Atlantic Avenue Acquisition Corp - Annual Report: 2021 (Form 10-K)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 2021
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File No. 001-39582
Atlantic Avenue Acquisition Corp
(Exact name of registrant as specified in its charter)
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Delaware
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85-2200249
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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2200 Atlantic Street
Stamford, Connecticut 06902
(Address of principal executive offices) (zip code)
(203) 989-9709
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Trading Symbols
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Name of Each Exchange on Which Registered
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| Units, each consisting of one share of Class A common stock and one-half of one redeemable warrant |
ASAQ.U
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New York Stock Exchange
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Class A common stock, par value $0.0001 per share
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ASAQ
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New York Stock Exchange
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| Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share |
ASAQ WS
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☑ No ☐
The aggregate market value of the Class A ordinary shares held by non-affiliates as of June 30, 2021, the last business day of the registrant’s most recently
completed second fiscal quarter, was approximately $242,750,000, based on the last reported sales price of $9.71 on the New York Stock
Exchange.
As of March 31, 2022, 25,000,000
shares of Class A common stock, par value $0.0001 per share, and 6,250,000 shares of Class B common stock, par value $0.0001 per share,
were issued and outstanding, respectively.
ATLANTIC AVENUE ACQUISITION CORP
FORM 10-K
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Page
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PART I
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Item 1.
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1
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Item 1A.
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19
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Item 1B.
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48
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Item 2.
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49
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Item 3.
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49
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Item 4.
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49
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PART II
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Item 5.
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50
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Item 6.
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50
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Item 7.
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51
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Item 7A.
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54
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Item 8.
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54
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Item 9.
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55
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Item 9A.
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55
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Item 9B.
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56
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Item 9C.
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56 |
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PART III
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Item 10.
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57
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Item 11.
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63 | |
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Item 12.
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63
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Item 13.
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65
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Item 14.
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66
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PART IV
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Item 15.
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67
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Item 16.
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69
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| Signatures |
70 |
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Additional Information
Descriptions of agreements or other documents in this report are intended as summaries and are not necessarily complete. Please refer to the agreements or the other documents filed or incorporated herein by
reference as exhibits. Please see “Item 15. Exhibits, Financial Statement Schedules” in this report for a complete list of those exhibits.
Special Note Regarding Forward-Looking Statements
Please see the note under “Statement Regarding Forward-Looking Information” for a description of special factors potentially affecting forward-looking statements included in this report.
PART I
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Business
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Introductory Note
The following describes the business of Atlantic Avenue Acquisition Corp. Except where otherwise noted, all references to “we,” “us,” “our,” “ASAQ,” or the “Company,” are
to Atlantic Avenue Acquisition Corp.
Description of Business
We are a recently incorporated blank check company incorporated on July 27, 2020 as a Delaware corporation formed for the purpose of effecting a merger, share exchange,
asset acquisition, stock purchase, reorganization, recapitalization or other similar business combination with one or more businesses (the “business combination”). We have reviewed, and continue to review, a number of opportunities to enter
into a business combination with an operating business, but we are not able to determine at this time whether we will complete a business combination with any of the target businesses that we have reviewed or with any other target business. We
also have neither engaged in any operations nor generated any revenue to date. Based on our business activities, we are a “shell company” as defined under the Exchange Act of 1934 (the “Exchange Act”) because we have no operations and nominal
assets consisting almost entirely of cash.
As of December 31, 2021, the Company had not commenced any operations. All activity for the period from July 27, 2020 (inception) through December 31, 2021 relates to the
Company’s formation, our initial public offering (“Initial Public Offering” or “IPO”), which is described below, and identifying a target company for a business combination. The Company will not generate any operating revenues until after the
completion of a business combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
On August 5, 2020, the Company issued an aggregate of 7,187,500 shares (the “founder shares”) of Class B common stock, par value $0.0001 par value (the “Class B common
stock”), to Atlantic Avenue Partners LLC (our “sponsor”), an affiliate of MC Credit Partners LP (“MC” or “MC Credit Partners”), and ASA Co-Investment LLC (“ASA Co-Investment”), an affiliate of Cowen and Company, LLC, the representative of the
underwriters of our Initial Public Offering, in exchange for an aggregate capital contribution of $25,000. We refer to our sponsor and ASA Co-Investment as the “founders.” Prior to the initial investment in the company of $25,000 by our
founders, the Company had no assets, tangible or intangible. The purchase price of the founder shares was determined by dividing the amount of cash contributed to us by the number of founder shares issued. In August 2020, our sponsor
transferred 145,000 founder shares to each of our independent directors at their original per share purchase price. On November 16, 2020, the founders forfeited 937,500 founder shares following the expiration of the unexercised underwriters’
over-allotment option, so that the founder shares held by our founders and independent directors (collectively, the “initial stockholders”) would represent 20.0% of the outstanding shares of common stock following completion of the Initial
Public Offering.
On October 6, 2020, the Company consummated the Initial Public Offering of 25,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in
the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $250,000,000. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (the “Class A common stock”), and one-half
of one redeemable warrant of the Company, each whole warrant entitling the holder thereof to purchase one share of Class A common stock at an exercise price of $11.50 per share (each whole warrant, a “warrant”).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,000,000 warrants (the “private placement warrants”). The sponsor
purchased an aggregate of 3,950,000 private placement warrants, ASA Co-Investment LLC purchased an aggregate of 2,750,000 private placement warrants and the Company’s independent directors purchased an aggregate of 300,000 private placement
warrants, at a price of $1.00 per unit, for an aggregate purchase price of $7,000,000. The private placement warrants have terms and provisions that are identical to those of the warrants sold as part of the Units in the Initial Public
Offering, except that the private placement warrants may be net cash settled and are not redeemable so long as they are held by the initial stockholders or their permitted transferees. With respect to private placement warrants held by ASA
Co-Investment, they are not exercisable more than five years from the commencement of sales of the offering in accordance with Financial Industry Regulatory Authority (“FINRA”) Rule 5110(g)(8)(C). The sale of the private placement warrants was
made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. A portion of the proceeds from the private placements were added to the net proceeds from the Initial Public Offering held in the trust account
described below.
A total of $250,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the private placement warrants was
placed in a trust account (the “trust account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations, until the earlier of: (a) the completion of
the initial business combination, (b) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation or (c) the redemption of the Company’s
Public Shares if the Company is unable to complete the initial business combination within 24 months from October 6, 2020, the closing of the Initial Public Offering.
On October 12, 2020, we announced that the holders of our Units may elect to separately trade the Class A common stock and warrants included in the Units commencing on
October 15, 2020 on the New York Stock Exchange (“NYSE”) under the symbols “ASAQ” and “ASAQ WS”, respectively. Those Units not separated will continue to trade on the NYSE under the symbol “ASAQ.U”.
Business Strategy
Our business strategy is to leverage the origination network and strategic and transactional experience of our dedicated team to identify attractive potential business
combination targets. We are focusing on businesses that can benefit from the MC investment team’s expertise and that complement the experience of our management team, the MC investment team and our operating partners. We are leveraging the MC
investment team’s and our operating partners’ broad sourcing networks in our selection process to provide attractive business combination opportunities and are applying our rigorous diligence, analytical and structuring skills to executing a
value creating transaction.
MC’s investment team provides strategic, capital markets and operational advice to MC’s portfolio companies, working alongside management to drive new product development,
geographic expansion, cost rationalization and technology transformation. Members of MC’s investment team often sit on the board of companies to which MC lends and work side by side with company executives to provide strategic advice on
acquisitions, divestitures and capital structure optimization. Importantly, we seek to acquire a company that will benefit particularly from the experience and expertise of one or more of our operating partners, each of whom served as a senior
executive across multiple successful companies.
Our selection process leverages our team’s network of private equity sponsors and industry executives as well as relationships with management teams of public and private
companies, investment bankers, restructuring advisors, attorneys and accountants, which we believe provides us with a number of attractive business combination opportunities. We will seek to drive stockholder value post acquisition by
leveraging our experience and network. Additionally, we will benefit from MC’s unique vantage point of investing direct lending funds by providing in-depth knowledge of private equity portfolios as well as growth companies migrating from debt
to equity financings. Our management team has experience in:
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defining corporate strategy, growing companies both organically and through strategic transactions, expanding portfolios and broadening geographic footprints;
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strategically investing in companies to help accelerate growth and maturation;
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fostering relationships with private and public companies, capital providers and advisors;
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negotiating transactions favorable to investors; and
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accessing the capital markets, including financing businesses and helping companies transition to public ownership.
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We communicate with MC’s and our management team’s network of deal sourcing relationships to articulate parameters for our search for a potential business combination and
the process of pursuing and reviewing potential opportunities.
Our Investment Criteria
Consistent with our strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We
use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not necessarily meet these criteria and guidelines. We intend to seek
to acquire one or more businesses that we believe:
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are poised for growth in an industry undergoing secular change through a meaningful technological transformation. We are targeting businesses that are enhancing their traditional models with technology.
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have significant embedded and/or underexploited expansion opportunities through add-on acquisitions. Our management team and MC’s investment team have significant experience in identifying and executing
such opportunities and helping management teams assess the strategic and financial fit. Similarly, our management team and MC’s investment professionals have the expertise to assess the likely synergies and processes necessary to help a
target integrate acquisition.
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are fundamentally sound but underperforming their potential in industries that are otherwise exhibiting stable or improving fundamentals. We are conducting thorough diligence and rigorously analyzing our
potential acquisition candidates to understand the risks and opportunities that the business presents and we will pursue opportunities that we believe provide attractive risk-adjusted returns.
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have a defensible market position with demonstrated advantages that create barriers to entry against new potential market entrants.
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have a diversified customer base better positioned to endure economic downturns, changes in the industry landscape and evolving customer, supplier and competitor preferences.
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are understood by our management team, MC’s investment professionals and our operating partners, particularly those where we believe we can increase value through our strategic or operational expertise.
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have underappreciated value and/or sub-optimal capital structure that will be availed by our management’s history of providing capital structure solutions, through either capital infusions, creative
and/or unique structures or recapitalizations in order to optimize a company’s balance sheet and increase equity value.
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are at an inflection point, such as those requiring additional management expertise or access to capital markets where we believe we or our operating partners can be catalysts to turn that inflection
point into transformative growth.
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will offer attractive risk-adjusted equity returns for our stockholders. We seek to acquire a target on terms and in a manner consistent with our disciplined investing approach.
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These criteria and guidelines are not intended to be exhaustive. Any evaluation relating to the merits of an initial business combination may be based, to the extent
relevant, on these general criteria and guidelines as well as other considerations, factors, criteria and guidelines that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target
business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria and guidelines in our stockholder communications related to our initial business combination, which would
be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC.
Initial Business Combination
The NYSE rules require that our initial business combination must be 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 and excluding the amount of any deferred underwriting discount held in trust) at the time of our signing a definitive agreement in
connection with our initial business combination. If our board of directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm
that is a member of FINRA or from an independent accounting firm, with respect to the satisfaction of such criteria. We do not currently intend to purchase multiple businesses in unrelated industries in conjunction with our initial business
combination, although there is no assurance that will be the case.
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
outstanding 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 in order to meet certain objectives of the target management team or stockholders or for other reasons. However, we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the
outstanding voting securities of the target or otherwise acquires a controlling interest in the target business 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.” Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the
post-business combination company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A common
stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% 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 outstanding 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 our 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 purposes of a
tender offer or for seeking stockholder approval, as applicable. Notwithstanding the foregoing, if we are not then listed on the NYSE for whatever reason, we would no longer be required to meet the foregoing 80% of net asset test.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are
not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result
in our incurring losses and will reduce the funds we can use to complete another business combination.
Our Acquisition Process
In evaluating a prospective target business, we conduct an extensive due diligence review which encompasses, among other things, meetings with incumbent management and
employees, document reviews, interviews of customers and suppliers, inspection of facilities, and a review of financial and other information about the target and its industry.
We are not prohibited from pursuing our initial business combination with a business that is affiliated with our sponsor, MC, our directors, or our officers or from making
the acquisition through a joint venture or other form of shared ownership with our sponsor, MC, our directors, our officers, or their affiliates. In the event we seek to complete our initial business combination with a business combination
target that is affiliated with our sponsor, MC, our directors, or our officers, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent
accounting firm that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
MC’s investment professionals are from time to time made aware of potential business opportunities, one or more of which we may desire to pursue, for a business
combination. Each of our directors and officers may, directly or indirectly, own founder shares and/or private placement warrants and, accordingly, may have a conflict of interest in determining whether a particular target business is an
appropriate business with which to effectuate our initial business combination. Further, such directors and officers may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of
any such directors and officers was included by a target business as a condition to any agreement with respect to our initial business combination.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary, contractual or other obligations or duties to one or more
other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entities. Accordingly, if any of our officers or directors becomes aware of a business combination
opportunity which is suitable for one or more entities to which he or she has fiduciary, contractual or other obligations or duties, he or she will honor these obligations and duties to present such business combination opportunity to such
entities first, and only present it to us if such entities reject the opportunity and he or she determines to present the opportunity to us. However, we do not expect these duties to present a significant conflict of interest with our search
for an initial business combination.
Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such
opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us
to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Sourcing of Potential Business Combination Targets
We believe our management team’s significant operating and transaction experience and relationships with companies provide us with a substantial number of potential
business combination targets. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships around the world. This network has grown through the activities of our
management team sourcing, acquiring, financing and selling businesses, our management team’s relationships with sellers, financing sources and target management teams and the experience of our management team in executing transactions under
varying economic and financial market conditions.
We believe that the network of contacts and relationships of our management team provide us with important sources of acquisition opportunities. In addition, target
business candidates have been brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest non-core assets or divisions.
We are not prohibited from pursuing an initial business combination with a business that is affiliated with our founders, officers or directors, or making the acquisition
through a joint venture or other form of shared ownership with our founders, officers or directors. In the event we seek to complete our initial business combination with a business that is affiliated with our founders, officers or directors,
we, or a committee of independent and disinterested directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, that our initial business combination is fair
to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
As more fully discussed in “Management-Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination opportunity that falls within the
line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination
opportunity to us. All of our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
Status as a Public Company
We believe our structure makes us an attractive business combination partner to target businesses. As an existing public company, we offer a target business an alternative
to the traditional initial public offering through a merger or other business combination. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock or for a
combination of shares of our stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company, we believe target businesses
will find this method a more certain and cost effective method to becoming a public company than the typical initial public offering. In a typical initial public offering, there are additional expenses incurred in marketing, road show and
public reporting efforts that may not be present to the same extent in connection with a business combination with us.
Furthermore, once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public offering is always
subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring. Once public, we believe the target business would then have greater access to capital
and an additional means of providing management incentives consistent with stockholders’ interests. It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented
employees.
We are an “emerging growth company,” as defined in the JOBS Act. 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, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common
stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt 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 the fiscal year in which (1) the market value of our common stock
that is held by non-affiliates exceeds $250 million as of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock that is held by non-affiliates exceeds
$700 million as of the prior June 30th.
Financial Position
With funds available for a business combination initially in the amount of approximately $241,250,000 assuming no redemptions (after payment of the fee payable to the
underwriters pursuant to the Business Combination Marketing Agreement we entered into at the time of our IPO, which we refer to throughout this report as the “Marketing Fee”), 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 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 intend to effectuate our initial business combination using cash from the proceeds of the IPO and the sale of the private placement warrants, our capital stock, debt or
a combination of these as the consideration to be paid in our initial business combination. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of
development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt, 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.
Our officers and directors are from time to time made aware of potential business opportunities, one or more of which we may desire to pursue, for a business combination.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of
such offering rather than using the amounts held in the trust account.
In the case of an initial business combination funded with assets other than the trust account assets, our tender offer documents or proxy materials disclosing the business
combination would disclose the terms of the financing and, only if required by applicable law or we decide to do so for business or other reasons, we would seek stockholder approval of such financing. There are no prohibitions on our ability to
raise funds privately or through loans in connection with our initial business combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale
of securities or otherwise.
Selection of a Target Business and Structuring of our Initial Business Combination
The NYSE rules require that our initial business combination must be 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 and excluding the amount of any deferred underwriting discount held in trust) at the time of our signing a definitive agreement in
connection with our initial business combination. The fair market value of the target or targets 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 or value of comparable businesses. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is
a member of FINRA, or from an independent accounting firm, with respect to the satisfaction of such criteria. We do not currently intend to purchase multiple businesses in unrelated industries in conjunction with our initial business
combination, although there is no assurance that will be the case. 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 solely with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise
acquire a controlling interest in the target business 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 outstanding 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 net assets test. There is no basis for investors to
evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.
To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may
be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all
significant risk factors.
In evaluating a prospective target business, we expect to conduct a thorough due diligence review which may encompass, among other things, meetings with incumbent
management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal and other information which will be made available to us.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are
not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result
in our incurring losses and will reduce the funds we can use to complete another business combination.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a
single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate
the risks of being in a single line of business. By completing our initial business combination with only a single entity, our lack of diversification may:
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subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial
business combination; and
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cause us to depend on the marketing and sale of a single product or limited number of products or services.
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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. 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 our initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you
that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC subject to the provisions of our second 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 legal reasons.
Under the NYSE’s listing rules, stockholder approval would be required for our initial business combination if, for example:
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we issue (other than in a public offering for cash) shares of Class A common stock that will either (a) be equal to or in excess of 20% of the number of shares of our Class A common stock then outstanding
or (b) have voting power equal to or in excess of 20% of the voting power then outstanding;
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any of our directors, officers or substantial security holders (as defined by the NYSE rules) has a 5% or greater interest, directly or indirectly, in the target business or assets to be acquired and if
the number of shares of common stock to be issued, or if the number of shares of common stock into which the securities may be convertible or exercisable, exceeds either (a) 1% of the number of shares of common stock or 1% of the voting
power outstanding before the issuance in the case of any of our directors and officers or (b) 5% of the number of shares of common stock or 5% of the voting power outstanding before the issuance in the case of any substantial
securityholders; or
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the issuance or potential issuance of common stock will result in our undergoing a change of control.
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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:
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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;
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the expected cost of holding a stockholder vote;
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the risk that the stockholders would fail to approve the proposed business combination;
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other time and budget constraints of the company; and
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additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.
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Permitted Purchases of Our Securities
In the event we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant
to the tender offer rules, our founders, directors, officers, advisors or any of their affiliates may purchase shares or 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 such persons may purchase. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or
conditions for any such transactions. In the event our sponsor, directors, officers, advisors or any of their affiliates determine to make any such purchases at the time of a stockholder vote relating to our initial business combination, such
purchases could have the effect of influencing the vote necessary to approve such transaction. None of the funds in the trust account will be used to purchase shares or warrants in such transactions. If they engage in such transactions, they
will be restricted from making any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a purchase may
include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. We have adopted an insider trading
policy which requires insiders to: (i) refrain from purchasing securities during certain blackout periods and when they are in possession of any material non-public information; and (ii) clear all trades with a designated 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.
In the event that our founders, directors, officers, advisors or any of their affiliates purchase shares in privately negotiated transactions from public stockholders who
have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender
offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases
are subject to such rules, the purchasers will comply with such rules.
The purpose of such purchases would be to (i) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of
our initial business combination or (ii) 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. This may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our securities 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 founders, officers, directors, advisors, and/or any of their affiliates anticipate that they may identify the stockholders with whom our founders, officers, directors,
advisors or any of their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in
connection with our initial business combination. To the extent that our founders, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have
expressed their election to redeem their shares for a pro rata share of the trust account or vote against the business combination. 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 founders, officers, directors, advisors or their affiliates will be restricted from purchasing shares if such purchases do not comply with Regulation M
under the Exchange Act and the other federal securities laws.
Any purchases by our founders, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will be restricted unless
such purchases are 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 founders, officers, directors and/or their affiliates will be restricted from making purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of
the Exchange Act.
Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock
upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account calculated as of two business days prior to the consummation of the initial
business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The
amount in the trust account is initially anticipated to be $10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the Marketing Fee 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. There will be no redemption rights upon the completion of our initial business combination with respect to
our warrants. Each of our founders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them
in connection with the completion of our initial business combination.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business
combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or
conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under
applicable law or stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more
than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would typically require stockholder approval. We intend to conduct redemptions without a stockholder vote pursuant to the tender
offer rules of the SEC unless stockholder approval is required by applicable law or stock exchange listing requirements or we choose to seek stockholder approval for business or other reasons.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other reasons, we will, pursuant to our amended and restated
certificate of incorporation:
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conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers,
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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.
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Upon the public announcement of our initial business combination, we and our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares
of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a)
under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than
a specified number of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets, after payment of the Marketing Fee, to be less than $5,000,001 (so
that we do not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more
shares than we have offered to purchase, we will withdraw the tender offer and not complete such initial business combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirement, or we decide to obtain stockholder approval for
business or other reasons, we will, pursuant to our amended and restated certificate of incorporation:
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conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules,
and
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file proxy materials with the SEC.
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We expect that a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy
statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Although we are not required to do so, we
currently intend to comply with the substantive and procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our NYSE listing or Exchange Act registration.
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 business combination (or, if the applicable rules of the NYSE then in effect require, a majority of the outstanding shares of common stock held by public stockholders are voted in favor of the business transaction). Unless restricted by
NYSE rules, a quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding capital stock of our company
entitled to vote at such a meeting. Unless restricted by NYSE rules, our initial stockholders will count toward this quorum. Pursuant to the terms of a letter agreement entered into with us, our initial stockholders, officers and directors have
agreed (and their permitted transferees will agree) to vote any founder shares and any public shares held by them in favor of our initial business combination. We expect that at the time of any stockholder vote relating to our initial business
combination, our initial stockholders and their permitted transferees will own at least 20% of our outstanding common stock entitled to vote thereon. These quorum and voting thresholds and the letter agreement may make it more likely that we
will consummate our initial business combination. Each public stockholder may elect to redeem their public shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction. In addition, each
of our founders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with
the completion of a business combination.
Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be
less than $5,000,001 (so that we do not then become 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 Class
A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete
the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternative business combination.
Limitation on Redemption upon Completion of Our Initial Business Combination If We Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business
combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting
in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to Excess Shares, without our prior consent. 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 founders or their affiliates to purchase
their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in the IPO could threaten to exercise its
redemption rights if such holder’s shares are not purchased by us or our founders or their affiliates at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15%
of the shares sold in the IPO, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our 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. Our founders, officers and directors have, pursuant to a letter agreement entered into with us, waived their right to have any founder shares or public shares redeemed in connection with our
initial business combination. Unless any of our other affiliates acquires founder shares through a permitted transfer from an initial stockholder, and thereby becomes subject to the letter agreement, no such affiliate is subject to this waiver.
However, to the extent any such affiliate acquires public shares in the IPO or thereafter through open market purchases, it would be a public stockholder and subject to the 15% limitation in connection with any such redemption right.
Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender
their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the scheduled vote on the proposal to approve the business
combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, rather than simply voting against the
initial business combination. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public
stockholders to satisfy such delivery requirements, 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 business days prior to the scheduled vote on the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek
to exercise its redemption rights. Pursuant to the tender offer rules, the tender offer period will be not less than 20 business days and, in the case of a stockholder vote, a final proxy statement would be mailed to public stockholders at
least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in
conjunction with a proxy solicitation. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The
transfer agent will typically charge the tendering broker 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 business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result,
the stockholder then had an “option window” after the completion of the business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell
his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would
become “option” rights surviving past the completion of the business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s
election to redeem is irrevocable once the business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or two business days prior to the date of
the stockholder meeting set forth in our proxy materials, as applicable (unless we elect to allow additional withdrawal rights). 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 24 months from the
closing of the IPO.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our founders, officers and directors have agreed that we have only 24 months from the closing of the IPO to complete our initial business combination. If we have not
completed our initial business combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, subject to
lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and
not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidating distributions, if any); 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. There are 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 24-month time period.
Each of our founders, officers and directors 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 fail to complete our initial business combination within 24 months from the closing of the IPO. However, if our founders, officers and directors acquire public shares, they will be
entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 24-month time period.
Our founders, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate
of incorporation (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 our initial business combination
within 24 months from the closing of the IPO or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem
their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account
and not previously released to us to pay our taxes, divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that
we do not then become subject to the SEC’s “penny stock” rules).
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out
of the proceeds held outside the trust account, although we cannot assure you that there will be sufficient funds for such purpose. 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, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and
expenses.
If we were to expend all of the net proceeds of the IPO and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without
taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.00. 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
$10.00. 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 seek to have all third parties, service providers (other than our independent registered public accounting firm), prospective target businesses and other
entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such
agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as
well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement
waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management
believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third
party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider
willing to execute a waiver.
In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations,
contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we have not completed our initial business combination within the prescribed time frame, or upon the
exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption.
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business
with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the
liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, except as to any claims by a third party who executed a waiver of any and all rights
to seek access to the trust account and except as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, 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. We have not independently verified whether our sponsor has sufficient funds to satisfy its
indemnity obligations and believe that our sponsor’s only assets are securities of our company. Our sponsor may not have sufficient funds available to satisfy those obligations. None of our officers or directors will indemnify us for claims by
third parties including, without limitation, claims by third parties and prospective target businesses.
In the event that the proceeds in the trust account are reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as
of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, and our sponsor asserts that it is unable to satisfy its
indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business
judgment may choose not to do so 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 substantially less than $10.00 per share.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all third parties,
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 monies held in the trust account. Our sponsor is 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.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro
rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of the IPO may be considered a
liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice
period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are
made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete
our initial business combination within 24 months from the closing of the IPO, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL,
the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we have not completed our initial business
combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds
therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released
to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including
the right to receive further liquidating distributions, if any); 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 from the closing of the IPO and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and
any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our
payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited
to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation
contained in our underwriting agreement, we seek 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 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) $10.00 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 petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to
applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot
assure you we will be able to return $10.00 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by
stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our
stockholders. Furthermore, our board may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing our directors and our company to claims of punitive damages, by paying public
stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) the completion of our initial business combination,
and then only in connection with those public shares that such stockholder properly elected to redeem, subject to the limitations described herein; (ii) the redemption of any public shares properly submitted in connection with a stockholder
vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do
not complete our initial business combination within 24 months from the closing of the IPO or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (iii) the redemption of all
of our public shares if we have not completed our initial business combination within 24 months from the closing of the IPO, subject to applicable law and as further described herein. In no other circumstances will a stockholder have any right
or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the business combination alone will not result in a
stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights described above.
Competition
In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business
objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to
acquire. Many of these entities are well-established and have extensive experience identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Moreover, many of these
competitors possess greater financial, technical, human and other resources or more local industry knowledge than we do. Our ability to acquire larger target businesses is limited by our available financial resources. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of certain 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.
Human Capital Resources
We currently have five officers and do not intend to have any full-time employees prior to the completion of our initial business combination. Members of our management
team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that
members of our management will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process.
Periodic Reporting and Financial Information
We have registered our units, Class A common stock and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual,
quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual report contains financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent
to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). 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 GAAP or that the potential target business will be able to prepare its financial statements in
accordance with GAAP. To the extent that this requirement cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will
be material.
We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2021 as required by the Sarbanes-Oxley Act. Only in the event we are
deemed to be a large accelerated filer or an accelerated filer will we be required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of
their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Statement Regarding Forward-Looking Information
Some statements contained in this report constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but
are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of
future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,”
“predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may
include:
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our ability to select an appropriate target business or businesses;
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our ability to complete our initial business combination;
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our expectations around the performance of a prospective target business or businesses;
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our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
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our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;
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our potential ability to obtain additional financing to complete our initial business combination;
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our pool of prospective target businesses;
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our ability to consummate an initial business combination due to the uncertainty resulting from the COVID-19 pandemic and our ability to conduct necessary due diligence in view of the COVID-19 pandemic
and steps taken by governments to respond to the pandemic;
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the ability of our officers and directors to generate a number of potential business combination opportunities;
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our public securities’ potential liquidity and trading;
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the limited history of market for our securities;
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the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;
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the trust account not being subject to claims of third parties; or
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our financial performance.
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The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us.
There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that
may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading
“Item 1A. Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We
undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Additional Information
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d)
of the Exchange Act, are filed with the Securities and Exchange Commission (the “SEC”). The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements and other information with the
SEC. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Our website address is www.asaqspac.com. We make available free of charge on or through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. However, the information found
on our website is not part of this or any other report.
Our executive offices are located at 2200 Atlantic Street, Stamford, Connecticut 06902 and our telephone number is (203) 989-9709.
| Item 1A. |
Risk Factors
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In the course of conducting our business operations, we are exposed to a variety of risks, some of which are inherent in our industry and others of which are more specific
to our own businesses. The risk factors summarized below could materially harm our business, operating results and/or financial condition, impair our future prospects and/or cause the price of our common stock to decline. These risks are
discussed more fully following this summary. Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, the following:
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We identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of
operations and financial condition accurately and in a timely manner.
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Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
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Our warrants are accounted for as liabilities and changes in the value of our warrants could have a material effect on our financial results.
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We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
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Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business
combination even though a majority of our public stockholders do not support such a combination.
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If we seek stockholder approval of our initial business combination, our founders, officers and directors have agreed to vote in favor of such initial business combination, regardless
of how our public stockholders vote.
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Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash,
unless we seek stockholder approval of such business combination.
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The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it
difficult for us to enter into a business combination with a target.
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The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination
or optimize our capital structure.
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We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and
we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
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If we seek stockholder approval of our initial business combination, our founders, directors, officers, advisors or any of their affiliates may elect to purchase shares or warrants
from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our securities.
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The NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading
restrictions.
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You will not be entitled to protections normally afforded to investors of many other blank check companies.
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Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination.
If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on our redemption of their shares, and
our warrants will expire worthless.
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If the net proceeds of the IPO and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate for at least the 24 months
following the closing of the IPO, we may be unable to complete our initial business combination.
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If the net proceeds of the IPO and the sale of the private placement warrants not being held in the trust account are insufficient, it could limit the amount available to fund our
search for a target business or businesses and complete our initial business combination and we may depend on loans from our sponsor or management team to fund our search, to pay our taxes and to complete our initial business
combination.
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Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial
business combination, investments and results of operations.
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If we have not consummated our initial business combination within 24 months of the closing of the IPO, our public stockholders may be forced to wait beyond such 24 months before
redemption from our trust account.
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The grant of registration rights to our initial stockholders and holders of our private placement warrants may make it more difficult to complete our initial business combination, and
the future exercise of such rights may adversely affect the market price of our Class A common stock.
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Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
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We may seek acquisition opportunities with an early stage company, a financially unstable business or an entity lacking an established record of revenue or earnings, which could
subject us to volatile revenues or earnings or difficulty in retaining key personnel.
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We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an
independent source that the price we are paying for the business is fair to our company from a financial point of view.
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We are dependent upon our officers and directors and their departure could adversely affect our ability to operate.
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We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose
management may not have the skills, qualifications or abilities to manage a public company.
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Our officers and directors allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This
conflict of interest could have a negative impact on our ability to complete our initial business combination.
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Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be
conducted by us, including another blank check company, and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented
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Our officers, directors, securityholders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
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We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our founders, officers or directors which
may raise potential conflicts of interest.
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Since our initial stockholders will lose their entire investment in us if our initial business combination is not completed, a conflict of interest may arise in determining whether a
particular business combination target is appropriate for our initial business combination.
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Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control of a target
business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
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Economic uncertainty or economic deterioration could adversely affect us.
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As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets.
This could increase the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business combination.
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We are a recently incorporated company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
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Past performance by MC, members of our management team and their respective affiliates, may not be indicative of future performance of an investment in the company.
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The other risks and uncertainties disclosed in this Annual Report on Form 10-K.
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An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information
contained in this report, before making a decision to invest in our units. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of
our securities could decline, and you could lose all or part of your investment.
Risks Relating to Restatement of Our Previously Issued Financial Statements
Our warrants are accounted for as liabilities and changes in the value of our warrants could have a material effect on our financial results.
On April 12, 2021, the Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities instead
of equity on the SPAC’s balance sheet. As a result of the SEC Staff Statement, we re-evaluated the accounting treatment of our 19,500,000 warrants issued in connection with our initial public offering (including the 12,500,000 warrants included
in the units and the 7,000,000 private placement warrants), and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value reported in our statement of operations for each reporting period.
As a result, included on our balance sheet as of December 31, 2021 contained elsewhere in this annual report are derivative liabilities related to embedded features
contained within our warrants. ASC 815-40 provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in
earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors which are outside of our control. Due to the recurring
fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
We identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our
ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls, and we will disclose any changes and
material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
During the fiscal year ended December 31, 2021, we identified a material weakness in our internal control over financial reporting related to the classification of our
warrants as equity instead of liabilities and accounting for our shares of Class A common stock subject to redemption, which led to restatements of certain of our financial statements.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we are unable to develop and maintain an effective system of
internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may cause us to be unable to comply with securities law or applicable NYSE requirements, adversely affect
investor confidence in us and/or materially and adversely affect our business and operating results. Any required remediation measures may be time consuming and costly and there is no assurance that any measures taken to date or any such
measures taken in the future will ultimately have the intended effects, including to avoid potential future material weaknesses.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
Following the issuance of the SEC Staff Statement, our management and our Audit Committee concluded that it was appropriate to restate our previously issued audited
financial statements as of, and for the period from July 27, 2020 (date of inception) to December 31, 2020. As part of the restatement, we identified a material weakness in our internal controls over financial reporting.
As a result of such material weakness, the restatements related to the accounting for the warrants and the shares of Class A common stock subject to redemption, we face
potential litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weakness in our internal control over
financial reporting. As of the date of this annual report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or
dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a business combination.
Risks Relating to our Search for, and Consummation of or Inability to Consummate, a Business Combination
Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial
business combination even though a majority of our public stockholders do not support such a combination.
We may not hold a stockholder vote to approve our initial business combination unless the business combination would typically require stockholder approval under applicable
law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or other reasons. For instance, the NYSE rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still
require us to obtain stockholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore, if we were structuring a business combination that
required us to issue more than 20% of our outstanding shares, we would seek stockholder approval of such business combination. However, except as required by applicable law or stock exchange listing requirements, the decision as to whether we
will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the
timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may consummate our initial business combination even if holders of a majority of our public shares do
not approve of the business combination we consummate. Please see the section entitled “Item 1. Business-Stockholders May Not Have the Ability to Approve Our Initial Business Combination” for additional information
If we seek stockholder approval of our initial business combination, our founders, officers and directors have agreed to vote in favor of such initial
business combination, regardless of how our public stockholders vote.
Unlike many other blank check companies in which the initial stockholders agree to vote their founder shares in accordance with the majority of the votes cast by the public
stockholders in connection with an initial business combination, our founders, officers and directors have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote any
founder shares and any public shares held by them, in favor of our initial business combination. As a result, in addition to our initial stockholders’ founder shares, we would need 9,375,001, or approximately 37.5% (assuming all outstanding
shares are voted), or 1,562,501, or 6.25% (assuming only the minimum number of shares representing a quorum are voted), of the 25,000,000 public shares sold in the IPO to be voted in favor of an initial business combination in order to have
such initial business combination approved (or, if the applicable rules of the NYSE then in effect, as applicable, require approval by a majority of the votes cast by public stockholders, we would need 12,500,001 of public shares sold in the
offering to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have an initial business combination approved). We expect that our initial stockholders and their permitted transferees will own at least 20%
of our outstanding common stock at the time of any such stockholder vote. Accordingly, if we seek stockholder approval of our initial business combination, it is more likely that the necessary stockholder approval will be received than would be
the case if such persons agreed to vote their founder shares in accordance with the majority of the votes cast by our public stockholders.
Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to
redeem your shares from us for cash, unless we seek stockholder approval of such business combination.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of any target businesses. Since our board of
directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the business combination, unless we seek such stockholder approval. Accordingly, if we do
not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business
days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.
The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination
targets, which may make it difficult for us to enter into a business combination with a target.
We may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a
certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. The amount of the
Marketing Fee payable to the underwriters will not be adjusted for any shares that are redeemed in connection with a business combination and such amount of Marketing Fee is not available for us to use as consideration in an initial business
combination. If we are able to consummate an initial business combination, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay and the payment of the Marketing Fee. Furthermore, in no event will
we redeem our public shares in an amount that would cause our net tangible assets, after payment of the Marketing Fee, to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules) or any greater net
tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than
$5,000,001 or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination.
Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most
desirable business combination or optimize our capital structure.
At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore we
will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the trust account to
pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements, or arrange for third-party financing. In addition, if a larger
number of shares is submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third-party financing. Raising additional
third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or
optimize our capital structure.
The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us
in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to
complete our initial business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination
within 24 months from the closing of the IPO. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that particular target
business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may
enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for
the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our founders, officers and directors have agreed that we must complete our initial business combination within 24 months from the closing of the IPO. We may not be able to
find a suitable target business and complete our initial business combination within such time period. Our ability to complete our initial business combination may be negatively impacted by general market conditions, volatility in the capital
and debt markets and the other risks described herein. For example, the outbreak of COVID-19 continues to grow both in the United States and globally and, while the extent of the impact of the outbreak on us will depend on future developments,
it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all.
Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services
providers are unavailable to negotiate and consummate a transaction in a timely manner. Additionally, the outbreak of COVID-19 may negatively impact businesses we may seek to acquire. It may also have the effect of heightening many of the other
risks described in this “Risk Factors” section, such as those related to the market for our securities and cross-border transactions.
If we have not completed our initial business combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up; (ii) as
promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding
public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless. See “-If third parties bring claims
against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein
The securities in which we invest the proceeds held in the trust account could bear a negative rate of interest, which could reduce the interest income
available for payment of taxes or reduce the value of the assets held in trust such that the per-share redemption amount received by stockholders may be less than $10.00 per share.
The net proceeds of the IPO and certain proceeds from the sale of the private placement warrants, in the amount of $250,000,000, are held in an interest-bearing trust
account. The proceeds held in the trust account may be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act
which invest only in direct U.S. government treasury obligations. While short-term U.S. treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe
and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event of very low
or negative yields, the amount of interest income (which we may use to pay our taxes, if any) would be reduced. In the event that we are unable to complete our initial business combination, our public stockholders are entitled to receive their
pro-rata share of the proceeds then held in the trust account, plus any interest income (less up to $100,000 of interest to pay dissolution expenses). If the balance of the trust account is reduced below $250,000,000 as a result of negative
interest rates, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.00 per share.
If we seek stockholder approval of our initial business combination, our founders, directors, officers, advisors or any of their affiliates may elect to
purchase shares or warrants from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” 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 founders, directors, officers, advisors or any of their affiliates may purchase shares or warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial
business combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and
therefore agrees not to exercise its redemption rights. In the event that our founders, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to
exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The 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. The purpose of such purchases 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. This may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our securities and the number of beneficial holders of our securities may be reduced, possibly making it
difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to
comply with the procedures for tendering its shares, such shares may not be redeemed.
We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our
compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy
materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public
shares. In the event that a stockholder fails to comply with these procedures, its shares may not be redeemed. See “Item 1. Business-Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights.”
You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be
forced to sell your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) the completion of our initial business combination,
and then only in connection with those public shares that such stockholder properly elected to redeem, subject to the limitations described herein; (ii) the redemption of any public shares properly submitted in connection with a stockholder
vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do
not complete our initial business combination within 24 months from the closing of the IPO or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (iii) the redemption of all
of our public shares if we have not completed our initial business combination within 24 months from the closing of the IPO, subject to applicable law and as further described herein. In addition, if we have not completed our initial business
combination within 24 months from the closing of the IPO for any reason, compliance with Delaware law may require that we submit a plan of dissolution to our then existing stockholders for approval prior to the distribution of the proceeds held
in our trust account. In that case, public stockholders may be forced to wait beyond 24 months from the closing of the IPO before they receive funds from our trust account. In no other circumstances will a public stockholder have any right or
interest of any kind in the trust account. Holders of warrants will not have any right to the proceeds held in the trust account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public
shares or warrants, potentially at a loss.
The NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject
us to additional trading restrictions.
Our units, Class A common stock and warrants are listed on the NYSE. We cannot assure you that our securities will continue to be listed on the NYSE in the future or prior
to our initial business combination. In order to continue listing our securities on the NYSE prior to our initial business combination, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a
minimum number of holders of our securities. Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s
continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE. For instance, in order for our Class A common stock to be listed upon the consummation of our initial business combination, at such
time, our share price would generally be required to be at least $4.00 per share, our total market capitalization would be required to be at least $200,000,000, the aggregate market value of publicly-held shares would be required to be at least
$100,000,000 and we would be required to have at least 400 round lot holders. We cannot assure you that we will be able to meet those initial listing requirements at that time.
If the NYSE delists any of our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect such
securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity for our securities;
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a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of
trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which
are referred to as “covered securities.” Because our units, Class A common stock and warrants are listed on the NYSE, our units, Class A common stock and warrants qualify as covered securities under such statute. Although the states are
preempted from regulating the sale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or
bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the state of Idaho, certain state
securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on the
NYSE, our securities would not qualify as covered securities under such statute and we would be subject to regulation in each state in which we offer our securities.
You are not entitled to protections normally afforded to investors of many other blank check companies.
Since the net proceeds of the IPO and the sale of the private placement warrants are intended to be used to complete an initial business combination with a target business
that has not been selected, we may be deemed to be a “blank check” company under the United States securities laws. However, because we will have net tangible assets in excess of $5,000,000 upon the successful completion of the IPO and the sale
of the private placement warrants and will file a Current Report on Form 8-K, including an audited balance sheet of the company demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check
companies, such as Rule 419. Accordingly, investors are not afforded the benefits or protections of those rules. Among other things, this means we have a longer period of time to complete our initial business combination than do companies
subject to Rule 419. Moreover, if the IPO were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in
connection with our completion of an initial business combination.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or
a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the
tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in the IPO, which we refer to as the “Excess Shares,” without our prior consent.
However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our
ability to complete our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect
to the Excess Shares if we complete our initial business combination. As a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your shares in open market
transactions, potentially at a loss.
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our
initial business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on our
redemption of their shares, and our warrants will expire worthless.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or
investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive
experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local
industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net
proceeds of the IPO and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, if we are obligated to pay cash for the shares of Class A common stock which our public stockholders redeemed and, in the
event we seek stockholder approval of our initial business combination, we make purchases of our Class A common stock, potentially reducing the resources available to us for our initial business combination. Any of these obligations may place
us at a competitive disadvantage in successfully negotiating a business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per
share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “-If third parties bring
claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
If the net proceeds of the IPO and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to
operate for at least the 24 months following the closing of the IPO, we may be unable to complete our initial business combination.
The funds available to us outside of the trust account may not be sufficient to allow us to operate for at least the 24 months following the closing of the IPO, assuming
that our initial business combination is not completed during that time. We expect to incur significant costs in pursuit of our acquisition plans. Management’s plans to address this need for capital through the IPO and potential loans from
certain of our affiliates are discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” However, our affiliates are not obligated to make loans to us in the future, and we may not be able to
raise additional financing from unaffiliated parties necessary to fund our expenses. Any such event in the future may negatively impact the analysis regarding our ability to continue as a going concern at such time.
We believe that the funds available to us outside of the trust account will be sufficient to allow us to operate for at least the 24 months following the closing of the
IPO; however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use
a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target
businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity from a target business and
were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we have not
completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share on the liquidation of our trust account and our warrants will expire worthless. In certain
circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “-If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share
redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
If the net proceeds of the IPO and the sale of the private placement warrants not being held in the trust account are insufficient, it could limit the
amount available to fund our search for a target business or businesses and complete our initial business combination and we may depend on loans from our sponsor or management team to fund our search, to pay our taxes and to complete our
initial business combination.
As of December 31, 2021, we held $1,085,973 outside the trust account. If we are required to seek additional capital, we would need to borrow funds from our sponsor,
management team or other third parties to operate or may be forced to liquidate. None of our sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to, or invest in, us in such
circumstances. Any such advances may be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination. We do not expect to seek loans from parties other than our sponsor
or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. If we have not completed our initial business
combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. Consequently, our public stockholders may receive only approximately
$10.00 per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “-If third parties
bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to
negotiate and complete our initial business combination, investments and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal
requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time. For example,
on March 30, 2022, the SEC proposed several new rules related to special purpose acquisition companies. These and other changes could have a material adverse effect on our business, including our ability to negotiate and complete our initial
business combination, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.
If we have not consummated our initial business combination within 24 months of the closing of the IPO, our public stockholders may be forced to wait
beyond such 24 months before redemption from our trust account.
If we have not consummated our initial business combination within 24 months from the closing of the IPO, we will distribute the aggregate amount then on deposit in the
trust account (less up to $100,000 of the net interest earned thereon to pay dissolution expenses), pro rata to our public stockholders by way of redemption and cease all operations except for the purposes of winding up of our affairs, as
further described herein. Any redemption of public stockholders from the trust account shall be effected automatically by function of our amended and certificate of incorporation prior to any voluntary winding up. If we are required to windup,
liquidate the trust account and distribute such amount therein, pro rata, to our public stockholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the DGCL. In
that case, investors may be forced to wait beyond the initial 24 months before the redemption proceeds of our trust account become available to them and they receive the return of their pro rata portion of the proceeds from our trust account.
We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless, prior thereto, we consummate our initial business combination or amend certain provisions of our amended and restated certificate of
incorporation, and only then in cases where investors have properly sought to redeem their common stock. Only upon our redemption or any liquidation will public stockholders be entitled to distributions if we have not completed our initial
business combination with the required time period and do not amend certain provisions of our amended and restated certificate of incorporation prior thereto.
Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their
shares.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro
rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of the IPO may be considered a
liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice
period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are
made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 24th month from the closing of the IPO in the event we do not
complete our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our
payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations
will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution
complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any
liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could
potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust
account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of the IPO is not considered a liquidating distribution
under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution,
instead of three years, as in the case of a liquidating distribution.
We did not register the issuance of shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state
securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis and potentially causing
such warrants to expire worthless.
We did not register the issuance of shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this
time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than fifteen (15) business days after the closing of our initial business combination, we will use our best efforts to
file with the SEC a registration statement covering the issuance of shares of Class A common stock issuable upon exercise of the warrants. We will use our best efforts to cause the same to become effective within 60 business days after the
closing of our initial business combination and to maintain the effectiveness of such registration statement and a current prospectus relating thereto, until the warrants expire or are redeemed. We cannot assure you that we will be able to do
so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not
current, complete or correct or the SEC issues a stop order. If the issuance of shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a
cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is
registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not
listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so
on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use our best efforts to register or
qualify the stock under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, nor will we be required to issue securities or other compensation in exchange for the
warrants in the event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws and no exemption is available. If the issuance of the shares upon exercise of the warrants is not so
registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their
warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A common stock included in the units. If and when the warrants become redeemable by us, we may exercise our redemption right even
if we are unable to register or qualify the underlying the shares of Class A common stock for sale under all applicable state securities laws. As a result, we may redeem the warrants as set forth above even if the holders are otherwise unable
to exercise their warrants.
The grant of registration rights to our initial stockholders and holders of our private placement warrants may make it more difficult to complete our
initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to an agreement entered into in connection with the IPO, at or after the time of our initial business combination, our initial stockholders and their permitted
transferees can demand that we register the resale of their founder shares, after those shares convert to our Class A common stock. In addition, holders of our private placement warrants and their permitted transferees can demand that we
register the resale of the private placement warrants and the shares of Class A common stock issuable upon exercise of the private placement warrants, and holders of warrants that may be issued upon conversion of working capital loans may
demand that we register the resale of such warrants or the Class A common stock issuable upon exercise of such warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of
securities for trading in the public market may have an adverse effect on the market price of our Class A common stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to
conclude. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common stock
that is expected when the securities owned by our initial stockholders, holders of our private placement warrants or holders of our working capital loans or their respective permitted transferees are registered for resale
Because we are not limited to a particular industry or any specific target businesses with which to pursue our initial business combination, you will be
unable to ascertain the merits or risks of any particular target business’s operations.
We may seek to complete a business combination with an operating company in any industry, sector or location. However, we are not, under our amended and restated
certificate of incorporation, permitted to effectuate our initial business combination solely with another blank check company or similar company with nominal operations. To the extent we complete our initial business combination, we may be
affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the
risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that
we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or
reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to investors than a direct investment, if such opportunity
were available, in a business combination target. Accordingly, any securityholders who choose to remain securityholders following our initial business combination could suffer a reduction in the value of their securities. Such securityholders
are unlikely to have a remedy for such reduction in value of their securities.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into
our initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our
general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our
initial business combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these criteria and guidelines, such combination may not be as
successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a
greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition,
if stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or we decide to obtain stockholder approval for business or other reasons, it may be more difficult for us to attain stockholder
approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we have not completed our initial business combination within the required time period, our public stockholders may
receive only approximately $10.00 per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their
shares. See “-If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
We may seek acquisition opportunities with an early stage company, a financially unstable business or an entity lacking an established record of revenue
or earnings, which could subject us to volatile revenues or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with an early stage company, a financially unstable business or an entity lacking an established record of sales
or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include investing in a business without a proven business model and with limited historical financial data, volatile
revenues or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess
all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will
adversely impact a target business.
We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may
have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our initial business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm that is
a member of FINRA, or from an independent accounting firm, that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of
directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to our
initial business combination.
We may issue additional common stock or preferred stock to complete our initial business combination or under an employee incentive plan after
completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of
the anti-dilution provisions contained in our amended and restated certificate of incorporation. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation authorizes the issuance of up to 300,000,000 shares of Class A common stock, par value $0.0001 per share, 30,000,000
shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. Immediately after the IPO, there were 255,500,000 and 23,750,000 authorized but unissued shares of Class A and
Class B common stock, respectively, available for issuance, which amount takes into account the shares of Class A common stock reserved for issuance upon exercise of outstanding warrants but not the conversion of the Class B common stock.
Shares of Class B common stock are automatically convertible into shares of our Class A common stock at the time of our initial business combination, or earlier at the option of the holder, initially at a one-for-one ratio but subject to
adjustment as set forth herein. There are no shares of preferred stock outstanding.
We may issue a substantial number of additional shares of common stock or preferred stock in order to complete our initial business combination or under an employee
incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination
as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. However, our amended and certificate of incorporation provides, among other things, that prior to our initial business combination,
we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote as a class with our public shares on any initial business combination. The issuance of
additional shares of common stock or preferred stock:
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may significantly dilute the equity interest of investors in the IPO;
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may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
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could cause a change in control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any,
and could result in the resignation or removal of our present officers and directors;
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may adversely affect prevailing market prices for our units, Class A common stock and/or warrants; and
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may not result in adjustment to the exercise price of our warrants.
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Resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and
acquire or merge with another business. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain
circumstances, on the liquidation of our trust account and our warrants will expire worthless.
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other
instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the
proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our
control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business
combination within the required time period, our public stockholders may receive only approximately $10.00 per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public
stockholders may receive less than $10.00 per share on the redemption of their shares. See “-If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by
stockholders may be less than $10.00 per share” and other risk factors herein.
We are dependent upon our officers and directors and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals. We believe that our success depends on the continued service of our officers and directors, at
least until we have completed our initial business combination. In addition, our officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating
management time among various business activities, including identifying potential business combinations and monitoring the related due diligence. Moreover, certain of our officers and directors have time and attention requirements for other
employers, including MC, and other third parties with which they are affiliated, and, in the case of our officers and directors affiliated with MC, may have time and attention requirements for other blank check companies that MC may sponsor in
the future. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental effect on
us.
Our ability to successfully effect our initial business combination and to be successful thereafter will be dependent upon the efforts of our key
personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target
business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial business combination, it is likely that some or all of
the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be
correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These
agreements may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or
consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of
cash payments and/or our securities for services they would render to us after the completion of the business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a
target business, subject to his or her fiduciary duties under Delaware law. However, we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be the determining factor in our
decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our initial business combination. We cannot assure
you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business combination.
We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination
with a target business whose management may not have the skills, qualifications or abilities to manage a public company.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management
may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we
suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any
securityholders who choose to remain securityholders following our initial business combination could suffer a reduction in the value of their securities. Such securityholders are unlikely to have a remedy for such reduction in value.
The officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s key
personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidates’ key personnel upon the completion of our initial business combination cannot be ascertained at this
time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of
an acquisition candidate will not wish to remain in place.
Our officers and directors allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to
devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required to, and do not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time
between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our officers is engaged in
several other business endeavors for which he may be entitled to substantial compensation and our officers are not obligated to contribute any specific number of hours per week to our affairs. In particular, certain of our officers and
directors are employed by MC or its affiliates, which may make investments in securities or other interests of or relating to companies in industries that we may make target for our initial business combination. MC and its affiliates do not
have any duty to offer acquisition opportunities to us. Our officers and directors also serve or may in the future serve as officers and board members for other entities. In addition, our officers and directors affiliated with MC may have time
and attention requirements for other blank check companies that MC may sponsor in the future. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current
commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination. For a complete discussion of our officers’ and directors’ other business
affairs, please see “Item 10. Directors, Executive Officers and Corporate Governance.”
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar
to those intended to be conducted by us, including another blank check company, and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Following the completion of the IPO and until we consummate our initial business combination, we intend to engage in the business of identifying and combining with one or
more businesses. Our sponsor and officers and directors are, or may in the future become, affiliated with entities that are engaged in a similar business, including another blank check company that may have acquisition objectives that are
similar to ours or that is focused on a particular industry. Moreover, MC and its affiliates, including our officers and directors who are affiliated with MC, may sponsor or form other blank check companies similar to ours during the period in
which we are seeking an initial business combination. Any such companies may present additional conflicts of interest in pursuing an acquisition target.
Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain
fiduciary or contractual duties. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target
business may be presented to other entities prior to its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless
such opportunity is expressly offered to such person solely in their capacity as our director or officer and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
For a complete discussion of our officers’ and directors’ business affiliations and the potential conflicts of interest that you should be aware of, please see “Item 10.
Directors, Executive Officers and Corporate Governance.”
Our officers, directors, securityholders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, securityholders or affiliates from having a direct or indirect pecuniary or financial
interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into a business combination with a target business that is affiliated with our founders, our
directors or officers, although we do not intend to do so. Nor do we have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us, including the formation of, or
participation in, one or more other blank check companies. For example, our officers and directors who are affiliated with MC or its affiliates, may sponsor or form other blank check companies similar to ours during the period in which we are
seeking an initial business combination. Accordingly, such persons or entities may have a conflict between their interests and ours.
We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our
founders, officers or directors which may raise potential conflicts of interest.
In light of the involvement of our founders, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our founders,
officers and directors. Our officers and directors also serve as officers and board members for other entities, including, without limitation, those described under “Management-Conflicts of Interest.” Such entities may compete with us for
business combination opportunities. Our founders, officers and directors are not currently aware of any specific opportunities for us to complete our initial business combination with any entities with which they are affiliated, and there have
been no substantial discussions concerning a business combination with any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction
if we determined that such affiliated entity met our criteria for a business combination as set forth in “Item 1. Business-Selection of a Target Business and Structuring of Our Initial Business Combination” and such transaction was approved by
a majority of our disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, regarding the fairness to our company from a
financial point of view of a business combination with one or more domestic or international businesses affiliated with our founders, officers or directors, potential conflicts of interest still may exist and, as a result, the terms of the
business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
Since our initial stockholders will lose their entire investment in us if our initial business combination is not completed, a conflict of interest may
arise in determining whether a particular business combination target is appropriate for our initial business combination.
In August 2020, our founders purchased an aggregate of 7,187,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. In August
2020, our sponsor transferred 145,000 founder shares to each of our independent directors at their original per share purchase price. As such, our initial stockholders collectively own 20% of our outstanding shares. The founder shares will be
worthless if we do not complete an initial business combination. In addition, in connection with the closing of the IPO, our initial stockholders purchased an aggregate of 7,000,000 private placement warrants, each exercisable to purchase one
share of our Class A common stock, for a purchase price of $7,000,000 in the aggregate, or $1.00 per warrant. The private placement warrants will also be worthless if we do not complete a business combination. Each private placement warrant may
be exercised for one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein.
The founder shares are identical to the shares of Class A common stock included in the units being sold in the IPO, except that: (i) only holders of the founder shares have
the right to vote on the election of directors prior to our initial business combination; (ii) the founder shares are subject to certain transfer restrictions; (iii) each of our founders, officers and directors have entered into a letter
agreement with us, pursuant to which they have agreed (A) to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with (1) the completion of our initial business combination and (2) a
stockholder vote to amend our amended and restated certificate of incorporation (x) 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 our initial business combination within 24 months from the closing of the IPO or (y) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (B) to waive
their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 24 months from the closing of the IPO (although they will be
entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame); (iv) the founder shares are automatically
convertible into our Class A common stock at the time of our initial business combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described herein; and
(v) the founder shares are entitled to registration rights.
The personal and financial interests of our officers and directors may influence their motivation in identifying and selecting a target business combination, completing an
initial business combination and influencing the operation of the business following the initial business combination.
None of Cowen and Company, LLC or, any of its affiliates has an obligation to provide us with potential investment opportunities or to devote any
specified amount of time or support to our company’s business.
Although we expect we may benefit from Cowen and Company, LLC’s and its affiliates’ networks of relationships and processes for sourcing and evaluating potential
acquisition targets, neither it nor any of its affiliates has any legal or contractual obligation to seek on our behalf or present to us investment opportunities that might be suitable for our business, and they may allocate any such
opportunities at their discretion to us or other parties. We have no investment management, advisory, consulting or other agreement in place with Cowen or any of its affiliates that obligates them to undertake efforts on our behalf or that
govern the manner in which they will allocate investment opportunities. Moreover, even if Cowen or one of its affiliates refers an opportunity to us, there can be no assurance that such an opportunity will result in an acquisition agreement or
a business combination.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our
leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our
initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no
issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
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default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial
ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
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our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;
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our inability to pay dividends on our common stock;
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures,
acquisitions and other general corporate purposes;
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and
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other purposes and other disadvantages compared to our competitors who have less debt.
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We may only be able to complete one business combination with the proceeds of the IPO and the sale of the private placement warrants, which will cause
us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.
The net proceeds from the IPO and the sale of the private placement warrants provided us with approximately $242,350,000 that we may use to complete our initial business
combination (after payment of the Marketing Fee of $8,750,000), that we may use to complete our initial business combination (and prior to any post-IPO working capital expenses).
We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we
may not be able to effectuate our initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial
statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity our lack
of diversification may subject us to numerous economic, competitive and regulatory risks. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities
which may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single business, property or asset; or
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dependent upon the development or market acceptance of a single or limited number of products, processes or services.
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This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the
particular industry in which we may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to
complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its
business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. With multiple business combinations, we could
also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent
assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete our initial business combination with a private company about which little information is available, which may result in a
business combination with a business that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally
exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in a business combination with a business that is
not as profitable as we suspected, if at all.
Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon
loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire less than 100% of the
outstanding equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise
acquires a controlling interest in the target business sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if
the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post business combination company, depending on
valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A common stock in exchange for all of the outstanding
capital stock of a target. In this case, we would acquire a controlling 100% 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. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group
obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business. We cannot provide assurance that, upon
loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a business
combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in
an amount that would cause our net tangible assets, after payment of the Marketing Fee, to be less than $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules), and the agreement relating to our initial business combination
may have additional net tangible asset or cash requirements. As a result, we may be able to complete our initial business combination even though a substantial majority of our public stockholders do not agree with the transaction and have
redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, have entered into privately
negotiated agreements to sell their shares to our founders, officers, directors, advisors or any of their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are
validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination
or redeem any shares, all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
The exercise price for the public warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the warrants are
more likely to expire worthless.
The exercise price of the public warrants is higher than is typical in many similar blank check companies in the past. Historically, the exercise price of a warrant was
generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our public warrants is $11.50 per share, subject to adjustment as provided herein. As a result, the warrants are less likely to ever
be in the money and more likely to expire worthless.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and
modified governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us
to complete our initial business combination but that some of our stockholders may not support.
In order to effectuate a business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing
instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds, extended the time to consummate an initial business combination and, with
respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. We cannot assure you that we will not seek to amend our charter or governing instruments, including their
warrant agreements, in order to effectuate our initial business combination.
Certain provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and
corresponding provisions of the agreement governing the release of funds from our trust account) may be amended with the approval of holders of at least 65% of our common stock, which is a lower amendment threshold than that of some other
blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders
may not support.
Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s
pre-business combination activity, without approval by holders of a certain percentage of the company’s shares. In those companies, amendment of these provisions typically requires approval by holders holding between 90% and 100% of the
company’s public shares. Our amended and restated certificate of incorporation provides that any of its provisions related to pre-business combination activity, other than amendments relating to the appointment of directors, which require the
approval of holders of at least 90% of our outstanding common stock entitled to vote thereon (including the requirement to deposit proceeds of the IPO and the private placement of warrants into the trust account and not release such amounts
except in specified circumstances, and to provide redemption rights to public stockholders, as described herein), may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon, and corresponding provisions
of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon. In all other instances our amended and restated certificate of
incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders, who collectively
beneficially owned 20% of our common stock, may participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be
able to amend the provisions of our amended and restated certificate of incorporation which govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete a business
combination with which you do not agree.
We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business,
which could compel us to restructure or abandon a particular business combination.
Although we believe that the net proceeds of the IPO and the sale of the private placement warrants will be sufficient to allow us to complete our initial business
combination, we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of the IPO and the sale of the private placement warrants prove to be insufficient, either because of the size of our initial business
combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination
or the terms of negotiated transactions to purchase shares in connection with our initial business combination, we may be required to seek additional financing or to abandon the proposed business combination. We cannot assure you that such
financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction
or abandon that particular business combination and seek an alternative target business candidate. In addition, even if we do not need additional financing to complete our initial business combination, we may require such financing to fund the
operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is
required to provide any financing to us in connection with or after our initial business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only
approximately $10.00 per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “-If
third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
Our initial stockholders control the election of our board of directors until consummation of our initial business combination and hold a substantial
interest in us. As a result, they will elect all of our directors prior to our initial business combination and may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Upon the closing of the IPO, our initial stockholders owned 20% of our outstanding shares of common stock. In addition, the founder shares, all of which are held by our
initial stockholders, entitle the holders to elect all of our directors prior to our initial business combination. Holders of our public shares have no right to vote on the election of directors during such time. These provisions of our amended
and restated certificate of incorporation may only be amended if approved by holders of at least 90% of our outstanding common stock entitled to vote thereon. As a result, you will not have any influence over the election of directors prior to
our initial business combination.
Neither our initial stockholders nor, to our knowledge, any of our officers or directors, have any current intention to purchase additional securities. Factors that would
be considered in making such additional purchases would include consideration of the current trading price of our Class A common stock. In addition, as a result of their substantial ownership in our company, our initial stockholders may exert a
substantial influence on other actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation or bylaws and approval of major corporate
transactions. If our initial stockholders purchase any additional shares of Class A common stock in the aftermarket or in privately negotiated transactions, this would increase their influence over these actions. Accordingly, our initial
stockholders exert significant influence over actions requiring a stockholder vote at least until the completion of our initial business combination.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant; provided that
the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period
ending on the third trading day prior to the date we send the notice of such redemption to the warrant holders. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify
the underlying securities for sale under all applicable state securities laws. As a result, we may redeem the warrants as set forth above even if the holders are otherwise unable to exercise their warrants. Redemption of the outstanding
warrants could force you to (i) exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) sell your warrants at the then-current market price when you might otherwise wish to hold
your warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the private placement warrants
are redeemable by us so long as they are held by our initial stockholders or their permitted transferees.
In addition, we may redeem your warrants after they become exercisable for $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that
holders will be able to exercise their warrants prior to redemption for a number of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock. Any such redemption may have similar
consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of
the Class A common stock had your warrants remained outstanding.
Our warrants and founder shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate our
initial business combination.
We issued warrants to purchase 12,500,000 shares of our Class A common stock, at a price of $11.50 per share (subject to adjustment as provided herein), as part of the
units offered in the IPO and, simultaneously with the closing of the IPO, we issued in a private placement warrants to purchase an aggregate of 7,000,000 shares of Class A common stock at $11.50 per share (subject to adjustment). Prior to the
IPO, our founders purchased an aggregate of 7,187,500 founder shares in a private placement, and our sponsor transferred an aggregate of 435,000 of its founder shares to our independent directors. The founder shares are convertible into shares
of Class A common stock on a one-for-one basis, subject to adjustment as provided herein. In addition, if our sponsor, an affiliate of our sponsor or certain of our officers and directors make any working capital loans, up to $1,500,000 of such
loans may be converted into warrants, at the price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants.
To the extent we issue shares of Class A common stock for any reason, including to effectuate a business combination, the potential for the issuance of a substantial number
of additional shares of Class A common stock upon exercise of these warrants or conversion rights could make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of outstanding shares of our
Class A common stock and reduce the value of the shares of Class A common stock issued to complete the business combination. Therefore, our warrants and founder shares may make it more difficult to effectuate a business combination or increase
the cost of acquiring the target business.
The private placement warrants are identical to the warrants sold as part of the units in the IPO except that, so long as they are held by our initial stockholders or their
permitted transferees, (i) they are not redeemable by us, except in certain circumstances, (ii) they (including the shares of Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be
transferred, assigned or sold by our sponsor until 30 days after the completion of our initial business combination, (iii) they may be exercised by the holders on a cashless basis, and (iv) they (including the shares of Class A common stock
issuable upon exercise of these warrants) are entitled to registration rights.
Because each unit contains one-half of one warrant and only a whole warrant may be exercised, the units may be worth less than units of other blank
check companies.
Each unit contains one-half of one warrant. Because, pursuant to the warrant agreement, the warrants may only be exercised for a whole number of shares of Class A common
stock, only a whole warrant may be exercised at any given time. This is different from other offerings similar to ours whose units include one share of common stock and one whole warrant to purchase one whole share. We have established the
components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of a business combination since the warrants are exercisable in the aggregate for one-half of the number of shares compared to units that
each contain a whole warrant to purchase one whole share, thus making us, we believe, a more attractive business combination partner for target businesses. Nevertheless, this unit structure may cause our units to be worth less than if they
included a warrant to purchase one whole share.
A provision of our warrant agreement may make it more difficult for use to consummate an initial business combination.
Unlike most blank check companies, if we issue additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of
our initial business combination at a newly issued price of less than $9.20 per share of common stock, then the exercise price of the warrants will be adjusted to be equal to 115% of the newly issued price. This may make it more difficult for
us to consummate an initial business combination with a target business.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous
initial business combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include target
historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer
rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards as
issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight
Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such
financial statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require
substantial financial and management resources, and increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year
ending December 31, 2021. Only in the event we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public
accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to
other public companies because a target business with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development
of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors
might be willing to pay in the future for our Class A common stock and could entrench management.
Our amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their
best interests. These provisions include two-year director terms and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may
discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of
management more difficult and may discourage transactions that could involve payment of a premium over prevailing market prices for our securities.
We would be subject to a second level of U.S. federal income tax on a portion of our income if we are determined to be a personal holding company (a
“PHC”), for U.S. federal income tax purposes.
A U.S. corporation generally will be classified as a PHC for U.S. federal income tax purposes in a given taxable year if (i) at any time during the last half of such
taxable year, five or fewer individuals (without regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain tax exempt organizations, pension funds and charitable trusts) own or are
deemed to own (pursuant to certain constructive ownership rules) more than 50% of the stock of the corporation by value and (ii) at least 60% of the corporation’s adjusted ordinary gross income, as determined for U.S. federal income tax
purposes, for such taxable year consists of PHC income (which includes, among other things, dividends, interest, certain royalties, annuities and, under certain circumstances, rents).
Depending on the date and size of our initial business combination, it is possible that at least 60% of our adjusted ordinary gross income may consist of PHC income as
discussed above. In addition, depending on the concentration of our stock in the hands of individuals, including the members of our sponsor and certain tax exempt organizations, pension funds and charitable trusts, it is possible that more than
50% of our stock may be owned or deemed owned (pursuant to the constructive ownership rules) by such persons during the last half of a taxable year. Thus, no assurance can be given that we will not become a PHC in the future. If we are or were
to become a PHC in a given taxable year, we would be subject to an additional PHC tax, currently 20%, on our undistributed PHC income, which generally includes our taxable income, subject to certain adjustments.
If we effect our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to a
variety of additional risks that may negatively impact our operations.
We may pursue a business combination with a target business in any geographic location. If we effect our initial business combination with a company with operations or
opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
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costs and difficulties inherent in managing cross-border business operations and complying with difficult commercial and legal requirements of the overseas market;
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rules and regulations regarding currency redemption;
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complex corporate withholding taxes on individuals;
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laws governing the manner in which future business combinations may be effected;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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longer payment cycles;
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tax issues, such as tax law changes and variations in tax laws as compared to the United States;
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changes in local regulations as part of a response to the COVID-19 coronavirus outbreak;
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currency fluctuations and exchange controls;
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rates of inflation;
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challenges in collecting accounts receivable;
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cultural and language differences;
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employment regulations;
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crime, strikes, riots, civil disturbances, terrorist attacks, natural disasters and wars, including the conflict in Ukraine and the surrounding region;
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deterioration of political relations with the United States; and
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government appropriation of assets.
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We may not be able to adequately address these additional risks. If we were unable to do so, we may be unable to complete such combination or, if we complete such
combination, our operations might suffer, either of which may adversely impact our results of operations and financial condition.
If our management following our initial business combination is unfamiliar with United States securities laws, they may have to expend time and
resources becoming familiar with such laws, which could lead to various regulatory issues.
Following our initial business combination, any or all of our management could resign from their positions as officers of the company, and the management of the target
business at the time of the business combination could remain in place. Management of the target business may not be familiar with United States securities laws. If new management is unfamiliar with United States securities laws, they may have
to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
After our initial business combination, substantially all of our assets may be located in a foreign country and substantially all of our revenue will be
derived from our operations in such country. Accordingly, our results of operations and prospects will be subject, to a significant extent, to the economic, political, social and government policies, developments and conditions in the country
in which we operate.
The economic, political and social conditions, as well as government policies, of the country in which our operations are located could affect our business. Economic growth
could be uneven, both geographically and among various sectors of the economy and such growth may not be sustained in the future. If in the future such country’s economy experiences a downturn or grows at a slower rate than expected, there may
be less demand for spending in certain industries. A decrease in demand for spending in certain industries could materially and adversely affect our ability to find an attractive target business with which to consummate our initial business
combination and if we effect our initial business combination, the ability of that target business to become profitable.
Exchange rate fluctuations and currency policies may cause a target business’ ability to succeed in the international markets to be diminished.
In the event we acquire a non-U.S. target, all revenues and income would likely be received in a foreign currency, and the dollar equivalent of our net assets and
distributions, if any, could be adversely affected by reductions in the value of the local currency. The value of the currencies in our target regions fluctuate and are affected by, among other things, changes in political and economic
conditions. Any change in the relative value of such currency against our reporting currency may affect the attractiveness of any target business or, following consummation of our initial business combination, our financial condition and
results of operations. Additionally, if a currency appreciates in value against the dollar prior to the consummation of our initial business combination, the cost of a target business as measured in dollars will increase, which may make it less
likely that we are able to consummate such transaction.
Economic uncertainty or economic deterioration could adversely affect us.
There continues to be global economic uncertainty, as well as increased inflation. Ongoing political changes and conflicts in the U.S. and abroad continue to contribute to global economic
uncertainty and volatility in the global financial markets. In February 2022, Russian forces launched significant military actions against Ukraine, which has caused significant international conflict, including sanctions, tensions and military
actions. In addition, the COVID-19 pandemic continues to contribute to economic uncertainty. Continued economic uncertainty may continue to drive stock market and interest rate volatility, increased inflation and adversely impact consumer
confidence, product demand, and our ability to refinance our debt. Economic conditions, along with our operating performance, may also materially and adversely impact our ability to access the financial markets. Accordingly, our future business
and financial results are subject to uncertainty. If economic conditions deteriorate in the future, our future revenues and financial results could be materially and adversely affected.
As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more
competition for attractive targets. This could increase the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business combination.
In recent years, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets for special purpose
acquisition companies have already entered into an initial business combination, and there are still many special purpose acquisition companies seeking targets for their initial business combination, as well as many such companies currently in
registration. As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an initial business combination.
In addition, because there are more special purpose acquisition companies seeking to enter into an initial business combination with available targets, the competition for
available targets with attractive fundamentals or business models may increase, which could cause target companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry
sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or
frustrate our ability to find and consummate an initial business combination, and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to
continue as a “going concern.”
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting
Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have determined that if the Company is unable to complete a Business Combination by October 6, 2022, then the Company
will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements
contained elsewhere in this report do not include any adjustments that might result from our inability to continue as a going concern.
General Risk Factors
We are a recently incorporated company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our
business objective.
We are a recently incorporated company with no operating results. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our
business objective of completing our initial business combination with one or more target businesses. We may be unable to complete our initial business combination. If we fail to complete our initial business combination, we will never generate
any operating revenues.
Past performance by MC, members of our management team and their respective affiliates, may not be indicative of future performance of an investment in
the company.
We will consider a business combination outside of our management’s areas of expertise if a business combination candidate is presented to us and we determine that such
candidate offers an attractive acquisition opportunity for our company. In the event we elect to pursue an acquisition outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its
evaluation or operation, and the information contained in this report regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be
able to adequately ascertain or assess all of the significant risk factors related to such acquisition. Accordingly, any securityholders who choose to remain securityholders following our initial business combination could suffer a reduction in
the value of their securities. Such securityholders are unlikely to have a remedy for such reduction in value.
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of
the then outstanding public warrants.
Our warrants are issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement
provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants
to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding
public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to,
among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of our Class A common stock purchasable upon exercise of a warrant.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain
exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other
public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years,
although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging
growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our
reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have
elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or
revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced
disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock
that is held by non-affiliates exceeds $250 million as of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock that is held by non-affiliates exceeds
$700 million as of the prior June 30th. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
Data privacy and security breaches, including, but not limited to, those resulting from cyber incidents or attacks, acts of vandalism or theft, computer
viruses and/or misplaced or lost data, could result in information theft, data corruption, operational disruption, reputational harm, criminal liability and/or financial loss.
In searching for targets for our initial business combination, we may depend on digital technologies, including information systems, infrastructure and cloud applications
and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or privacy and security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud,
could lead to corruption or misappropriation of our assets, proprietary information, and sensitive or confidential data. As an early stage company without significant investments in data privacy or security protection, we may not be
sufficiently protected against such occurrences and therefore could be liable for privacy and security breaches, including potentially those caused by any of our subcontractors. We may not have sufficient resources to adequately protect
against, or to investigate and remediate any vulnerability to, cyber incidents or other incidents that result in a privacy or security breach. It is possible that any of these occurrences, or a combination of them, could have adverse
consequences on our business and lead to reputational harm, criminal liability and/or financial loss.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for
certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees or other
stockholders.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware
shall, to the fullest extent permitted by law, be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of
breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL,
our amended and restated certificate of incorporation or our bylaws, or (iv) action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware, except for, as to each of (i) through (iv) above, any claim (A)
as to which the Court of Chancery of the State of Delaware determines that there is an indispensable party not subject to the personal jurisdiction of the Court of Chancery of the State of Delaware (and the indispensable party does not consent
to the personal jurisdiction of the Court of Chancery of the State of Delaware within 10 days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of
Delaware, (C) for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction or (D) any action arising under the Securities Act, as to which the Court of Chancery of the State of Delaware and the federal
district court for the District of Delaware shall have concurrent jurisdiction. The federal courts shall be the sole and exclusive forum for the resolution of any action asserting a claim arising under the Exchange Act or any other claim for
which the federal courts have exclusive jurisdiction. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in any shares of our capital stock shall be deemed to have notice of
and consented to the forum provision in our amended and restated certificate of incorporation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a different judicial forum, including one that it may find
favorable or convenient for a specified class of disputes with us or our directors, officers, other stockholders, or employees, which may discourage such lawsuits, make them more difficult or expensive to pursue, and result in outcomes that are
less favorable to such stockholders than outcomes that may have been attainable in other jurisdictions. By agreeing to this provision, however, stockholders will not be deemed to have waived our compliance with the federal securities laws and
the rules and regulations thereunder. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of
provisions to be inapplicable or unenforceable. If a court were to find the choice of forum provisions in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs
associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business and results of operations.
| Item 1B. |
Unresolved Staff Comments
|
None.
| Item 2. |
Properties
|
We do not own any real estate or other physical properties materially important to our operation. We currently maintain our executive offices at 2200 Atlantic Street,
Stamford, Connecticut 06902. The cost for our use of this space is included in the $10,000 per month fee we pay to an affiliate of our sponsor for office space, administrative support services. We consider our current office space adequate for
our current operations.
| Item 3. |
Legal Proceedings
|
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity.
| Item 4. |
Mine Safety Disclosures
|
None.
PART II
| Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
|
Market Information
Our Units began trading on the NYSE under the symbol “ASAQ.U” on October 2, 2020. Commencing on October 15, 2020, holders of the Units could elect to separately trade the
shares of Class A common stock and warrants included in the Units. The shares of the Class A common stock and warrants that are separated, trade on the NYSE under the symbols “ASAQ” and “ASAQ WS”, respectively. Those Units not separated
continue to trade on the NYSE under the symbol “ASAQ”.
Holders
At March 31, 2022, there was one holder of record of our Units, one holder of record of our Class A common stock, five holders of record of our Class B common stock, one
holder of record of our warrants and five holders of record of our private placement warrants.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
Unregistered Sales of Equity Securities
The sales of the founder shares and private placement warrants to our initial stockholders as described herein were deemed to be exempt from registration under the
Securities Act, in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
Use of Proceeds
On October 6, 2020, we consummated our Initial Public Offering of 25,000,000 Units. The Units were sold at an offering price of $10.00 per Unit, generating total gross
proceeds of $250,000,000. Cowen and Company, LLC and Robert W. Baird & Co. Incorporated acted as the joint book-running managers. The securities sold in the offering were registered under the Securities Act on registration statement on Form
S-1 (No. 333-248782). The SEC declared the registration statement effective on October 1, 2020.
Of the gross proceeds received from the Initial Public Offering, $245,000,000 was placed in the trust account.
We paid a total of $5,000,000 in underwriting discounts and commissions and $246,193 for other offering costs and expenses related to the Initial Public Offering. In
addition, we have agreed to pay the underwriters the Marketing Fee of $8,750,000 under a Business Combination Marketing Agreement entered into at the time of the IPO upon consummation of our initial business combination.
There has been no material change in the planned use of proceeds from the Initial Public Offering as described in our final prospectus dated October 1, 2020, which was
filed with the SEC.
| Item 6. |
Selected Financial Data
|
Pursuant to Release No. 33-10890 (including the transition guidance therein), which was adopted by the SEC on November 19, 2020, the Company has elected to exclude the
disclosures formerly required by this Item 6.
References to the “Company,” “us,” “our” or “we” refer to Atlantic Avenue Acquisition Corp. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words
such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of
management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors
detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this report as our initial business combination. We have not selected any business combination target and we have not, nor has
anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target.
In September 2020, our independent directors purchased, in advance, an aggregate of 300,000 private placement warrants, at a price of $1.00 per warrant, for an aggregate
purchase price of $300,000. Simultaneously with the closing of the Initial Public Offering, Atlantic Avenue Partners LLC (the “sponsor”) purchased an aggregate of 3,950,000 private placement warrants and ASA Co-Investment LLC (“ASA
Co-Investment”) purchased an aggregate of 2,750,000 private placement warrants at a price of $1.00 per warrant, for an aggregate purchase price of $7,000,000. A portion of the $7,000,000 proceeds from the private placements was added to the
net proceeds from the Initial Public Offering held in the trust account.
As of December 31, 2021, we held cash of $1,085,937 and deferred legal fees of $2,115,147. Further, we expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Results of Operations
Our entire activity since inception up to December 31, 2021, relates to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, a
search for a Business Combination candidate. We will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest.
For the year ended December 31, 2021, we had net income of $9,589,773, which consisted of $16,687 in interest earned on marketable securities held in the Trust Account and
cash held in the working capital account, and $11,658,700 in unrealized gain on change in fair value of warrants, offset by $2,085,614 in formation and operating costs.
For the period from July 27, 2020 (inception) through December 31, 2020, we had net loss of $2,302,514, which consisted of $4,658 in interest earned on marketable securities
held in the Trust Account, offset by $1,831,450 in unrealized loss on change in fair value of warrants, $295,225 in offering costs related to the warrants and $180,497 in formation and operating costs.
Liquidity and Capital Resources
As of December 31, 2021, we had cash of $1,085,937 and a working capital deficiency of ($1,127,084).
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating the business. However, if the estimate of the costs of
identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to the
Business Combination. Moreover, in addition to the access to the Working Capital Loans (as defined in Note 5 to the Company’s Notes to the Financial Statements), we may need to obtain other financing either to complete our Business
Combination or because we become obligated to redeem a significant number of the public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business
Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of the Business Combination. If we are unable to complete the Business Combination because we do not
have sufficient funds available, we will be forced to cease operations and liquidate the Trust Account. In addition, following the Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to
meet our obligations.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of
our officers and directors to meet the needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying
and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring,
negotiating and consummating the Business Combination.
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to
Continue as a Going Concern,” management has determined that if the Company is unable to complete a Business Combination by October 6, 2022, then the Company will cease all operations except for the purpose of liquidating. The date for
mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required
to liquidate after October 6, 2022.
Critical Accounting Policies and Estimates
The preparation of the financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could
differ from those estimates. We have identified the following as our critical accounting policies:
Class A Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption
rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as
stockholders’ deficit. Our common stock feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, 25,000,000 shares of Class A common stock
subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of our balance sheets at December 31, 2021 and December 31, 2020, respectively.
Net Income (Loss) Per Common Share
We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro-rata between the two classes of
shares. The potential common stock for outstanding warrants to purchase our shares were excluded from diluted earnings per share for the years ended December 31, 2021, and 2020, because the warrants are contingently exercisable, and the
contingencies have not yet been met. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common stock for the periods.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock
purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
We issued 12,500,00 warrants to purchase shares of Class A common stock to investors in our Initial Public Offering and issued 7,000,000 private placement warrants. All of our
outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The
liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The private placement warrants were initially valued at their purchase price
($1.00 per warrant). Their value as of December 31, 2021, and 2020, was determined using a Monte Carlo Simulation. The Public Warrants were initially valued using a Monte Carlo Simulation. Their value as of December 31, 2021, and 2020, was
determined based on the closing market price of the Public Warrants as of that date.
Offering Costs
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs consist of legal,
accounting, underwriting fees and other costs incurred in connection with the preparation for the Public Offering. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis
compared to total proceeds received. Offering costs associated with warrant liabilities are expensed, and offering costs associated with the Class A common stock are charged to temporary equity.
Off-Balance Sheet Arrangements
As of December 31, 2021, and 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
As of December 31, 2021, and 2020, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds
received into the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of
these investments, we believe there will be no associated material exposure to interest rate risk.
| Item 8. |
Financial Statements and Supplementary Data
|
This information appears following Item 15 of this Report and is included herein by reference.
| Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
None.
| Item 9A. |
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure
that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our principal executive officer and principal financial officer carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of December 31, 2021. Based upon their evaluation, our principal executive officer and principal financial officer concluded that our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for
complex financial instruments. As a result, our management performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management
believes that the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, result of operations and cash flows of the periods presented.
Management has identified a material weakness in internal controls related to the accounting for complex financial instruments. While we have processes to identify and appropriately apply
applicable accounting requirements, we plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party
professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended
effects.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and
the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all
our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions
Management’s Report on Internal Controls over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in
accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
|
(1)
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of our company;
|
|
(2)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and disbursement are being made only
in accordance with authorizations of our management and directors; and
|
|
(3)
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed
the effectiveness of our internal control over financial reporting at December 31, 2021. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2021 because of material
weaknesses in our internal control over financial reporting. Specifically, our management has concluded that our control around the interpretation and accounting for certain complex financial instruments issued by the Company was not
effectively designed or maintained. This material weakness resulted in the restatement of the company’s balance sheet as of October 6, 2020, its annual financial statements for the period ended December 31, 2020 and its interim financial
statements for the quarters ended September 30, 2021, June 30, 2021 and March 31, 2021.
This Form 10-K does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Management has made changes in the Company’s internal control over financial reporting to enhance our processes to identify and appropriately apply applicable accounting requirements to better
evaluate and understand the nuances of the complex accounting standards that apply to our financial statements, including providing enhanced access to accounting literature, research materials and documents and increased communication among our
personnel and third-party professionals with whom we consult regarding complex accounting applications. The Company can offer no assurance that these changes will ultimately have the intended effects.
| Item 9B. |
Other Information
|
None.
| Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
|
Not applicable.
PART III
| Item 10. |
Directors, Executive Officers and Corporate Governance
|
Our directors and executive officers are as follows:
|
Name
|
Age
|
Position
|
||||
|
Ashok Nayyar
|
60
|
Chief Executive Officer, Chairman
|
||||
|
David Gelobter
|
54
|
Co-President and Secretary
|
||||
|
Michael Zimmerman
|
68
|
Co-President
|
||||
|
Barry Best
|
56
|
Chief Financial Officer
|
||||
|
James Dubin
|
75
|
Director
|
||||
|
Thomas Neff
|
84
|
Director
|
||||
|
Robert Halmi
|
65
|
Director
|
||||
|
Mark Field
|
72
|
Director
|
Ashok Nayyar has been our Chief Executive Officer and has served as our Chairman of our board of directors since our inception in
July 2020. Mr. Nayyar is the Founder and has served as the Managing Director and Chief Investment Officer of MC since May 2013. Mr. Nayyar has over 19 years of bulge-bracket finance experience. He was the co-head of Global Leveraged Finance at
Morgan Stanley & Co. LLC (“Morgan Stanley”) from 2006 to 2008 where he had responsibility for leveraged loans, high yield bonds, asset-based loans, debtor-in-possession lending, non-investment grade and investment grade acquisition finance
and syndication of all non-investment grade debt transactions. Mr. Nayyar joined Salomon Brothers in 1989 and was a Managing Director in the Leveraged Finance group at Citigroup from 1997 to 2006. He served as co-head of the North American
Leveraged Finance group at Citigroup from 2003 to 2006. Under his leadership, Citigroup moved from the number four ranked high yield underwriter to number one. Mr. Nayyar was a member of the Debt Capital Markets Management Committee at
Citigroup and a member of the Investment Banking Management Committee and the Global Capital Markets Management Committee at Morgan Stanley. In addition to his responsibility for supervising all leveraged capital raising as group head at
Citigroup and Morgan Stanley, Mr. Nayyar has worked on and overseen transactions which raised in excess of $250 billion in leveraged loans, bridge loans, high yield bonds and mezzanine debt. Mr. Nayyar serves on the board of directors of Ryan,
LLC and formerly served on the board of Endeavor International Corporation. Mr. Nayyar holds an M.B.A. from the University of Chicago Graduate School of Business and a B.A. from Columbia University. Mr. Nayyar’s significant investment and
financial expertise make him well qualified to serve as a member of our board of directors.
David Gelobter has been our Co-President and Secretary since our inception in July 2020. Mr. Gelobter has served as a Managing
Director of MC since October 2015. Prior to joining MC, Mr. Gelobter was the Managing Principal of Emerson Capital, LP, a hedge fund which he founded in 2006 that focused on consumer and services companies as well as special situations, from
June 2007 to September 2015. From 2003 to 2005, Mr. Gelobter was an Analyst at Tremblant Capital Group (“Tremblant”), a hedge fund focused on the consumer industry. Prior to Tremblant, he was a Director in the Financial Sponsors Group at
Citigroup and Salomon Brothers from 1993 to 2002. Mr. Gelobter started his career in operational and investment roles at General Electric and GE Capital Inc. He is currently a member of the board of trustees for New York Public Radio and a
member of the board of directors of Mobile Technologies Inc. Mr. Gelobter holds an M.B.A. from the Harvard Business School and a B.A. from Williams College.
Michael Zimmerman has been our Co-President since our inception in July 2020. Mr. Zimmerman is a Co-Founder and has served as
Managing Director of MC since May 2013. Prior to joining MC, Mr. Zimmerman was a Senior Managing Director of Cyan Partners, LP and from 2004 to 2011 served as President of Tower Capital, LLC, a hedge fund of funds providing manager selection,
portfolio management, hedging, risk management and monitoring services. From 1994 to 2003, he was a Managing Director in Investment Banking at Salomon Brothers and then the Global Head of Private Equity at Citigroup. Mr. Zimmerman managed the
firm’s relationships with many of the industry’s largest private equity franchises. He also provided strategic advisory services to multiple sponsors. Additionally, he ran capital raising for PIPEs, private equity and mezzanine capital raising
for corporate clients. Previously, Mr. Zimmerman was a Managing Director at CS First Boston Group. During his seventeen-year tenure, Mr. Zimmerman was a senior member of the Financial Buyer’s Group, providing investment banking services to
private equity clients of the firm. For the first ten years of his career, he was a senior member of the Private Finance Group, and before that was in the Debt Capital Markets Group. Mr. Zimmerman holds an M.B.A. from Columbia University
Graduate School of Business and a B.A. from the University of North Carolina at Chapel Hill.
Barry Best has been our Chief Financial Officer since our inception in July 2020. Mr. Best is a Managing Director at MC where he
has been employed since April 2016. Mr. Best has more than 25 years of investment management, investment banking and capital markets experience. He was previously the President of AEG Capital, LLC, a Chicago-based investment banking firm
focused on advising middle market companies in connection with mergers and acquisitions and capital raising from October 2012 to March 2016. From 2006 to 2009, Mr. Best was the head of Sagent Advisors, LLC’s Private Capital Markets Group. Prior
to that he held several senior positions at Citigroup (including its predecessor firms, Salomon Brothers and Salomon Smith Barney) in the Mergers and Acquisitions and Financial Entrepreneurs Groups. Mr. Best began his career in 1989 as a member
of Salomon Brothers’ Mergers and Acquisitions Group, where he was a co-founder of the Financial Sponsors Group. He is a member of the board of directors of Mobile Technologies Inc. and Precision Spine, Inc. Mr. Best holds an M.B.A. from the
University of Chicago Graduated School of Business and a B.A. from the University of Illinois.
James Dubin has served on our board of directors since October 2020. Mr. Dubin served as the Executive Chairman of Conair Corporation, a global
manufacturer and distributor of hair fashion and kitchen appliances and accessories from 2018 until May 2021. Mr. Dubin has also served as the Managing Partner of Madison Place Partners, LLC, a financial and organizational consulting firm, and
as the Chairman of Lighthouse Guild International, a non-profit devoted to vision rehabilitation and advocacy for the blind and visually impaired, both since 2012. Prior to that, Mr. Dubin served as a senior partner of Paul, Weiss, Rifkind,
Wharton & Garrison LLP, where he served as chair of the firm’s Corporate Department, a member of its Management Committee and chair of its Finance Committee. Mr. Dubin is a member of the board of directors of Emmis Communications
Corporation, where he also serves as a member of the executive, audit, compensation and governance committees since 2012, and Omega Flex, Inc., where he also serves as a member of the executive, audit and corporate governance committees since
February 2019. Mr. Dubin has also served as a member of the boards of directors of Conair Corporation and Carnival Corporation & plc. Mr. Dubin was Vice Chairman of the Board of Governors of Tel Aviv University from 2004 until 2022 and a
past chair of its Buchmann Faculty of Law. Mr. Dubin has served as Treasurer of the Friends of Neuberger Museum of Art since 2020. Mr. Dubin is a former Chairman of The National Foundation for Advancement in the Arts (now Young Arts) and a
former President of the Board of Trustees of Williston Northampton School. Further, Mr. Dubin has served as a member of the Board of Trustees of the American Ballet Theatre, the Miami City Ballet, the Presidential Scholars Foundation, the
Jewish Home Lifecare System and as Vice Chair of the Board of Trustees of the Solomon Schechter School of Westchester. Mr. Dubin received a Bachelor of Arts Degree from the University of Pennsylvania and a Juris Doctor from Columbia University
School of Law. Mr. Dubin’s significant legal, financial and investment expertise makes him well qualified to serve as a member of our board of directors.
Thomas Neff has served on our board of directors since October 2020. Since 1976, Mr. Neff has served in various roles at Spencer
Stuart Management Consultants, N.A., the global executive search and leadership advisory firm. Mr. Neff currently serves as Chairman of Spencer Stuart, U.S. and previously managed the worldwide firm from 1979 to 1987. Previously, Mr. Neff was a
Principal with Booz Allen & Hamilton, the consulting firm. Earlier, Mr. Neff was CEO of Hospital Data Sciences, an information systems company. Mr. Neff began his career as a consultant with McKinsey & Company, the global consulting
firm, and worked in both New York and Australia. After McKinsey, Mr. Neff held a senior marketing position with TWA, the global airline. Mr. Neff currently serves on the board of Accolade, Inc., the publicly traded health, fitness and wellness
company, and is chair of the compensation committee and also sits on the nominating and governance committee. Previously, Mr. Neff served for 16 years on the board of directors of ACE Limited, which was renamed Chubb, a Zurich-based global
insurance company which now has in excess of $30 billion in revenues, as well as three other public companies. Hewitt Associates, Macmillan and Exult, until they were acquired. In each case, he chaired the compensation and/or nominating
committees. Mr. Neff also previously served on the board of Lord Abbett Mutual Funds, with assets in excess of $150 billion. Mr. Neff is a Trustee Emeritus of Lafayette College and past Chairman of the Board of Trustees of Brunswick School in
Greenwich, CT. Previously, Mr. Neff served on the board of directors of Greenwich Hospital and the Stanwich Club. Mr. Neff holds an M.B.A. from Lehigh University and a B.S. in Industrial Engineering from Lafayette College. Mr. Neff served as an
officer and aide de camp in the U.S. Army. Mr. Neff’s significant experience in leadership and board consulting and his extensive experience serving on public boards and his experience serving as chairman of multiple committees makes him well
qualified to serve as a member of our board of directors.
Robert Halmi has served on our board of directors since October 2020. Mr. Halmi is currently the Chairman and majority shareholder
of Great Point Media, a U.K.-based media fund, as well as CEO of Great Point Capital, a U.S. private equity fund that invests in television and film infrastructure. Prior to Great Point Media, he was the President and CEO of RHI Entertainment,
Inc., which was the successor to Hallmark Entertainment, LLC (a wholly-owned subsidiary of Hallmark Cards), which Mr. Halmi and members of senior management and affiliates acquired in 2006. Under Mr. Halmi’s leadership, Hallmark Entertainment
was one of the largest suppliers of movies and miniseries in the television industry. Prior to that, Mr. Halmi was instrumental in the formation of Crown Media Holdings, where he founded the Hallmark Channel. He is also an accomplished and
prolific film and television producer. He has produced more than 50 theatrical motion pictures and more than 350 movies and miniseries for television, including Lonesome Dove, which earned seven Emmy Awards and a Golden Globe for Best
Miniseries. Mr. Halmi’s productions have earned 76 Emmy Awards and were nominated for over 300 Emmy Awards. His career as a film producer began in 1980 with Wilson’s Reward, which garnered numerous awards, including a gold medal at the Houston
Film Festival. He has produced many award-winning television “events,” including Dreamkeeper, Dinotopia, Arabian Nights, The 10th Kingdom, Cleopatra, Alice in Wonderland, Supernova, Neverland, Treasure Island, Tin Man, Mitch Albom’s The Five
People You Meet in Heaven and King Solomon’s Mines. Mr. Halmi’s significant private equity and investment experience and public and private company leadership roles make him well qualified to serve as a member of our board of directors.
Mark Field has served on our board of directors since our inception in July 2020. Mr. Field has served as a Managing Director of
MC since July 2013. Mr. Field brings over forty years of experience in fixed income and high yield sales and trading to MC. Mr. Field was most recently the Co-Head of High Yield and a Senior Managing Director at Guggenheim Securities, LLC
(“Guggenheim Securities”) from 2010 to 2013. Prior to Guggenheim Securities, Mr. Field was the Co-Founder, Principal and President of Summit Securities Group (“Summit Securities”), a boutique high yield sales and trading broker dealer. Prior to
co-founding Summit Securities, Mr. Field was the Head of Fixed Income and a member of the Executive and Operating Committees of Schroder Investment Management North America Inc. (“Schroders”) from 1996 to 2000. Before Schroders, Mr. Field spent
23 years at Salomon Brothers where he was the Branch Manager of Chicago, Salomon’s largest regional office, the Head of Chicago Taxable Fixed Income Sales and ultimately the Head of High Yield. Mr. Field earned a M.S. in Finance from the
University of California at Los Angeles and a B.S.B.A. from the University of Denver. Mr. Field’s significant financial and investment expertise makes him well qualified to serve as a member of our board of directors.
Number, Terms of Office, Actions and Election of Officers and Directors
Our board of directors consists of five members. Holders of our founder shares have the right to elect all of our directors prior to consummation of our initial business
combination and holders of our public shares do not have the right to vote on the election of directors during such time. These provisions of our amended and restated certificate of incorporation may only be amended if approved by holders of at
least 90% of our outstanding common stock entitled to vote thereon. Each of our directors holds office for a two-year term. Subject to any other special rights applicable to the stockholders, any vacancies on our board of directors may be
filled by the affirmative vote of a majority of the remaining directors of our board or by a majority of the holders of our common stock (or, prior to our initial business combination, a majority of the holders of our founder shares).
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors
is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman, Chief Executive Officer, President, Chief Financial Officer, Vice Presidents,
Secretary, Assistant Secretaries, Treasurer and such other offices as may be determined by the board of directors.
Director Independence
Our board of directors has determined that each of James Dubin, Thomas Neff and Robert Halmi is independent under applicable SEC and NYSE rules. Our independent directors
have regularly scheduled meetings at which only independent directors are present.
Committees of the Board of Directors
Our board of directors has three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. Each committee
operates under a charter that has been approved by our board and has the composition and responsibilities described below. The charter of each committee is available on our website.
Audit Committee
The members of our audit committee consist of James Dubin, Thomas Neff and Robert Halmi. James Dubin serves as the chair of the audit committee.
Each member of the audit committee meets the financial literacy requirements of the NYSE and our board of directors has determined that James Dubin qualifies as an “audit
committee financial expert” as defined in applicable SEC rules and has accounting or related financial management expertise.
The primary purposes of our audit committee are to assist the board’s oversight of:
| • |
audits of our financial statements;
|
| • |
the integrity of our financial statements;
|
| • |
our process relating to risk management and the conduct and systems of internal control over financial reporting and disclosure controls and procedures;
|
| • |
the qualifications, engagement, compensation, independence and performance of our independent registered public accounting firm; and
|
| • |
the performance of our internal audit function.
|
The audit committee is governed by a charter that complies with the rules of the NYSE.
Compensation Committee
The members of our compensation committee consist of James Dubin, Thomas Neff and Robert Halmi. Thomas Neff serves as the chair of the compensation committee.
The primary purposes of our compensation committee are to assist the board in overseeing our management compensation policies and practices, including:
| • |
determining and approving the compensation of our executive officers; and
|
| • |
reviewing and approving incentive compensation and equity compensation policies and programs.
|
The compensation committee is governed by a charter that complies with the rules of the NYSE.
Nominating and Corporate Governance Committee
The members of our nominating and corporate governance consist of James Dubin, Thomas Neff and Robert Halmi. Robert Halmi serves as chair of the nominating and corporate governance committee.
The primary purposes of our nominating and corporate governance committee are to assist the board in:
| • |
identifying, screening and reviewing individuals qualified to serve as directors and recommending to the board of directors candidates for nomination for election at the annual meeting of stockholders or
to fill vacancies on the board of directors;
|
| • |
developing, recommending to the board of directors and overseeing implementation of our corporate governance guidelines;
|
| • |
coordinating and overseeing the annual self-evaluation of the board of directors, its committees, individual directors and management in the governance of the company; and
|
| • |
reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary.
|
The nominating and corporate governance committee is governed by a charter that complies with the rules of the NYSE.
Director Nominations
Our nominating and corporate governance committee will recommend to the board of directors candidates for nomination for election at the annual meeting of the stockholders.
Prior to our initial business combination, the board of directors will also consider director candidates recommended for nomination by holders of our founder shares during such times as they are seeking proposed nominees to stand for election
at an annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Prior to our initial business combination, holders of our public shares do not have the right to recommend director candidates for nomination to our
board of directors.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and
evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent
the best interests of our stockholders.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, and in the past year has not served, (i) as a member of the compensation committee or board of directors of another entity, one of
whose executive officers served on our compensation committee, or (ii) as a member of the compensation committee of another entity, one of whose executive officers served on our board of directors.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics applicable to our directors, officers and employees. A copy of the Code of Business Conduct and Ethics is available on
our website. Any amendments to or waivers of certain provisions of our Code of Business Conduct and Ethics will be disclosed on such website promptly following the date of such amendment or waiver.
Conflicts of Interest
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
| • |
the corporation could financially undertake the opportunity;
|
| • |
the opportunity is within the corporation’s line of business; and
|
| • |
it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.
|
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 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 that 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. Our amended and restated
certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or
officer of the company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. We do not believe, however, that the fiduciary duties or contractual obligations of
our officers or directors will materially affect our ability to complete our initial business combination.
Potential investors should also be aware of the following other potential conflicts of interest:
| • |
None of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business
activities.
|
| • |
In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other
entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented. For a complete description of our management’s other
affiliations, see “Item 10. Directors, Executive Officers and Corporate Governance.”
|
| • |
Our founders, officers and directors have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the consummation of our initial
business combination. Additionally, our initial stockholders, officers and directors have agreed to waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to
complete our initial business combination within 24 months from the closing of the IPO. However, if our initial stockholders, officers and directors acquire public shares, they will be entitled to liquidating distributions from the
trust account with respect to such public shares if we fail to complete our initial business combination within the prescribed time period. If we do not complete our initial business combination within such applicable time period, the
proceeds of the sale of the private placement warrants held in the trust account will be used to fund the redemption of our public shares, and the private placement warrants will expire worthless. With certain limited exceptions, the
founder shares are not transferable, assignable or salable by our initial stockholders until the earliest to occur of: (A) one year after the completion of our initial business combination; (B) subsequent to our initial business
combination, if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within
any 30-trading day period commencing at least 150 days after our initial business combination; and (C) the date following the completion of our initial business combination on which we complete a liquidation, merger, stock exchange,
reorganization or other similar transaction that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property. With certain limited exceptions, the private
placement warrants and the Class A common stock underlying such warrants, are not transferable, assignable or salable until 30 days after the completion of our initial business combination. Since our founders and officers and directors
may directly or indirectly own common stock and warrants following the IPO, our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to
effectuate our initial business combination.
|
| • |
Our officers and directors may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive
compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether to proceed with a particular business combination.
|
| • |
Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a
target business as a condition to any agreement with respect to our initial business combination
|
The conflicts described above may not be resolved in our favor.
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities
meeting the above-listed criteria to multiple entities.
We are not prohibited from pursuing an initial business combination with a business that is affiliated with our founders, officers or directors. In the event we seek to
complete our initial business combination with such a business, we, or a committee of independent and disinterested directors, would obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent
accounting firm, that such an initial business combination is fair to our company from a financial point of view.
In addition, our sponsor or any of its affiliates may make additional investments in the company in connection with the initial business combination, although our sponsor
and its affiliates have no obligation or current intention to do so. If our sponsor or any of its affiliates elect to make additional investments, such proposed investments could influence our sponsor’s motivation to complete an initial
business combination.
In the event that we submit our initial business combination to our public stockholders for a vote, our founders, officers and directors have agreed, pursuant to the terms
of a letter agreement entered into with us, to vote any founder shares held by them (and their permitted transferees will agree) and any public shares held by them in favor of our initial business combination.
| Item 11. |
Executive Compensation
|
None of our officers or directors have received any cash compensation for services rendered to us. Our founders, officers and directors, or any of their respective
affiliates, will be reimbursed for any reasonable out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our
audit committee reviews on a quarterly basis all payments that were made by us to our founders, officers, directors or our or their affiliates.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting, management or other fees
from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business
combination. It is unlikely the amount of such compensation will be known at the time such materials are distributed, because the directors of the post-combination business will be responsible for determining executive officer and director
compensation. Any compensation to be paid to our officers will be determined by a compensation committee constituted solely by independent directors.
The existence or terms of any employment or consulting arrangements may influence our management’s motivation in identifying or selecting a target business but we do not
believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any
agreements with our officers and directors that provide for benefits upon termination of employment.
| Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
We have no compensation plans under which equity securities are authorized for issuance.
The following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2022, by:
| • |
each person known by us to be a beneficial owner of more than 5% of our outstanding common stock of, on an as-converted basis;
|
| • |
each of our officers and directors; and
|
| • |
all of our officers and directors as a group.
|
The following table is based on 31,250,000 shares of common stock of outstanding at March 31, 2022, of which 25,000,000 were shares of Class A common stock and 6,250,000
were shares of Class B common stock. Unless otherwise indicated, it is believed that all persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
|
Name and Address of Beneficial Owner (1)
|
Number of Shares
Beneficially Owned
|
Percentage of Outstanding
Common Stock
|
|||
|
Atlantic Avenue Partners LLC (2)(3)
|
4,565,000
|
15.4
|
%
|
||
|
Saba Capital Management, L.P. (4)
|
1,287,118
|
5.2
|
%
|
||
|
Barclays PLC (5)
|
1,586,516
|
6.3
|
%
|
||
|
Ashok Nayyar (2)(3)
|
4,565,000
|
15.4
|
%
|
||
|
David Gelobter
|
-
|
-
|
|||
|
Michael Zimmerman
|
-
|
-
|
|||
|
Barry Best
|
-
|
-
|
|||
|
James Dubin
|
145,000
|
*
|
|||
|
Thomas Neff
|
145,000
|
*
|
|||
|
Robert Halmi
|
145,000
|
*
|
|||
|
Mark Field
|
-
|
-
|
|||
|
All officers and directors as a group (8 individuals)
|
5,000,000
|
16.7
|
%
|
| * |
Less than one percent
|
| (1) |
Unless otherwise noted, the business address of each of the following entities or individuals is 2200 Atlantic Street, Stamford, Connecticut 06902.
|
| (2) |
Interests shown consist solely of founders shares, classified as shares of Class B common stock. The founder shares will convert into shares of Class A common stock at the time of our initial business
combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment.
|
| (3) |
Represents the interests directly held by Atlantic Avenue Partners LLC. The managing member of Atlantic Avenue Partners LLC is Atlantic Avenue Partners GP LLC, a Delaware limited liability company, which
is controlled by Mr. Nayyar. Mr. Nayyar ultimately exercises voting and dispositive power with respect to all securities owned by Atlantic Avenue Partners LLC and may be deemed to beneficially own all such securities. Mr. Nayyar
disclaims beneficial ownership of these securities except to the extent of any pecuniary interest therein.
|
| (4) |
According to the Schedule 13G jointly filed with the SEC on October 8, 2021 on behalf of Saba Capital Management, L.P., Saba Capital Management GP, LLC and Mr. Boaz R. Weinstein. The business address of Saba Capital Management, L.P.,
Saba Capital Management GP, LLC and Mr. Boaz R. Weinstein is 405 Lexington Avenue, 58th Floor, New York, New York 10174.
|
| (5) |
According to the Schedule 13G jointly filed with the SEC on February 10, 2022 on behalf of Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. The business address for Barclays PLC and Barclays Bank PLC is 1 Churchill Place,
London, E14 5HP, England. The business address for Barclays Capital Inc. is 745 Seventh Avenue, New York, New York 10019.
|
| Item 13. |
Certain Relationships and Related Transactions, and Director Independence
|
Founder Shares
In August 2020, our founders purchased 7,187,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. In August 2020, our sponsor
transferred 145,000 founder shares to each of our independent directors at their original per share purchase price. As such, our initial stockholders collectively own 20% of our outstanding shares of common stock and have the right to elect all
of our directors prior to our initial business combination. On November 16, 2020, the founders forfeited 937,500 founder shares following the expiration of the unexercised underwriters’ over-allotment option.
Our initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earliest to occur of: (A) one year after the completion of our
initial business combination; (B) subsequent to our initial business combination, if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination; and (C) the date following the completion of our initial business combination on which
we complete a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the sponsor purchased an aggregate of 3,950,000 private placement warrants, ASA Co-Investment LLC purchased
an aggregate of 2,750,000 private placement warrants and the Company’s independent directors purchased an aggregate of 300,000 private placement warrants, at a price of $1.00 per unit, for an aggregate purchase price of $7,000,000. The private
placement warrants have terms and provisions that are identical to those of the warrants sold as part of the Units in the Initial Public Offering, except that the private placement warrants may be net cash settled and are not redeemable so long
as they are held by the initial stockholders or their permitted transferees. With respect to private placement warrants held by ASA Co-Investment, they are not exercisable more than five years from the commencement of sales in the IPO in
accordance with FINRA Rule 5110(g)(8)(C).
Promissory Note with Related Parties
On August 5, 2020, our founders agreed to loan us up to $300,000 to be used for a portion of the expenses related to the organization of our company and the IPO, our
sponsor up to $182,143 and ASA Co-Investment up to $117,857. These loans were non-interest bearing, unsecured and due at the earlier of June 30, 2021 or the closing of the IPO. The outstanding balances under the promissory notes of $111,194 to
our sponsor and $71,949 to ASA Co-Investment were repaid upon the completion of the IPO.
Administrative Services Agreement
We entered into an agreement with an affiliate of our sponsor, commencing October 2, 2020, pursuant to which we have agreed to pay a total of $10,000 per month for office
space, administrative and support services to such affiliate. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. For the period from July 27, 2020 (inception) through December 31,
2021, the Company has not been invoiced nor has it paid any fee for these services.
Registration Rights Agreement
Pursuant to a registration rights agreement entered into on October 1, 2020, the holders of founder shares, private placement warrants and warrants issued upon conversion
of working capital loans (if any) are entitled to registration rights. These holders are entitled to make up to three demands (ASA Co-Investment is entitled to one demand in accordance with FINRA Rule 5110(g)(8)(B)), excluding short form
registration demands, that we register certain of our securities held by them for sale under the Securities Act. In addition, these holders have certain “piggy-back” registration rights to include such securities in other registration
statements filed by us and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that we will not permit any registration statement filed
under the Securities Act to become effective until the securities covered thereby are released from their applicable lock-up restrictions. We will bear the costs and expenses of filing any such registration statements. Notwithstanding the
foregoing, the founder shares and private placement warrants purchased by ASA Co-Investment were deemed underwriter compensation by FINRA and are subject to the restrictions imposed by FINRA Rule 5110.
Business Combination Marketing Agreement
We engaged the underwriters, including Cowen and Company, LLC, an affiliate of ASA Co-Investment, as advisors in connection with our business combination, pursuant to the
Business Combination Marketing Agreement, dated October 1, 2020 We will pay the underwriters the Marketing Fee for such services upon the consummation of our initial business combination in an amount equal to, in the aggregate, 3.5% of the
gross proceeds of the IPO.
Director Independence
NYSE listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or
employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the
responsibilities of a director. Our Board of Directors has determined that Messrs. Dubin, Neff and Halmi are “independent directors” as defined in the NYSE listing standards and applicable SEC rules. Our independent directors have regularly
scheduled meetings at which only independent directors are present.
| Item 14. |
Principal Accounting Fees and Services
|
Fees for professional services provided by our independent registered public accounting firm for the year ended December 31, 2021 include:
|
For the fiscal year ended
December 31, 2021
|
For the fiscal year ended
December 31, 2020
|
|||||||
|
Audit Fees (1)
|
$
|
95,070
|
$
|
39,655
|
||||
|
Audit-Related Fees (2)
|
0
|
0
|
||||||
|
Tax Fees (3)
|
0
|
0
|
||||||
|
All Other Fees (4)
|
0
|
0
|
||||||
|
Total Fees
|
$
|
95,070
|
$
|
39,655
|
||||
(1) Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally
provided by our independent registered public accounting firm in connection with statutory and regulatory filings.
(2) Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of
our year-end financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
(3) Tax Fees. Tax fees consist of fees billed for professional services relating to tax compliance, tax planning and tax advice.
(4) All Other Fees. All other fees consist of fees billed for all other services.
Policy on Board Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Auditors
Our audit committee was formed in connection with our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although
any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing
services and permitted non-audit services to be performed for us by WithumSmith+Brown, PC, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the
audit committee prior to the completion of the audit).
PART IV
| Item 15. |
Exhibit and Financial Statement Schedules
|
(a) (1) Financial Statements. Reference is made to the Index to the Consolidated Financial Statements of Atlantic Avenue
Acquisition Corp included in Item 8 of Part II above.
(a) (2) All other schedules are omitted because they are not applicable or not required, or because the required information is included in the Consolidated Financial
Statements or notes thereto.
(a) (3) We hereby file as part of this report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public
reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at
prescribed rates or on the SEC website at www.sec.gov.
ATLANTIC AVENUE ACQUISITION CORP
INDEX TO FINANCIAL STATEMENTS
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Page
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F - 1
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F - 2
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F - 3
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F - 4
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F - 5
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| F - 6 |
To the Stockholders and the Board of Directors of
Atlantic Avenue Acquisition Corp
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Atlantic Avenue Acquisition Corp (the “Company”) as of December 31, 2021 and 2020, the related
statements of operations, changes in stockholders’ deficit and cash flows for the year ended December 31, 2021 and for the period from July 27, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the result of its operations and its cash flows for the year
ended December 31, 2021 and for the period from July 27, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, if the Company is unable to complete a business combination by October 6, 2022, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution
raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to this matter is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
We have served as the Company’s auditor since 2020.
New York, New York
April 7, 2022
PCAOB ID Number
ATLANTIC AVENUE ACQUISITION CORP
BALANCE SHEETS
|
December 31, 2021
|
December 31,
2020
|
|||||||
|
Assets:
|
||||||||
|
Current assets
|
||||||||
|
Cash
|
$
|
1,085,937
|
$
|
1,527,662
|
||||
|
Prepaid expenses
|
102,713 |
246,814
|
||||||
|
Total current assets
|
1,188,650 |
1,774,476
|
||||||
|
Investments held in Trust Account
|
250,021,058 |
250,004,549
|
||||||
|
Total Assets
|
$ | 251,209,708 |
$
|
251,779,025
|
||||
|
Liabilities, Redeemable Common Stock and Stockholders’ Deficit
|
||||||||
|
Liabilities:
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable and accrued expenses
|
$ | 200,587 |
$
|
176,057
|
||||
| Deferred legal fees |
2,115,147 | — | ||||||
|
Total current liabilities
|
2,315,734 |
176,057
|
||||||
|
Warrant liabilities
|
9,711,500 |
21,370,200
|
||||||
|
Deferred legal fees
|
— |
640,067
|
||||||
|
Total liabilities
|
12,027,234 |
22,186,324
|
||||||
|
Commitments and Contingencies
|
||||||||
| Redeemable Common Stock | ||||||||
|
Class A common stock subject to possible redemption, $0.0001
par value; 25,000,000 shares at $10.00 per share redemption value at December 31, 2021 and 2020
|
250,000,000 |
250,000,000
|
||||||
|
Stockholders’ Deficit:
|
||||||||
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none
issued and outstanding
|
— |
—
|
||||||
|
Class A common stock, $0.0001 par value; 300,000,000 shares authorized; none
issued and outstanding, excluding 25,000,000 shares subject to possible redemption
|
— |
—
|
||||||
|
Class B common stock, $0.0001 par value; 30,000,000 shares authorized; 6,250,000
shares issued and outstanding at December 31, 2021 and 2020
|
625 |
625
|
||||||
|
Additional paid-in capital
|
— |
—
|
||||||
|
Accumulated deficit
|
(10,818,151 | ) |
(20,407,924
|
)
|
||||
|
Total Stockholders’ Deficit
|
(10,817,526 | ) |
(20,407,299
|
)
|
||||
|
Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit
|
$ | 251,209,708 |
$
|
251,779,025
|
||||
The accompanying notes are an integral part of these financial statements.
ATLANTIC AVENUE ACQUISITION CORP
STATEMENTS OF OPERATIONS
|
For the Year Ended December 31, 2021
|
For the Period from July 27, 2020 (inception) through December 31, 2020 | |||||||
|
Formation and operating costs
|
$
|
2,085,614
|
$
|
180,497
|
||||
|
Loss from operations
|
(2,085,614 | ) |
(180,497
|
)
|
||||
|
Other income (expense)
|
||||||||
|
Interest income
|
16,687 |
4,658
|
||||||
|
Offering expense allocated to warrant issuance
|
— |
(295,225
|
)
|
|||||
|
Unrealized gain (loss) on change in fair value of warrants
|
11,658,700 |
(1,831,450
|
)
|
|||||
|
Total other income (expense)
|
11,675,387 |
(2,122,017
|
)
|
|||||
|
Net income (loss)
|
$ | 9,589,773 |
$
|
(2,302,514
|
)
|
|||
|
Basic and diluted weighted average shares outstanding, Class A common stock
|
25,000,000 |
13,765,823
|
||||||
|
Basic and diluted net income (loss) per share, Class A common stock
|
$ | 0.31 |
$
|
(0.12
|
)
|
|||
|
Basic and diluted weighted average shares outstanding, Class B common stock
|
6,250,000 | 6,250,000 |
||||||
|
Basic and diluted net income (loss) per share, Class B common stock
|
$ | 0.31 | $ | (0.12 | ) | |||
The accompanying notes are an integral part of these financial statements.
ATLANTIC AVENUE ACQUISITION CORP
FOR THE YEAR ENDED DECEMBER 31, 2021 AND
FOR THE PERIOD FROM JULY 27, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020
|
Class B Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Stockholders’
|
|||||||||||||||||
|
Shares
|
Amount
|
Capital
|
deficit
|
Deficit
|
||||||||||||||||
|
Balance as of July 27, 2020 (inception)
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||||||
|
Class B common stock issued to Sponsor and ASA Co-Investment LLC
|
7,187,500
|
719
|
24,281
|
—
|
25,000
|
|||||||||||||||
|
Forfeiture of Class B common stock
|
(937,500
|
)
|
(94
|
)
|
94
|
—
|
—
|
|||||||||||||
|
Accretion of Class A common stocks subject to possible redemption
|
— | — |
(24,375
|
)
|
(18,105,410
|
)
|
(18,129,785
|
)
|
||||||||||||
|
Net loss
|
—
|
—
|
—
|
(2,302,514
|
)
|
(2,302,514
|
)
|
|||||||||||||
|
Balance as of December 31, 2020
|
6,250,000
|
625
|
—
|
(20,407,924
|
)
|
$
|
(20,407,299
|
)
|
||||||||||||
|
Net income
|
—
|
—
|
—
|
9,589,773
|
9,589,773
|
|||||||||||||||
|
Balance as of December 31, 2021
|
6,250,000
|
$
|
625
|
$
|
—
|
$
|
(10,818,151
|
)
|
$
|
(10,817,526
|
)
|
|||||||||
|
For the Year Ended
December 31,
2021
|
For the Period
from July 27, 2020
(inception) through
December 31, 2020
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income (loss)
|
$
|
9,589,773
|
$
|
(2,302,514
|
)
|
|||
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
||||||||
|
Offering expense allocated to warrant issuance
|
—
|
295,225
|
||||||
|
Interest earned on investments held in Trust Account
|
(16,509
|
)
|
(4,549
|
)
|
||||
|
Unrealized (gain) loss on change in fair value of warrants
|
(11,658,700
|
)
|
1,831,450
|
|||||
|
Changes in operating assets and current liabilities:
|
||||||||
|
Prepaid expenses
|
144,101
|
(246,814
|
)
|
|||||
|
Accounts payable and accrued expenses
|
24,530
|
176,057
|
||||||
|
Deferred legal fees
|
1,475,080
|
—
|
||||||
|
Net cash used in operating activities
|
(441,725
|
)
|
(251,145
|
)
|
||||
|
Cash flows from investing activity:
|
||||||||
|
Investment of cash in trust account
|
—
|
(250,000,000
|
)
|
|||||
|
Net cash used in investing activity
|
—
|
(250,000,000
|
)
|
|||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from issuance of founder shares
|
—
|
25,000
|
||||||
|
Proceeds from issuance of Private Placement Warrants
|
—
|
7,000,000
|
||||||
|
Proceeds from sale of Units, net of offering costs
|
—
|
244,753,807
|
||||||
|
Net cash provided by financing activities
|
—
|
251,778,807
|
||||||
|
Net change in cash
|
(441,725
|
)
|
1,527,662
|
|||||
|
Cash, beginning of the period
|
1,527,662
|
—
|
||||||
|
Cash, end of the period
|
$
|
1,085,937
|
$
|
1,527,662
|
||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Deferred offering costs included in deferred legal fees
|
$
|
—
|
$
|
640,067
|
||||
NOTE 1 — ORGANIZATION AND BUSINESS OPERATIONS
Organization and General
Atlantic Avenue Acquisition Corp (formerly known as “Atlantic Street Acquisition Corp”) (the “Company”) was incorporated in Delaware on July 27, 2020. The Company is a
blank check company and 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 that the Company had not yet identified (the “Business Combination”). Although the Company is not limited to a particular industry or geographic region for
consummating a Business Combination, the Company intends to capitalize on the ability of its management team to identify, acquire and operate a business that may provide opportunities for attractive risk-adjusted returns.
The Company is an emerging growth company and, as such, the Company is subject to all the risks associated with emerging growth companies.
As of December 31, 2021, the Company had not commenced any operations. All activity for the period from July 27, 2020 (inception) through December 31, 2021, relates to
the Company’s formation and initial public offering (“Public Offering” or “IPO”), and, since the completion of the Public Offering, searching for a target to consummate a Business Combination. The Company will not generate any operating revenues
until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Public Offering and placed in the Trust Account (defined below).
Public Offering
On October 6, 2020, the Company consummated the Public Offering of 25,000,000
units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), at $10.00
per Unit, generating gross proceeds of $250,000,000, which is described in Note 3.
Simultaneously with the closing of the Public Offering on October 6, 2020, the Company consummated the sale of an aggregate of 7,000,000 private warrants (the “Private Placement Warrants”) to Atlantic Avenue Partners LLC (the “Sponsor”), ASA Co-Investment LLC (“ASA
Co-Investment”) and the Company’s independent directors, generating gross proceeds to the Company of $7,000,000, which is described in
Note 4.
A description of the Company’s offering costs in connection with the IPO are further described in Note 2.
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Public Offering and Private
Placement Warrants, although substantially all the net proceeds are intended to be applied generally toward consummating a Business Combination. Because the Company’s securities are listed on the New York Stock Exchange (the “NYSE”), the
Company’s initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80%
of the assets held in the Trust Account (net of amounts disbursed to management for working capital purposes and excluding the amount of any deferred underwriting discount held in trust) at the time of the Company signing a definitive agreement
in connection with its initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. Upon the closing of the Public Offering, management has agreed that an amount equal to at least $10.00
per Unit sold in the Public Offering, including a portion of the proceeds of the Private Placement Warrants, will be held in a Trust Account and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as
determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
The Company will provide its stockholders of Public Shares (“Public Stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek
stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirement, or the Company decides
to obtain stockholder approval for business or other reasons, it will: (i) conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which
regulates the solicitation of proxies, and not pursuant to the tender offer rules; and (ii) file proxy materials with the SEC. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount in the
Trust Account (initially approximately $10.00 per share), plus any pro rata interest earned on the funds held in the Trust Account and
not previously released to the Company to pay for the Company’s tax obligations, calculated as of business days prior to the
consummation of the Business Combination. The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the marketing fee the Company will pay to the underwriters (as discussed in Note 7).
If the Company is unable to complete a Business Combination within the Combination Period (as defined below in Note 3), the Company will (i)
cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than business days
thereafter, redeem 100% of the outstanding Public Shares which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any) and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in
each case to its obligations to provide for claims of creditors and the requirements of applicable law.
In connection with the redemption of 100%
of the Company’s outstanding Public Shares for a portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the
Trust Account and not previously released to the Company to pay the Company’s taxes payable (less up to $100,000 of interest to pay
dissolution expenses).
The initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a
Business Combination within the Combination Period. However, if the initial stockholders should acquire Public Shares in or after the Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such
Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their marketing fee (see Note 7) held in the Trust Account in the event the Company does
not complete a Business Combination within the Combination Period, and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares.
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets)
will be only $10.00 per share initially held in the Trust Account (or less than that in certain circumstances). In order to protect the
amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company, if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company
has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind
in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the
possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all third parties, service providers (other than the Company’s independent auditors), prospective target businesses or other
entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity, Going Concern, and Capital Resources
As of December 31, 2021, the Company had cash of $1,085,937,
and a working capital deficiency of $(1,127,084).
If the estimate of the costs of identifying a target business, undertaking in-depth due diligence, and negotiating a Business Combination are
less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the Business Combination. Moreover, in addition to the access to the Working Capital Loans (as defined below in
Note 5), the Company may need to obtain other financing either to complete its Business Combination or because the Company becomes obligated to redeem a significant number of the public shares upon consummation of the Business Combination, in
which case the Company may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the
completion of the Business Combination. If the Company is unable to complete the Business Combination because the Company does not have sufficient funds available, the Company will be forced to cease operations and liquidate the Trust Account. In
addition, following the Business Combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an
affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these
funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business
to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board (“FASB”)
Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete a Business Combination by October 6, 2022,
then the Company will cease all operations except for the purpose of liquidating. The Company plans to complete a Business Combination by October 6, 2022. No adjustments have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after October 6, 2022.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to
the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups
Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.
The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can
adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging
growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant
liabilities. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2021, and 2020.
Investments Held in Trust Account
The Company’s portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, investments in money market funds that invest in U.S. government securities, cash, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on Investments Held in Trust
Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. As of December 31, 2021, and 2020, the assets held in the Trust Account were
invested in money market funds that invest solely in U.S. treasuries.
Fair Value Measurements
ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, the methods used to measure fair value and the expanded
disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair
value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and
seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from
sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company
has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a
significant degree of judgment.
Level 2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in
markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by the market through correlation or other means.
Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and
Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash, prepaid assets, and accounts payable are estimated to approximate the carrying values for the year ended December 31, 2021, and 2020, due to
the short maturities of such instruments.
The Company’s warrant liabilities are based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable
markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. In some circumstances, the inputs used to measure fair value might be
categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value
measurement. See Note 6 for additional information on assets and liabilities measured at fair value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may
exceed the Federal Depository Insurance Corporation coverage limits of $250,000. As of December 31, 2021, and 2020, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such
account.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ deficit The Company’s
common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, 25,000,000 shares of Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of
the Company’s balance sheets as of December 31, 2021, and 2020.
Net Income (Loss) Per Common Stock
The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro
rata between the two classes of shares. The potential common stock for outstanding warrants to purchase the Company’s shares were excluded from diluted earnings (loss) per share for the year ended December 31, 2021, and 2020 because the warrants
are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the periods. The table below presents a
reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common stock:
|
For the Year Ended
December 31, 2021
|
For the Period
from July 27, 2020
(inception) through
December 31, 2020
|
|||||||||||||||
|
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||
|
Basic and diluted net income (loss) per share:
|
||||||||||||||||
|
Numerator:
|
||||||||||||||||
|
Allocation of net income (loss)
|
$
|
7,671,818
|
$
|
1,917,955
|
$
|
(1,583,547
|
)
|
$
|
(718,967
|
)
|
||||||
|
Denominator:
|
||||||||||||||||
|
Weighted average shares outstanding
|
25,000,000
|
6,250,000
|
13,765,823
|
6,250,000
|
||||||||||||
|
Basic and diluted net income (loss) per share
|
$
|
0.31
|
$
|
0.31
|
$
|
(0.12
|
)
|
$
|
(0.12
|
)
|
||||||
Offering Costs
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs consist of
legal, accounting, underwriting fees and other costs incurred in connection with the preparation for the Public Offering. Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis
compared to total proceeds received. Offering costs allocated to warrant liabilities are expensed and offering costs allocated to the Class A common stock are charged to temporary equity.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of
operations. Derivative assets and liabilities are classified on the balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
The Company has determined the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity
and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the common stock.
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or
deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the United
States of America is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties for the years ended December 31, 2021 and 2020. The Company is currently not aware of any issues under
review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months. The Company is subject to income tax examinations by major taxing authorities since inception.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect
on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20)” and “Derivatives and Hedging -
Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2020-06 effective as of January 1, 2021. The adoption of ASU
2020-06 did not have an impact on the Company’s financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a
material effect on the Company’s condensed financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
On October 6, 2020, the Company sold 25,000,000 Units at
a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock, par value $0.0001 per share and of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50
per share, subject to adjustment (see Note 8).
The Company paid an underwriting discount at the closing of the Public Offering of $5,000,000.
Upon the closing of the Public Offering and Private Placement, $250
million ($10.00 per Unit) of the net proceeds was placed in a trust account (“Trust Account”) located in the United States and invested in
U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (a) the completion of the Company’s initial Business Combination, (b) the redemption of any public shares properly submitted in connection with a
stockholder vote to amend the Company’s amended and restated certificate of incorporation, and (c) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination within 24 months from October 6, 2020 (the “Combination Period”), the closing date of the Public Offering.
All the 25,000,000 Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public stock in connection with the
Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s certificate of incorporation. In accordance with the SEC and its staff’s
guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity.
The Class A common stock is subject to the SEC and its
staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over
the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as
they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately as they occur. Immediately upon the closing of the IPO,
the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital and accumulated deficit.
As of December 31, 2021 and 2020 the contingently
redeemable Class A common stock reflected on the balance sheets are reconciled in the following table:
|
Gross proceeds from IPO
|
$
|
250,000,000
|
||
|
Less:
|
||||
|
Proceeds allocated to Public Warrants
|
(12,538,750
|
)
|
||
|
Common stock issuance costs
|
(5,591,035
|
)
|
||
|
Plus:
|
||||
|
Accretion of carrying value to redemption value
|
18,129,785
|
|||
|
Contingently redeemable Class A common stock
|
$
|
250,000,000
|
Warrants
As of December 31, 2021
and 2020, there were 19,500,000 warrants outstanding, including 12,500,000 public warrants (the “Public Warrants”) and 7,000,000
Private Placement Warrants. Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become
exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A
common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from
registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days
after the closing of the initial Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the issuance of shares of Class A common stock issuable upon exercise of the Public Warrants. The
Company will use its best efforts to cause the same to become effective within 60 business days after the closing of the initial Business
Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement. If the Class A
common stock, at the time of any exercise of a warrant, is not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section (18)(b)(1) of the Securities Act, the Company may require warrant
holders who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. There will be no redemption rights or liquidating distributions with respect
to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Public Offering, except that (i) the Private Placement Warrants and
the Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (ii) the Private
Placement Warrants will be non-redeemable (except under scenario 2 below) so long as they are held by the initial purchasers or such purchasers’ permitted transferees, (iii) the Private Placement Warrants may be exercised by the holders on a cashless
basis, and (iv) the Private Placement Warrants and the Class A common stock issuable upon exercise of the Private Placement Warrants are entitled to registration rights. If the Private Placement Warrants are held by someone other than the initial
stockholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants.
With respect to Private Placement Warrants held by ASA Co-Investment, they will not be exercisable more than five years from the commencement of sales of the offering in accordance with FINRA Rule 5110(g)(8)(c).
The Company may call the Public Warrants for redemption:
|
1.
|
For cash:
|
|
|
■
|
in whole and not in part;
|
|
|
■
|
at a price of $0.01 per warrant;
|
|
|
■
|
upon a minimum of 30 days’ prior written notice of redemption; and
|
|
|
■
|
if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00
per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days
within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of
redemption to the warrant holders.
|
|
|
2.
|
For Class A common stock (commencing 90 days after the warrants become
exercisable):
|
|
|
■
|
in whole and not in part;
|
|
|
■
|
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption
and receive that number of shares of Class A common stock to be determined by reference to a table included in the warrant agreement, based on the redemption date and the fair market value of Class A common stock;
|
|
|
■
|
if, and only if, the last reported sale price of the Class A common stock equals or exceeds $10.00
per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to warrant holders;
|
|
|
■
|
if, and only if, the Private Placement Warrants are also concurrently exchanged at the same price (equal to a number of shares of Class A common stock) as the outstanding Public Warrants;
and
|
|
|
■
|
if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus
relating thereto available throughout the 30-day period after written notice of redemption is given.
|
|
If the Company calls the Public Warrants for redemption under scenario 1 above, management will have the option to require all holders that wish to exercise the Public
Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share
dividend, or recapitalization, reorganization, merger or consolidation. If the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business
Combination at a newly issued price of less than $9.20 per share of common stock, then the exercise price of the warrants will be adjusted
to be equal to 115% of the newly issued price. Additionally, in no event will the Company be required to net cash settle the warrants
shares. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants,
nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants. In such a situation, the warrants would expire worthless.
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Public Offering, the Sponsor purchased an aggregate of 3,950,000 warrants (“Private Placement Warrants”), ASA Co-Investment purchased an aggregate of 2,750,000
Private Placement Warrants and the Company’s independent directors purchased an aggregate of 300,000 Private Placement Warrants, at a
price of $1.00 per unit, for an aggregate purchase price of $7,000,000 (the “Private Placement”). A portion of the proceeds from the Private Placements were added to the net proceeds from the Public Offering held in the Trust Account. Each Private
Placement Warrant is exercisable to purchase one share of Class A common stock at $11.50 per share.
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On August 5, 2020, the Company issued an aggregate of 7,187,500
shares of Class B common stock to the Sponsor and ASA Co-Investment (the “Founder Shares”) in exchange for an aggregate capital contribution of $25,000.
The Founders had agreed to forfeit an aggregate of up to 937,500 Founder Shares to the extent that the over-allotment option was not
exercised in full by the underwriters. On November 16, 2020, the over-allotment option expired unexercised, hence, 937,500 Founder Shares
were forfeited.
The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (i) one year after the completion of the initial Business Combination; or (ii) the date on which the Company completes a liquidation, merger, share exchange
or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities or other property; except to certain permitted
transferees and under certain circumstances (the “lock-up”). Notwithstanding the foregoing, if (1) the closing price of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (2) if the Company consummates a transaction after the initial Business Combination which results in the Company’s stockholders
having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the lock-up.
Promissory Notes — Related Parties
The Sponsor and ASA Co-Investment agreed to loan the Company an aggregate of up to $300,000 to be used for the payment of costs related to the Public Offering (the Sponsor up to $182,143
and ASA Co-Investment up to $117,857). The promissory notes were non-interest bearing, unsecured and due on the earlier of September 30,
2021 and the closing of the Public Offering.
The Company borrowed $183,143 under the promissory
notes and repaid the amount in full on the consummation of the IPO. The loan was repaid out of the offering proceeds not held in the Trust Account.
Working Capital Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but is not obligated to, loan the Company funds as may be
required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid
only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the
Trust Account would be used to repay the Working Capital Loans, other than the interest on such proceeds that may be released for working capital purposes. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrant. As of December 31, 2021, and 2020, no Working Capital Loans were outstanding.
Administrative Services Agreement
The Company has agreed, commencing on October 1, 2020, through the earlier of the Company’s consummation of a Business Combination or its liquidation, to pay an
affiliate of the Sponsor a monthly fee of $10,000 for office space, administrative and support services. Upon completion of the initial
Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the period from July 27, 2020 (inception) through December 31, 2021, the Company has not been invoiced nor has it paid any fees for these
services.
NOTE 6 — RECURRING FAIR VALUE MEASUREMENTS
Warrant Liabilities
At December 31, 2021, and 2020, the Company’s warrant liabilities were valued at $9,711,500 and $21,370,200, respectively. Under the guidance in ASC 815-40 the
warrants do not meet the criteria for equity treatment. As such, the warrants must be recorded on the balance sheets at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, the warrant
valuation will be adjusted to fair value, with the change in fair value recognized in the Company’s statements of operations.
Recurring Fair Value Measurements
The following tables present information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2021, and
2020 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
December 31,
|
Quoted
Prices In
Active
Markets
|
Significant
Other
Observable
Inputs
|
Significant
Other
Unobservable
Inputs
|
|||||||||||||
|
2021
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
|
Assets:
|
||||||||||||||||
|
Money Market funds held in Trust Account
|
$ |
250,021,058
|
$ |
250,021,058
|
$ |
—
|
$ |
—
|
||||||||
|
$
|
250,021,058
|
$
|
250,021,058
|
$
|
—
|
$
|
—
|
|||||||||
|
Liabilities:
|
||||||||||||||||
|
Warrant Liabilities—Public Warrants
|
$
|
6,250,000
|
$
|
6,250,000
|
$
|
—
|
$
|
—
|
||||||||
|
Warrant Liabilities—Private Placement Warrants
|
3,461,500
|
—
|
—
|
3,461,500
|
||||||||||||
|
$
|
9,711,500
|
$
|
6,250,000
|
$
|
—
|
$
|
3,461,500
|
|||||||||
|
December 31,
|
Quoted
Prices In
Active
Markets
|
Significant
Other
Observable
Inputs
|
Significant
Other
Unobservable
Inputs
|
|||||||||||||
| 2020 |
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
|
Assets:
|
||||||||||||||||
|
Money Market funds held in Trust Account
|
$ |
250,004,549
|
$ |
250,004,549
|
$ |
—
|
$ |
—
|
||||||||
|
$
|
250,004,549
|
$
|
250,004,549
|
$
|
—
|
$
|
—
|
|||||||||
|
Liabilities:
|
||||||||||||||||
|
Warrant Liabilities—Public Warrants
|
$
|
13,750,000
|
$
|
13,750,000
|
$
|
—
|
$
|
—
|
||||||||
|
Warrant Liabilities—Private Placement Warrants
|
7,620,200
|
—
|
—
|
7,620,200
|
||||||||||||
|
$
|
21,370,200
|
$
|
13,750,000
|
$
|
—
|
$
|
7,620,200
|
|||||||||
The following table sets forth a summary of the changes in the fair value of the warrant liabilities for the period from July 27, 2020 (inception) through December 31,
2020:
|
Public
Warrant Liabilities
|
Private Placement
Warrant Liabilities
|
Total Warrant Liabilities
|
||||||||||
|
Fair value as of July 27, 2020 (Inception)
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
|
Initial fair value of warrant liabilities upon issuance at October 6, 2020 (initial measurement)
|
12,538,750
|
7,000,000
|
19,538,750
|
|||||||||
|
Revaluation of warrant liabilities included in other income within the statement of operations for the period from October 6, 2020 (initial measurement) through December
31, 2020
|
1,211,250
|
620,200
|
1,831,450
|
|||||||||
|
Fair value as of December 31, 2020
|
$
|
13,750,000
|
$
|
7,620,200
|
$
|
21,370,200
|
||||||
The following table sets forth a summary of the changes in the fair value of the warrant liabilities for the year ended December 31, 2021:
|
Public
Warrant Liabilities
|
Private Placement
Warrant Liabilities
|
Warrant Liabilities
|
||||||||||
|
Fair value as of January 1, 2021
|
$
|
13,750,000
|
$
|
7,620,200
|
$
|
21,370,200
|
||||||
|
Revaluation of warrant liabilities included in other income within the statement of operations for the year ended December 31, 2021
|
(7,500,000
|
)
|
(4,158,700
|
)
|
(11,658,700
|
)
|
||||||
|
Fair value as of December 31, 2021
|
$
|
6,250,000
|
$
|
3,461,500
|
$
|
9,711,500
|
||||||
The Private Placement Warrants were initially valued at purchase price, since the Company noted that the Private Placement Warrants were purchased substantially
concurrently with the consummation of the IPO on the Valuation Date, providing a robust indication of fair value given the transaction in the Private Placement Warrants occurred on or about the Valuation Date. At December 31, 2021 and 2020, the
Private Placement Warrants were valued using a Monte Carlo Model. The Private Placement Warrants are considered to be a Level 3 fair value measurement due to the use of unobservable inputs. The Monte Carlo Model’s primary unobservable input utilized
in determining the fair value of the Private Placement Warrants is the expected volatility of the common stock. The expected volatility as of December 31, 2021 and 2020, was derived from the historical volatility of similar SPACs at a similar stage
in their life cycle.
A Monte Carlo Simulation Method was used in estimating the fair value of the Public Warrants for periods where no observable traded price was available, using the same
expected volatility as was used in measuring the fair value of the Private Placement Warrants. For periods subsequent to the detachment of the warrants from the Units, the closing price of the Public Warrants was used as the fair value as of each
relevant date.
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 fair
value measurement to a Level 1 fair value measurement as of December 31, 2020, was $13,750,000 which was determined based on the then
current trading price of the Public Warrants.
There were no transfers between levels during the year ended December 31, 2021.
The Public Warrants were valued at their market prices of $0.50
and $1.10 per warrant as of December 31, 2021, and 2020, respectively. The key inputs into the
Monte Carlo simulation for the Private Placement Warrants were as follows:
|
Input
|
December 31, 2021 |
December 31, 2020
|
||||||
|
Stock price
|
$
|
9.80
|
$
|
10.08
|
||||
|
Exercise price
|
$
|
11.50
|
$
|
11.50
|
||||
|
Risk free rate
|
1.22
|
%
|
0.93
|
%
|
||||
|
Trading days per year
|
252
|
252
|
||||||
|
Annual volatility
|
10.50
|
%
|
15.0
|
%
|
||||
|
Time to exercise (years)
|
4.50
|
5.50
|
||||||
The following table provides a reconciliation of changes in the fair value balance for warrants classified as Level 3 from October 6, 2020 (inception) to December 31, 2020
and for the year ended December 31, 2021:
|
Warrant
Liabilities
|
||||
|
Beginning balance
|
$
|
—
|
||
|
Initial classification of Public Warrants at fair value on October 6, 2020
|
12,538,750
|
|||
|
Public Warrants reclassified to level 1 (1)
|
(13,750,000
|
)
|
||
|
Change in fair value
|
1,211,250
|
|||
|
Private Warrants reclassified to Level 3 (1)
|
7,000,000
|
|||
|
Change in fair value
|
620,200
|
|||
|
Fair value at December 31, 2020
|
$
|
7,620,200
|
||
(1) Assumes the Public Warrants and Private Warrants were reclassified on December 31, 2020.
|
Warrant
Liabilities
|
||||
|
Beginning balance
|
$
|
7,620,200
|
||
|
Transfers to/(from) Level 3
|
—
|
|||
|
Revaluation of warrant liabilities included in other income within the statement of operations for the year ended
December 31, 2021
|
(4,158,700
|
)
|
||
|
Fair value as of December 31, 2021
|
$
|
3,461,500
|
||
The Company’s use of models required the use of subjective assumptions:
|
•
|
The expected term was determined to be 4.5 years assuming the Company takes twelve months after the valuation date to complete
a business combination. An increase in the expected term, in isolation, would result in an increase in the fair value measurement of the warrant liabilities and vice versa.
|
|
•
|
The expected volatility assumption was based on the implied volatility from a set of comparable publicly traded warrants
as determined based on the size and proximity of other similar SPACs at a similar stage in their life cycle. An increase in the expected volatility, in isolation, would result in an increase in the fair value measurement of the
warrant liabilities and vice versa.
|
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares and Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock
issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the
closing date of the Public Offering. The holders of these securities are entitled to make up to three demands (ASA Co-Investment will be
entitled to one demand in accordance with FINRA Rules), excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed
subsequent to the consummation of a Business Combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the
applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements. Notwithstanding the foregoing, ASA Co-Investment may not exercise its demand or “piggyback” registration rights
after and seven years,
respectively, after the effective date of the registration statement related to the Public Offering and may not exercise its demand rights on more than one
occasion. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option
beginning October 6, 2020, to purchase up to an additional 3,750,000 units to cover over-allotments, if any. On November 16, 2020, the
over-allotment option was terminated.
On October 6, 2020, the underwriters were paid a cash underwriting fee of $5,000,000,
which constituted 2% of the gross proceeds of the Public Offering.
Business Combination Marketing Agreement
The Company has engaged the underwriters as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to
discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in
obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay the underwriters a cash fee for such services, yet to be
performed, upon the consummation of a Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the
Public Offering, including any proceeds from the full or partial exercise of the over-allotment option.
Deferred legal fees
The Company obtained legal advisory services in connection with, and subsequent to, the Public Offering and agreed to pay approximately $2,115,147 and $640,067 as of December 31,
2021, and 2020, respectively, of their fees upon the consummation of the initial Business Combination, which was recorded as deferred legal fees in the accompanying balance sheets. Such fees will not be paid in the event the Company does not complete
an initial Business Combination.
NOTE 8 — STOCKHOLDERS’ DEFICIT
Preferred Stock — The Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001
each. As of December 31, 2021, and 2020, there were no preferred shares issued or outstanding.
Class A Common Stock — The Company is authorized to issue a total of 300,000,000 shares of Class A common stock at par value of $0.0001
each. Holders of the Company’s Class A common stock are entitled to one vote for each share on each matter on which they are entitled to
vote. As of December 31, 2021, and 2020, there were 25,000,000 shares of Class A common stock issued and outstanding, all of which are
subject to possible redemption.
Class B Common Stock — The Company is authorized to issue a total of 30,000,000 shares of Class B common stock at par value of $0.0001
each. Holders of the Company’s Class B common stock are entitled to one vote for each share on each matter on which they are entitled to
vote. As of December 31, 2021, and 2020, there were 6,250,000 shares of Class B common stock issued and outstanding. The Class B
common stock will automatically convert into Class A common stock at the time of the consummation of the initial Business Combination, or earlier at the option of the holder, on a one-for-one basis.
Only holders of the Founder Shares will have the right to elect all the Company’s directors prior to the initial Business Combination. Otherwise, holders of Class A
common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders except as required by law or the applicable rules of the NYSE then in effect.
In the case that additional Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Public Offering and
related to the closing of the initial Business Combination, the ratio at which the Class B common stock shall convert into Class A common stock will be adjusted (unless the holders of a majority of the outstanding Class B common stock agree to waive
such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A common stock issuable upon conversion of all Class B common stock will equal, in the aggregate, 20% of the sum of the total number of all common stock outstanding upon the completion of the Public Offering plus all Class A common stock and
equity-linked securities issued or deemed issued in connection with the initial Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination.
NOTE 9 — INCOME TAX
The Company’s net deferred tax assets are as follows:
|
|
December 31,
2021 |
December 31,
2020 |
||||||
|
Deferred tax asset
|
||||||||
|
Organizational costs/startup expenses
|
$
|
409,159
|
$
|
17,734
|
||||
|
Federal net operating loss
|
62,242
|
19,192
|
||||||
|
Total deferred tax asset
|
471,401
|
36,926
|
||||||
|
Valuation allowance
|
(471,401
|
)
|
(36,926
|
)
|
||||
|
Deferred tax asset, net of allowance
|
$
|
—
|
$
|
—
|
||||
The income tax provision consists of the following:
|
|
For the Year Ended
December 31, 2021 |
For the Period
from July 27, 2020
(inception) through December 31,
2020 |
||||||
|
Federal
|
||||||||
|
Current
|
$
|
—
|
$
|
—
|
||||
|
Deferred
|
434,475
|
36,926
|
||||||
|
|
||||||||
|
State
|
||||||||
|
Current
|
—
|
—
|
||||||
|
Deferred
|
—
|
—
|
||||||
|
Change in valuation allowance
|
(434,475
|
)
|
(36,926
|
)
|
||||
|
Income tax provision
|
$
|
—
|
$
|
—
|
||||
As of December 31, 2021
and 2020, the Company has $205,000 and $91,389,
respectively, of U.S. federal net operating loss carryovers, which do not expire, and no state net operating loss carryovers available to offset future taxable income.
In assessing the
realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a
full valuation allowance. For the year ended December 31, 2021, and for the period from July 27, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $434,475 and $36,926, respectively.
A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:
|
For the Year Ended
December 31, 2021 |
For the Period
from July 27, 2020
(inception) through December 31,
2020 |
|||||||
|
Statutory federal income tax rate
|
21.0
|
%
|
21.0
|
%
|
||||
|
State taxes, net of federal tax benefit
|
0.0
|
%
|
0.0
|
%
|
||||
|
Permanent Book/Tax Differences
|
(25.5
|
)%
|
0.00
|
%
|
||||
|
Change in valuation allowance
|
4.5
|
%
|
(21.0
|
)%
|
||||
|
Income tax provision
|
—
|
%
|
—
|
%
|
||||
The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing
authorities.
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to April 7, 2022, the date that the financial statements were
issued. Based on this review, the Company did not identify any subsequent events that would have required recognition or disclosure in the financial statements.
|
No.
|
Description of Exhibit
|
|
Amended and Restated Certificate of Incorporation. (1)
|
|
|
Amended and Restated Bylaws. (2)
|
|
|
Specimen Unit Certificate. (3)
|
|
|
Specimen Class A Common Stock Certificate. (3)
|
|
|
Specimen Warrant Certificate (included in Exhibit 4.4). (1)
|
|
|
Warrant Agreement, dated October 1, 2020, between the Company and Continental Stock Transfer & Trust Company. (1)
|
|
|
Description of registrant’s securities. (3)
|
|
|
Investment Management Trust Agreement, dated October 1, 2020, between the Company and Continental Stock Transfer & Trust Company. (1)
|
|
|
Registration Rights Agreement, dated October 1, 2020, among the Company, the Sponsor and certain other security holders named therein. (1)
|
|
|
Private Placement Warrants Purchase Agreement, dated October 1, 2020, between the Company and the Sponsor. (1)
|
|
|
Private Placement Warrants Purchase Agreement, dated October 1, 2020, between the Company and ASA Co-Investment LLC. (1)
|
|
|
Private Placement Warrants Purchase Agreement, dated October 1, 2020, between the Company and James Dubin. (1)
|
|
|
Private Placement Warrants Purchase Agreement, dated October 1, 2020, between the Company and Thomas Neff. (1)
|
|
|
Private Placement Warrants Purchase Agreement, dated October 1, 2020, between the Company and Robert Halmi. (1)
|
|
|
Administrative Services Agreement, dated October 1, 2020, between the Company and MC Credit Partners LP. (1)
|
|
|
Form of Letter Agreement, dated October 1, 2020, between the Company and the Sponsor, the Company and ASA Co-Investment LLC and the Company and each of its officers and directors. (1)
|
|
|
Form of Indemnity Agreement, dated October 1, 2020, between the Company and each of its officers and directors. (1)
|
|
|
Business Combination Marketing Agreement, dated October 1, 2020, between the Company and the underwriters party thereto. (1)
|
|
|
Promissory Note, dated August 5, 2020, issued to Atlantic Avenue Partners LLC. (2)
|
|
|
Promissory Note, dated August 5, 2020, issued to ASA Co-Investment LLC. (2)
|
|
|
Securities Subscription Agreement, dated August 5, 2020, between the Company and Atlantic Avenue Partners LLC. (2)
|
|
|
Securities Subscription Agreement, dated August 5, 2020, between the Company and ASA Co-Investment LLC. (2)
|
|
|
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
101.INS*
|
XBRL Instance Document (4)
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
| * |
Filed herewith
|
| ** |
Furnished herewith
|
(1) Previously filed as an exhibit to our Current Report on Form 8-K filed on October 7, 2020 and incorporated by reference herein.
(2) Previously filed as an exhibit to our Form S-1 (File No.333-248782) initially filed on September 14, 2020 and incorporated by reference herein.
(3) Previously filed as an exhibit to our Annual Report on Form 10-K filed on March 25, 2021 and incorporated by reference herein.
(4) The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
| Item 16. |
Form 10-K Summary
|
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
Atlantic Avenue Acquisition Corp
|
|||
|
By:
|
/s/ Barry Best
|
||
|
Barry Best
|
|||
|
Chief Financial Officer
|
|||
|
Date: April 7, 2022
|
|||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
||
|
/s/ Ashok Nayyar
|
Chief Executive Officer, Chairman
|
April 7, 2022 | ||
|
Ashok Nayyar
|
(Principal Executive Officer)
|
|||
|
/s/ Barry Best
|
Chief Financial Officer
|
April 7, 2022 | ||
|
Barry Best
|
(Principal Financial Officer)
|
|||
|
/s/ Purvang Desai
|
Chief Accounting Officer
|
April 7, 2022 | ||
|
Purvang Desai
|
(Principal Accounting Officer)
|
|||
|
/s/ James Dubin
|
Director
|
April 7, 2022 | ||
|
James Dubin
|
||||
|
/s/ Thomas Neff
|
Director
|
April 7, 2022 | ||
|
Thomas Neff
|
||||
|
/s/ Robert Halmi
|
Director
|
April 7, 2022 | ||
|
Robert Halmi
|
||||
|
/s/ Mark Field
|
Director
|
April 7, 2022 | ||
|
Mark Field
|
70