor are U.S. persons save one director who is Canadian.
Our sponsor is not controlled by and does not have substantial ties with a non-U.S. person. However, if CFIUS has jurisdiction over our
initial Business Combination, CFIUS may decide to block or delay our initial business combination, impose conditions to mitigate national
security concerns with respect to such initial Business Combination or order us to divest all or a portion of a U.S. business of the combined
company if we had proceeded without first obtaining CFIUS clearance. If we were considered to be a “foreign person,” foreign
ownership limitations, and the potential impact of CFIUS, may limit the attractiveness of a transaction with us or prevent us from pursuing
certain initial business combination opportunities that we believe would otherwise be beneficial to us and our shareholders. As a result,
in such circumstances, the pool of potential targets with which we could complete an initial Business Combination could be limited and
we may be adversely affected in terms of competing with other SPACs which do not have similar foreign ownership issues.
Moreover, the process of government
review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial Business Combination,
our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public
shareholders may only receive the value in the trust account, and our warrants will expire worthless. This will also cause you to lose
any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price
appreciation in the combined company.
Our search for a business
combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected
by negative impacts on the global economy, capital markets or other geopolitical conditions resulting from the recent invasion of Ukraine
by Russia and subsequent sanctions against Russia, Belarus and related individuals and entities.
United States
and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the recent invasion
of Ukraine by Russia in February 2022. In response to such invasion, the North Atlantic Treaty Organization (“NATO”) deployed
additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced
various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain
financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Certain countries,
including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine during the ongoing
military conflict, increasing geopolitical tensions with Russia. The invasion of Ukraine by Russia and the resulting measures that have
been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union and other countries have
created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of
the ongoing military conflict in Ukraine is highly unpredictable, the conflict could lead to market disruptions, including significant
volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. Additionally, Russian military actions
and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity
in capital markets.
Any of the
abovementioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting
from the Russian invasion of Ukraine and subsequent sanctions, could adversely affect our search for a business combination, particularly
in Europe since that region includes Russia, and any target business with which we ultimately consummate a business combination, although
we are not seeking a target business in Russia. The extent and duration of the Russian invasion of Ukraine, resulting sanctions and any
related market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for
an extended period of time or if geopolitical tensions result in expanded military operations on a global scale. Any such disruptions
may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those related
to the market for our securities, cross-border transactions or our ability to raise equity or debt financing in connection with any particular
business combination. If these disruptions 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.