Item
1. Business.
In
this Annual Report on Form 10-K (the “Form 10-K”), references to the “Company” and to “we,” “us,”
“our” and refer to Pono Capital Corp.
Overview
We
are a blank check company incorporated in Delaware on February 12, 2021. The Company was 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
(the “Business Combination”). We are an emerging growth company and, as such, we are subject to all of the risks associated
with emerging growth companies.
Our
management team is led by our Chief Executive Officer, Dustin Shindo, who brings more than 25 years of experience as an entrepreneur
including a previous IPO on the NASDAQ, serving as a public company CEO, and having completed numerous business deals in the countries
of eastern and southeastern Asia. Mr. Shindo also serves as the CEO of Junify Corporation, a private company delivering cloud access
security services via the SaaS model. We believe our management team’s extensive
technology M&A and public company operating expertise will help us identify an exceptional market leading player benefiting from
significant growth and accelerating adoption of technology solutions in our target sectors.
The
Company’s sponsor is Mehana Equity LLC, a Delaware limited liability company (the “Sponsor”). The registration statement
for the Company’s Initial Public Offering was declared effective on August 10, 2021. On August 13, 2021, the Company consummated
its Initial Public Offering of 10,000,000 units (the “Units” and, with respect to the Class A common stock included in the
Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $100,000,000 (see Note 6) (the
“Initial Public Offering”). The Company granted the underwriter a 45-day option to purchase up to an additional 1,500,000
Units at the Initial Public Offering price to cover over-allotments, if any.
Simultaneously
with the consummation of the closing of the Offering, the Company consummated the private placement of an aggregate of 469,175 units
(the “Placement Units”) to the Sponsor at a price of $10.00 per Placement Unit, generating total gross proceeds of $4,691,750
(the “Private Placement”).
On August 18, 2021,
the underwriters exercised the over-allotment option in full, and the closing of the issuance and sale of the additional Units occurred
(the “Over-allotment Option Units”). The total aggregate issuance by the Company of 1,500,000 units at a price of $10.00
per unit resulted in total gross proceeds of $15,000,000. On August 18, 2021, simultaneously with the sale of the Over-allotment Option
Units, the Company consummated the private sale of an additional 52,500 Placement Units, generating gross proceeds of $525,000. The Placement
Units were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions did not involve a public
offering.
A
total of $116,725,000, comprised of the proceeds from the Offering and the proceeds of private placements that closed on August 13, 2021
and August 18, 2021, net of the underwriting commissions, discounts, and offering expenses, was deposited in a trust account established
for the benefit of the Company’s public stockholders.
On
October 8, 2021, the Class A ordinary shares and Public Warrant included in the Units began separate trading.
Proposed
Transaction
On
March 17, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Pono, Pono
Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Pono (“Merger Sub”), Benuvia, Inc., a Delaware
corporation (“Benuvia”), Mehana Equity, LLC, in its capacity as Purchaser Representative, and Shannon Soqui, in his
capacity as Seller Representative.
Pursuant
to the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement (the “Closing”),
Merger Sub will merge with and into Benuvia, with Benuvia continuing as the surviving corporation (the “Surviving Corporation”).
Merger
Consideration
As
consideration for the Merger, the holders of Benuvia securities collectively shall be entitled to receive from us, in the aggregate,
a number of our securities with an aggregate value equal to (the “Merger Consideration”) (a) Four Hundred Million
U.S. Dollars ($400,000,000) minus (b) the amount by which the aggregate amount of any outstanding indebtedness (minus cash held by Benuvia)
of Benuvia at Closing (the “Closing Net Indebtedness”) exceeds Forty Million Dollars ($40,000,000), and minus (c)
the value of the options of Benuvia held by employees and consultants that are vested at the Closing that are assumed by us (“Vested
Options”), with each Benuvia stockholder receiving, for each share of Benuvia common stock held, a number of shares of our
common stock equal to (i) the Per Share Price, divided by (ii) $10.00 (the total portion of the Merger Consideration amount payable to
all Benuvia Stockholders in accordance with the Merger Agreement is also referred to herein as the “Stockholder Merger Consideration”)
The
Merger Consideration otherwise payable to Benuvia stockholders is subject to the withholding of two escrows: (i) a number of shares of
our common stock equal to five percent (5.0%) of the Merger Consideration to be placed in escrow for post-closing adjustments (if any)
to the Merger Consideration and (ii) a number of shares mutually agreeable between Benuvia and us not to exceed twenty percent (20.0%)
of the Merger Consideration (the “Price Protection Escrow Amount”) to be held for downside protection for non-redeeming
stockholders following Closing.
The
Merger Consideration is subject to adjustment after the Closing based on confirmed amounts of the Closing Net Indebtedness of Benuvia
as of the Closing Date. If the adjustment is a negative adjustment in favor of us, the escrow agent shall distribute to us a number of
shares of our common stock with a value equal to the absolute value of the adjustment amount. If the adjustment is a positive adjustment
in favor of Benuvia, we will issue to the Benuvia stockholders an additional number of shares of our common stock with a value equal
to the adjustment amount.
The
Business Combination Agreement and related agreements are further described in our Current Report on Form 8-K filed with the SEC on March
18, 2022.
Other
than as specifically discussed, this Annual Report on Form 10-K does not assume the closing of the Business Combination or the transactions
contemplated by the Business Combination Agreement.
Our
Business Strategy
We
will seek to capitalize on the significant relationships of Mr. Shindo, Mr. Chiba and Mr. Iwamura, along with
other members of our management team, to identify, evaluate and acquire high growth technology and tech-enabled businesses domestically
and abroad in the enterprise security and operations applications, cloud-based content and digital streaming services, as well as other
industries which are being disrupted by advances in technology and on technology paradigms including drone technology and service, AI
companies, consumer healthcare and wellness, biomedical technology, entertainment/gaming companies, online retail and distance learning
industries. If we elect to pursue an investment outside of those industries, our management’s expertise related to those industries
may not be directly applicable to its evaluation or operation, and the information contained in the registration statement regarding
that industry might not be relevant to an understanding of the business that we elect to acquire.
Our
business strategy is to identify and complete our initial business combination with a company that can benefit from (i) the managerial
and operational experience of our management team, (ii) additional capital and (iii) access to public securities markets. We plan to
leverage our management team’s network of potential proprietary and public transaction sources where we believe a combination of
our relationships, knowledge and experience in the technology sector could effect a positive transformation or augmentation of existing
businesses to improve their overall value.
The
company’s focus is on emerging growth technology companies that are well positioned for the changes in how businesses operate or
how and what consumers buy. These changes have accelerated over the past year. Industries that fit this well, include but are not limited
to, enterprise security and operations applications, cloud-based content and digital streaming services, drone technology and service,
AI companies, consumer healthcare and wellness, biomedical technology, entertainment/gaming companies, distance learning, online retail
and e-sports companies. We believe that the way businesses and consumers operate, make decisions, and spend has forever been changed
because of the pandemic. These changes have accelerated an already growing digital transformation trend in businesses and reshaped consumer
behavior. In particular, we have seen significant changes to distributed work, entertainment, and services that push value points from
physical locations to more distant endpoints, most often homes.
Apart
from our exclusion from consideration of any potential target businesses in China and Hong Kong, there is no geographic limitation to
the location of potential targets, as these types of opportunities are not necessarily bound by geography.
We
believe and already have relationships with a large pool of quality initial business combination targets looking for an opportunity to
create liquidity for current investors and currency to acquire other companies. Further, we believe
that the management team and board members’ extensive background, careers, reputations, and relationships in cross border business
experience gives us the insight and position to identify the ideal targets for a business combination that creates long-term opportunity
and value growth and to complete the business combination.
Our
Acquisition Criteria
Our
acquisition philosophy is rooted in several core tenets, consistent with those that have been utilized in the past by members of our
management team as they have evaluated investment opportunities:
●
Large and Growing Addressable Market: Our management team will prioritize investing in large and growing industries that are poised for
disruption by new technologies. We look for both large problems amenable to technology solutions as well as businesses able to scale
to meet the market.
●
Proprietary Technology Advantage: We seek businesses protected by proprietary technology advantages, especially scientific breakthroughs
and intellectual property. We believe that significant technology innovation provides for years of durable, compounding growth and expanding
margins.
●
Scaling Business with Compelling Growth Opportunity: While we are primarily focused on the topline growth potential, we will seek to
acquire a company which has achieved sufficient technology and business maturity while still maintaining significant runway to capture
share in a large addressable market. We look for favorable secular trends and attractive unit economics which can be further enhanced
as the business grows.
●
World Class Management Teams: We seek to partner with creative and ambitious management teams that have a track record of success to
help them execute their vision.
Our
Acquisition Process
In
evaluating a potential target business, we expect to conduct a comprehensive due diligence review to seek to determine a company’s
quality and its intrinsic value. That due diligence review may include, among other things, financial statement analysis, detailed document
reviews, technology diligence, multiple meetings with management, consultations with relevant industry and academic experts, competitors,
customers and suppliers, as well as a review of additional information that we will seek to obtain as part of our analysis of a target
company.
We
expect to place significant emphasis on a business combination target’s technology and intellectual property as part of our acquisition
evaluation process, consistent with the investment approach of our management team. This due diligence may include the engagement of
multiple technical experts across both industry and academia to review the technology, participation in joint due diligence meetings
with these technical experts and management, as well as detailed intellectual property due diligence, to determine the nature and quality
of a company’s technology innovation.
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 directors, will obtain an opinion from either an independent investment banking firm that is a member
of the Financial Industry Regulatory Authority (“FINRA”) or an independent accounting firm that our initial business combination
is fair to our company from a financial point of view. Furthermore, in the event that we seek such a business combination, we expect
that the independent members of our board of directors would be involved in the process for considering and approving the transaction.
Members
of our management team, including our officers and directors, directly or indirectly own our securities following the IPO and,
accordingly, may have a conflict of interest in determining whether a particular target company is an appropriate business with which
to effectuate our initial business combination. Each of our officers and directors, as well as our management team, may have a conflict
of interest with respect to evaluating a particular business combination, including if the retention or resignation of any such
officers, directors, and management team members was included by a target business as a condition to any agreement with respect to such
business combination.
Each
of our directors, director nominees and officers 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.
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 or contractual obligations, he or she will honor his or her fiduciary or contractual obligations
to present such opportunity to such entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers
or directors will materially affect our ability to identify and pursue business combination opportunities or complete our initial business
combination.
Our
third amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity
offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director
or officer of our company, and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be
reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating
another legal obligation.
Our
founder, sponsor, officers, and directors may sponsor, form or participate in other blank check companies similar to ours during the
period in which we are seeking an initial business combination and their respective participation in any such companies may present additional
conflicts of interest in respect of determining to which such company a particular business combination opportunity should be presented,
particularly in the event there is overlap among the investment mandates of such companies. Additionally, one of our directors, Dr. Wuh,
has previously invested in two blank check companies, Blueprint Health Merger Corp. and Benessere Capital Acquisition Corp. Dr. Wuh’s
investments were made on a passive basis and accordingly, he has no fiduciary duty or any contractual obligation to present business
opportunities to these companies. Thus, we do not believe Dr. Wuh’s investments in these two companies, would affect our ability
to identify and pursue business opportunities or complete our initial business combination.
Moreover,
because our management team has significant experience in identifying and executing multiple acquisition opportunities simultaneously
and we are not limited by industry or geography in terms of the acquisition opportunities we can pursue, except with respect to our prohibition
from seeking target acquisitions in China and Hong Kong. In addition, our founder, sponsor, officers, and directors are not required
to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating management time
among various business activities, including identifying potential business combinations and monitoring the related due diligence.
Initial
Business Combination
Nasdaq
rules require that we complete one or more initial 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 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 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
anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares
will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target
business for the post-acquisition company to meet certain objectives of the target management team or stockholders or for other reasons,
but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires an interest in the target or assets sufficient for it not to be required to register as
an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act of 1940, as amended.
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 valued for purposes of the 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 target businesses and we will treat the target businesses together as the initial business combination for the purposes
of a tender offer or for seeking stockholder approval, as applicable.
The
net proceeds of the IPO and the sale of the placement units released to us from the trust account upon the closing of our initial
business combination may be used as consideration to pay the sellers of a target business with which we complete our initial business
combination. 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 redemption of
our public shares, we may use the balance of the cash released to us from the trust account following the closing 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, to fund the purchase of other companies or for working capital.
In addition, we may be required to obtain additional financing in connection with the closing of our initial business combination to
be used following the closing for general corporate purposes as described above.
There
is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances
or other indebtedness in connection with our initial business combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of 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. None of our sponsors, officers, directors or stockholders is required to provide any financing to us in connection with
or after our initial business combination. We may also obtain financing prior to the closing of our initial business combination to fund
our working capital needs and transaction costs in connection with our search for and completion of our initial business combination.
Our
third amended and restated certificate of incorporation provides that, following the IPO and prior to the consummation
of our initial business combination, we will be prohibited from issuing additional securities that would entitle the holders thereof
to (i) receive funds from the trust account; or (ii) vote as a class with our public shares: (a) on any initial business combination,
or (b) to approve an amendment to our third amended and restated certificate of incorporation to: (x) extend the time we have
to consummate a business combination from the closing of the IPO, or (y) amend the foregoing provisions, unless (in connection
with any such amendment to our third amended and restated certificate of incorporation) we offer our public stockholders the opportunity
to redeem their public shares.
Status
as a Public Company
We
believe our structure will make us an attractive business combination partner to target businesses. As an existing public company, we
offer a target business an alternative to the traditional initial public offering through a merger or other business combination with
us. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock,
shares or other equity interests in the target business for our Class A common stock (or shares of a new holding company) or for a combination
of our Class A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. 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, that may not be present to the same extent in connection with a business combination with us.
Furthermore,
once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public
offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could
delay or prevent the offering from occurring or could have negative valuation consequences. Once public, we believe the target business
would then have greater access to capital, 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.
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 the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation
pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value
of our Class A common stock that is held by non-affiliates equals or exceeds $700.0 million as of the prior June 30th, and (2) the date
on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our Class
A common stock held by non-affiliates did not equal or exceed $250.0 million as of the prior June 30, or (2) our annual revenues did
not exceed $100.0 million during such completed fiscal year and the market value of our Class A common stock held by non-affiliates did
not equal or exceed $700.0 million as of the prior June 30.
Financial
Position
With funds available for an initial business combination initially in the
amount of $113,275,000 after payment of $3,450,000 of deferred underwriting fees, before fees and expenses associated with our initial
business combination (other than deferred underwriting fees), we offer a target business a variety of options such as creating a liquidity
event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by
reducing its debt 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 following the Initial Public Offering. We
intend to effectuate our initial business combination using cash from the proceeds of the IPO, the private placements of the placement
units, our equity, debt or a combination of these as the consideration to be paid in our initial business combination. We may seek to
complete our initial business combination with a company or business that may be financially unstable or in its early stages of development
or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If
our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account
are used for payment of the consideration in connection with our 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 need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash
than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public
shares upon completion of the initial business combination, in which case we may issue additional securities or incur debt in connection
with such business combination. There are no prohibitions on our ability to issue securities or incur debt in connection with our initial
business combination. We are not currently a party to any arrangement or understanding with any third party with respect to raising any
additional funds through the sale of securities, the incurrence of debt or otherwise.
Sources
of Target Businesses
Our
process of identifying acquisition targets will leverage our sponsor and our management team’s industry experiences, proven deal
sourcing capabilities and broad and deep network of relationships in numerous industries, including executives and management teams,
private equity groups and other institutional investors, large business enterprises, lenders, investment bankers and other investment
market participants, restructuring advisers, consultants, attorneys and accountants, which we believe should provide us with a number
of business combination opportunities. We expect that the collective experience, capability and network of our sponsor, our directors
and officers, combined with their individual and collective reputations in the investment community, will help to create prospective
business combination opportunities.
In
addition, we anticipate that target business candidates may be brought to our attention from various unaffiliated sources, including
investment bankers and private investment funds. Target businesses may be brought to our attention by such unaffiliated sources as a
result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think
we may be interested on an unsolicited basis, since many of these sources will have read the prospectus and know what types of businesses
we are targeting. Our officers and directors, as well as their respective affiliates, may also bring to our attention target business
candidates of which they become aware through their business contacts as a result of formal or informal inquiries or discussions they
may have, as well as attending trade shows or conventions.
We
also expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result
of the business relationships of our officers and directors. 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 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, or any entity with which they are affiliated, be paid any finder’s
fee, consulting fee or other compensation by the company prior to, or for any services they render in order to effectuate, the completion
of our initial business combination (regardless of the type of transaction that it is). 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 acquisition of such target by us.
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 directors, will obtain an opinion from either an independent investment banking firm that is a member
of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view.
Furthermore, in the event that we seek such a business combination, we expect that the independent members of our board of directors
would be involved in the process for considering and approving the transaction.
Each
of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations
to other entities, including entities that are affiliates of our sponsor, pursuant to which such officer or director is or will be required
to present a business combination opportunity to such entity. 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 or contractual obligations, he
or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject
to their fiduciary duties under Delaware law.
Evaluation
of a Target Business and Structuring of our Initial Business Combination
Nasdaq
rules require that we consummate an initial business combination with one or more operating businesses or assets with a fair market value
equal to at least 80% of the net assets held in the trust account (net of amounts disbursed to management for working capital purposes,
if permitted, and excluding the amount of any deferred underwriting commissions). 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 (including with the assistance of financial advisors), 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 have virtually 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 operation.
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
valued for purposes of the 80% of fair market value test.
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 as described in more detail in our Registration Statement.
In
evaluating a prospective target business, we expect to conduct a thorough due diligence review, which will 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, operational, legal and other information which will be made available to us. If we determine to move
forward with a particular target, we will proceed to structure and negotiate the terms of the initial business combination transaction.
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, and negotiation with, 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. The company
will not pay any consulting fees to members of our management team, or any of their respective affiliates, for services rendered to or
in connection with our initial 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. By completing our initial business combination with only a single entity, our lack of
diversification may:
● subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination; and
●
cause us to depend on the marketing and sale of a single product or limited number of products or services.
Limited
Ability to Evaluate the Target’s Management Team
Although
we 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’s 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 a 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 subject to the provisions of our
third amended and restated certificate of incorporation. However, we will seek stockholder approval if it is required by law or
applicable stock exchange rule, or we may decide to seek stockholder approval for business or other reasons.
Under
Nasdaq’s listing rules, stockholder approval would be required for our initial business combination if, for example:
●
we issue shares of common stock that will be equal to or in excess of 20% of the number of our shares of common stock then outstanding
(other than in a public offering);
● any of our directors, officers or substantial stockholders (as defined by the 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
decision as to whether we will seek stockholder approval of a proposed business combination in those instances in which stockholder approval
is not required by law will be made by us, solely in our discretion, and will be based on business and legal reasons, which include a
variety of factors, including, but not limited to:
● the timing of the transaction, including in the event we determine stockholder approval would require additional time and there is either not enough time to seek stockholder approval or doing so would place the company at a disadvantage in the transaction or result in other additional burdens on the company;
●
the expected cost of holding a stockholder vote;
●
the risk that the stockholders would fail to approve the proposed business combination;
●
other time and budget constraints of the company; and
●
additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.
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 sponsor, 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 or warrants our initial stockholders, directors,
officers, advisors 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 non-public 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.
Subsequent
to the consummation of the Initial Public Offering, we have adopted an insider trading policy which requires insiders to: (i) refrain from purchasing
our securities during certain blackout periods when they are in possession of any material non-public information and (ii) clear all
trades of company securities with a compliance officer prior to execution. We cannot currently determine whether our insiders will make
such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing
and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan
or determine that such a plan is not necessary.
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 any of 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 tendered by stockholders following our mailing of proxy materials in connection with our initial
business combination. To the extent that our sponsor, officers, directors, advisors or their affiliates enter into a private purchase,
they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro
rata share of the trust account or vote against our initial business combination, whether or not such stockholder has already submitted
a proxy with respect to our initial business combination. Such persons would select the stockholders from whom to acquire shares based
on the number of shares available, the negotiated price per share and such other factors as any such person may deem relevant at the
time of purchase. The price per share paid in any such transaction may be different than the amount per share a public stockholder would
receive if it elected to redeem its shares in connection with our initial business combination. Our sponsor, officers, directors, advisors
or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal
securities laws.
Any
purchases by our sponsor, officers, directors and/or their respective affiliates who are affiliated purchasers under Rule 10b-18 under
the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor
from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements
that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their
respective affiliates will not make purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange
Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are
subject to such reporting requirements.
Redemption
Rights for Public Stockholders upon Completion of our Initial Business Combination
We
will provide our public stockholders with the opportunity to redeem all or a portion of their 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 calculated as of two business days prior to the completion 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, if any, divided by the number of then outstanding
public shares, subject to the limitations described herein. The amount in the trust account is initially $10.15 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by
the deferred underwriting commissions we will pay to the underwriters.
The
redemption rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares.
Our sponsor, directors and each member of our management have entered into a letter agreement with us, pursuant to which they have
agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with (i)
the completion of our initial business combination and (ii) a stockholder vote to approve an amendment to our third amended and
restated certificate of incorporation that would affect the substance or timing of our obligation to allow redemption in connection
with our initial business combination or to redeem 100% of our public shares if we have not completed an initial business
combination within the period to consummate the initial business combination. However, we will only redeem our public shares so long
as (after such redemption) 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 deferred 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. There will be no redemption rights or liquidating
distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination
within the 18-month time period.
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 approximately $750,000 of 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
taxes on interest income earned on the trust account balance, we may request the trustee to release to us an additional amount of up
to $70,000 of such accrued interest to pay taxes, and these costs and expenses.
Limitations
on Redemptions
Our
third amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that
would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny
stock” rules). However, the proposed business combination may require: (i) cash consideration to be paid to the target or its
owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of
cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash
consideration we would be required to pay for all 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 initial business combination or redeem any shares, and all Class A common stock submitted
for redemption will be returned to the holders thereof.
Manner
of Conducting Redemptions
We
will provide our public stockholders with the opportunity to redeem all or a portion of their public shares 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 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
applicable law or stock exchange listing requirement or whether we were deemed to be a foreign private issuer (which would require a
tender offer rather than seeking stockholder approval under SEC rules). Asset acquisitions and share 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 shares of outstanding common stock or seek to amend our third amended and restated certificate of incorporation
would require stockholder approval. We currently intend to conduct redemptions in connection with a stockholder vote unless
stockholder approval is not required by applicable law or stock exchange listing requirement and we choose to conduct redemptions
pursuant to the tender offer rules of the SEC for business or other reasons. So long as we obtain and maintain a listing for our
securities on Nasdaq, we will be required to comply with Nasdaq rules.
If
we held a stockholder vote to approve our initial business combination, we will, pursuant to our third amended and restated
certificate of incorporation:
●
conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the
solicitation of proxies, and not pursuant to the tender offer rules; and
●
file proxy materials with the SEC.
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 voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the holder 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 towards this quorum and, pursuant
to the terms of a letter agreement entered into with us, our sponsor and members of our management team have agreed to vote their founder
shares and any public shares purchased during or after the IPO, 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. Additionally, each public stockholder may elect to redeem its public shares irrespective
of whether they vote for or against the proposed transaction.
These
quorums and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will complete
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 or whether they were a stockholder on the record date for the stockholder meeting held to
approve the proposed transaction. In addition, our sponsor, directors and each member of our management, have entered into a letter
agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any
public shares held by them in connection with (i) the completion of a business combination and (ii) a stockholder vote to approve an
amendment to our third amended and restated certificate of incorporation that would affect the substance or timing of our obligation
to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we have not
completed an initial business combination within the period to consummate the initial business combination.
If,
however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain
stockholder approval for business or other reasons, we will, pursuant to our third 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 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, the tender offer will be conditioned on
public stockholders not tendering more than the number of public shares we are permitted to redeem. If public stockholders tender more
shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
Our
third amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount
that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny
stock” rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement
pursuant to an agreement relating to our initial business combination. For example, the proposed business combination may require:
(i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or
other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the
proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of our 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 initial business
combination or redeem any shares, and all shares of our 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 third amended and restated certificate of
incorporation will provide 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 the Excess Shares. We believe this restriction will discourage
stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise
their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares at
a significant premium to the then-current market price or on other undesirable terms.
Absent
this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in the IPO could threaten to exercise
its redemption rights if such holder’s shares are not purchased by us, our sponsor or our management at a premium to the then-current
market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold
in the IPO 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 a business combination with a target
that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, 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 a Tender Offer or Redemption Rights
Public
stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,”
will be required to either tender their certificates (if any) to our transfer agent prior to the date set forth in the proxy solicitation
or tender offer materials, as applicable, mailed to such holders, 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, in each case up to
two business days prior to the initially scheduled vote to approve the initial business combination. The proxy solicitation or tender
offer materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination
will indicate the applicable delivery requirements, which will include the requirement that a beneficial holder must identify itself
in order to validly redeem its shares. Accordingly, a public stockholder would have from the time we send out our tender offer materials
until the close of the tender offer period, or up to two days prior to the initial vote on the initial business combination if we distribute
proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short
period in which to exercise redemption rights, 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 a fee of approximately $80.00 and it would be up to the
broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not
we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising
redemption rights regardless of the timing of when such delivery must be effectuated.
The
foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with
their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial
business combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating
such holder was seeking to exercise his or her redemption rights. After the 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 shares 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 general 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 stockholder’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 two business days prior to the vote on the proposal to approve
the initial business combination, unless otherwise agreed to by us. 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 business combination is not completed, we may continue to try to complete a business combination with a different target
until 12 months from the closing of the IPO (or up to 18 months from the closing of the IPO at the election of the Company in two
separate three month extensions subject to satisfaction of certain conditions, including the deposit of up to $1,000,000, or
$1,150,000 if the underwriters’ over-allotment option is exercised in full ($0.10 per unit in either case) for each three
month extension, into the trust account, or as extended by the Company’s stockholders in accordance with our third amended and
restated certificate of incorporation).
Redemption
of Public Shares and Liquidation if no Initial Business Combination
Our
third amended and restated certificate of incorporation provides that we have only the period to consummate the initial
business combination to complete an initial business combination. If we have not completed an initial business combination within
the period to consummate the initial business combination, 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, if any (less up to $70,000 of interest to pay taxes
and potentially, dissolution expenses), divided by the number of the then outstanding public shares, which redemption will
completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation
distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Our
sponsor, directors and each member of our management have entered into a letter agreement with us, pursuant to which they have waived
their rights to liquidating distributions from the trust account with respect to their founder shares if we do not complete an initial
business combination within the period to consummate the initial business combination. However, if our sponsor, directors or members
of our management team acquire public shares in or after the IPO, they will be entitled to liquidating distributions from the trust
account with respect to such public shares if we do not complete an initial business combination within the period to consummate the
initial business combination.
Our
sponsor, executive officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any
amendment to our third amended and restated certificate of incorporation that would affect the substance or timing of our obligation
to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete
an initial business combination within the period to consummate the initial business combination, unless we provide our public
stockholders with the opportunity to redeem their public shares 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, if any divided by the number of the then outstanding public shares.
However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (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, we would not proceed
with the amendment or the related redemption of our public shares at such time. This redemption right shall apply in the event of
the approval of any such amendment, whether proposed by our sponsor, any executive officer, director or director nominee, or any
other person.
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 approximately $750,000 of proceeds held outside the trust account plus up to $70,000 of funds
from the interest on the trust account available to us to pay taxes and if needed, dissolution expenses, although we cannot assure you
that there will be sufficient funds for such purpose.
If
we were to expend all of the net proceeds of the IPO, the sale of the placement units, 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 $10.15. 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 $10.15. Under Section 281(b)
of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made
in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of
our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient
to pay or provide for all creditors’ claims.
Although
we will seek to have all vendors, service providers (other than our independent 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, 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.
The
underwriters 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. In order to protect the amounts
held in the trust account, 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 (other than our independent registered public accounting firm), or a prospective target business with
which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i) $10.15
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 $10.15 per unit, due to reductions in the value of the trust assets, in each case net of the interest that may be
withdrawn to pay our taxes, if any, provided that such liability will not apply to any claims by a third party or prospective target
business that executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity
of the underwriters of the 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. 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 their 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. 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 the lesser of (i) $10.15 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 $10.15 per unit, due to
reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, if any, and our
sponsor asserts that they are 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 in any particular instance. 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 $10.15 per unit.
We
will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring
to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses
or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or
to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of
the IPO against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately
$750,000 from the proceeds of the IPO and the sale of the placement units 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 $60,000). 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, however such liability will not be greater than
the amount of funds from our trust account received by any such stockholder. In the event that our offering expenses exceed our estimate
of $441,750, 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 offering expenses
are less than our estimate of $441,750, 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 the period to consummate the initial business combination
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 the period to consummate the initial business combination, 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 do not complete our initial business combination within the period
to consummate the initial business combination, 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 that
may be released to us to pay our taxes, if any (less up to $70,000 of interest to pay taxes and if needed, 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 our remaining stockholders and our board of directors, dissolve and liquidate, subject in each
case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly,
it is our intention to redeem our public shares as soon as reasonably possible following our 24th month and, therefore, we do not intend
to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions
received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because
we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such
time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within
the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be
limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as
lawyers, investment bankers, etc.) or prospective target businesses. 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) $10.15 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 the 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 or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed,
the proceeds held in the trust account could be subject to applicable bankruptcy or insolvency law and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims
deplete the trust account, we cannot assure you we will be able to return $10.15 per unit to our public stockholders. Additionally, if
we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed,
any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy or insolvency laws as either
a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy or insolvency 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, and thereby exposing itself and our company to claims of punitive
damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that
claims will not be brought against us for these reasons.
Our
public stockholders will be entitled to receive funds from the trust account only (i) in the event of the redemption of our public
shares if we do not complete an initial business combination within the period to consummate the initial business combination, (ii)
in connection with a stockholder vote to amend our third 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 to redeem 100% of
our public shares if we do not complete an initial business combination within the period to consummate the initial business
combination or (B) with respect to any other provisions relating to the rights of holders of our Class A common stock, or (iii) if
they redeem their respective shares for cash upon the completion of the initial business combination. Public stockholders who redeem
their shares of our Class A common stock in connection with a stockholder vote described in clause (ii) in the preceding sentence
shall not be entitled to funds from the trust account upon the subsequent completion of an initial business combination or
liquidation if we have not completed an initial business combination within the period to consummate the initial business
combination, with respect to such shares of our Class A common stock so redeemed. 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 described above. These provisions of our third amended and restated certificate of
incorporation, like all provisions of our third amended and restated certificate of incorporation, may be amended with a stockholder
vote.
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, public companies 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 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 three executive officers. These individuals are not obligated to devote any specific number of hours to our matters, but
they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination.
The amount of time they 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.
Periodic
Reporting and Financial Information
We
have registered our Class A common stock and warrants under the Exchange
Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance
with the requirements of the Exchange Act, this annual report contains financial statements audited and reported on by our independent
registered public accounting firm.
We
will provide stockholders with audited financial statements of the prospective target business as part of the proxy solicitation or tender
offer materials, as applicable, sent to stockholders to assist them in assessing the target business. In all likelihood, these financial
statements may be required 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 statement
requirements may limit the pool of potential target businesses we may acquire 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 acquisition candidate
will have financial statements prepared in accordance with the requirements outlined above, 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 acquisition candidates,
we do not believe that this limitation will be material.
We
will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2022, as required by the Sarbanes-Oxley
Act. Only 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 business may not be in compliance with the provisions
of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity
to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
We 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 completion of our initial business combination.
As
discussed above, 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 the Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation
pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value
of our Class A common stock that is held by non-affiliates equals or exceeds $700.0 million as of the prior June 30th, and (2) the date
on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Corporate
Information
Our
executive offices are located at 643 Ilalo Street, Honolulu, Hawaii 96813 and our telephone number is (808) 892-6611.
