ZeroFox Holdings, Inc. - Annual Report: 2021 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
☐ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
L&F Acquisition Corp.
(Exact name of registrant as specified in its charter)
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Cayman Islands
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001-39722
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98-1557361
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification Number)
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150 North Riverside Plaza, Suite 5200
Chicago, Illinois
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60606
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (312)
705-2786
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class:
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Trading Symbol:
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Name of Each Exchange on Which Registered:
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Units, each consisting of one Class A ordinary share, 0.0001 par value, and one-half of one warrant
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LNFA.U
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The New York Stock Exchange
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Class A ordinary shares included as part of the units
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LNFA
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The New York Stock Exchange
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Warrants included as part of the units, each whole warrant exercisable for one Class A ordinary share at an exercise price of 11.50
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LNFA WS
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The 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 Exchange 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 and post such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See
definition 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 voting and non-voting shares held by non-affiliates of the registrant, as of June 30, 2021, the last business day of the registrant’s
most recently completed second fiscal quarter, was approximately 222.9 million. Solely for purposes of this disclosure, ordinary
shares held by executive officers and directors of the Registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not necessarily a
conclusive determination for any other purposes.
As of March 14, 17,250,000 Class A ordinary shares, par value $0.0001, and
4,312,500 Class B ordinary shares, par value $0.0001, were issued and outstanding.
Documents Incorporated by Reference: None.
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CERTAIN TERMS
Unless otherwise stated in this Annual Report on Form 10-K (this “Report”), or the context otherwise requires, references to:
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“amended and restated memorandum and articles of association” are to the amended and restated memorandum and articles of association of the Company, adopted and filed on November 18, 2020.
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“we,” “us,” “company, ”“our company” and “LNFA” are to L&F Acquisition Corp., a Cayman Islands exempted company;
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“Companies Law” are to the Companies Act (2020 Revision) of the Cayman Islands as the same may be amended from time to time;
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“founder shares” are to Class B ordinary shares initially purchased by our sponsor in a private placement prior to our initial public offering and the Class A ordinary shares that will be issued upon the
automatic conversion of the Class B ordinary shares at the time of our initial business combination as described herein;
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“initial shareholders” are to holders of our founder shares prior to our initial public offering;
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“management” or our “management team” are to our officers and directors;
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“ordinary shares” are to our Class A ordinary shares and our Class B ordinary shares;
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“public shares” are to Class A ordinary shares sold as part of the units in our initial public offering (whether they are purchased in our initial public offering or thereafter in the open market);
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“public shareholders” are to the holders of our public shares, including our initial shareholders and management team to the extent our initial shareholders and/or members of our management team purchase
public shares, provided that each initial shareholder’s and member of our management team’s status as a “public shareholder” will only exist with respect to such public shares;
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“public warrants” are to the warrants sold as part of the units in our initial public offering (whether they are purchased in our initial public offering or thereafter in the open market);
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“private placement warrants” are to the warrants issued to our sponsor in a private placement simultaneously with the closing of our initial public offering;
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“sponsor” are to JAR Sponsor, LLC, a Delaware limited liability company;
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“Jefferies” are to Jefferies LLC, the sole underwriter in our initial offering; and
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“warrants” are to our public warrants and private placement warrants.
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This Report, including, without limitation, statements under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology,
including the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “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.
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, the following risks, uncertainties and other factors:
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our ability to complete our initial business combination with ZeroFox, Inc. (“ZeroFox”) and ID Experts Holdings, Inc. (“IDX” and, together with ZeroFox, the “Target Companies”) or an alternative business combination;
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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 if the Business Combination (as defined below) is not consummated;
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the ability of our officers and directors to generate a number of potential business combination opportunities if the Business Combination is not consummated;
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our public securities’ potential liquidity and trading;
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the lack of a 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 following our initial public offering.
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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.
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BUSINESS
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General
We are a blank check company incorporated as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more
businesses. Throughout this Report, we will refer to this as our initial business combination.
We focused our efforts primarily on identifying businesses seeking to be a market leader inthe governance, risk, and compliance (“GRC”) and legal technology and software (collectively, “GRCL”) sectors. If the Business Combination (as defined
below) is not consummated, we believe the GRCL universe is comprised of hundreds of alternative private companies attractive for today’s public market environment. Our sponsor combines seasoned executives that possess deep industry knowledge of
GRCL businesses with the sourcing, underwriting, and execution capabilities of a global alternative asset manager. As a consequence, we believe our team is well-suited to identify and execute on opportunities that have the potential to generate
attractive risk-adjusted returns for our shareholders.
On December 17, 2021 we entered into a business combination agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among LNFA, L&F Acquisition Holdings, LLC, a
Delaware limited liability company (“L&F Holdings”), ZF Merger Sub, Inc., a Delaware corporation (“ZF Merger Sub”), IDX Merger Sub, Inc., a Delaware corporation (“IDX Merger Sub”), IDX Forward Merger Sub, LLC, a Delaware limited liability
company (“IDX Forward Merger Sub”), ZeroFox, and IDX. Consummation of the transactions contemplated by the Business Combination Agreement (the “Business Combination”) is subject to customary conditions of the respective parties, including the
approval of the Business Combination by our shareholders in accordance with our amended and restated certificate of incorporation and the completion of a redemption offer whereby we will be providing our public shareholders with the opportunity
to redeem their Class A ordinary shares for cash equal to their pro rata share of the aggregate amount on deposit in our trust account.
For the risks associated with the Business Combination and ZeroFox and IDX, see the Company’s preliminary registration statement on Form S-4, as amended from time to time (the “Form S-4”)
containing information about the Business Combination, ZeroFox and IDX, as initially filed with the Securities and Exchange Commission on February 7, 2022.
The Business Combination Agreement and related agreements are further described in the Form 8-K/A, filed by us on December 20, 2021. For additional information regarding ZeroFox, IDX, the
Business Combination Agreement and the transactions contemplated therein please see the Form S-4.
Other than as specifically discussed, this Report does not assume that the closing of the Business Combination will occur.
Our Team
Our team has extensive operating and investing experience across public and private markets with deep sector expertise in GRCL:
Jeffrey C. Hammes serves as the Chairman of the company and is on the board of directors. Mr. Hammes served as the Chairman of Kirkland & Ellis LLP and Kirkland & Ellis International LLP (collectively, “K&E”) from 2010 until
retiring in 2019. During his tenure as Chairman of K&E, K&E revenues grew from $1.4 billion to more than $4.0 billion, and net income rose from less than $700 million to more than $2.2 billion according to The American Lawyer. Under Mr.
Hammes’ leadership, in 2019, K&E ranked first in total revenue and aggregate net income among the world’s top large law firms according to Bloomberg. That growth came across a variety of verticals where K&E has built leading franchises,
including private equity and M&A, restructuring and litigation, a breadth of expertise that affords valuable insight into various product categories as one of the largest consumers of the tech-enabled services offered by companies in our
target universe. In addition, K&E currently services more than 400 private equity clients around the world and Mr. Hammes maintains relationships at the senior levels of many of those firms. Mr. Hammes received
a B.B.A. in accounting from the University of Wisconsin-Madison and received a J.D. from Northwestern Pritzker School of Law. He is a member of the Illinois bar (inactive).
Adam Gerchen is the Chief Executive Officer of the company and serves on its board of directors and has served in both roles since 2020. Mr. Gerchen has also served as
co-founder and Chief Executive Officer of Keller Lenkner, a law firm that has developed unique arbitration strategies and other innovations in mass actions since 2018. Additionally, in order to serve the large number of firm clients, and
address the complexity of various areas of law, Mr. Gerchen also built a separate servicing business at Keller Lenkner in 2018 that combines client origination, intake, customer relationship management, IT, and settlement administration. From
2016 to 2017, Mr. Gerchen served as President of Burford Capital Limited (LSE: BUR) (“Burford”), the leading global finance firm focused on law. Previously, Mr. Gerchen co-founded and served as Chief Executive Officer of Gerchen Keller Capital
(“GKC”) from 2013 until GKC’s sale in 2016 to Buford. Prior to its acquisition, GKC grew into the largest private investment and advisory firm focused exclusively on legal and regulatory risk, raising $1.4 billion of institutional capital.
Across both organizations, products developed for and deployed into the legal sector included single-case litigation finance, portfolio funding, risk management & insurance, claim monetization, post-settlement, bankruptcy & insolvency,
international arbitration, and patent and intellectual property. Mr. Gerchen received a B.A. in Business Economics and graduated Magna Cum Laude from Brown University and a J.D. from Harvard Law School.
In the event we are unable to consummate the Business Combination, we believe our management team’s efforts to seek a high-quality business combination target will be complemented and augmented by the expertise of our independent directors. We
believe that our access to and affiliation with our independent directors represents a unique competitive advantage.
Our Strategic Partner
Our strategic partner brings substantial investment infrastructure and institutional resources for underwriting and execution:
Victory Park Capital Advisors, LLC (“VPC”) is a registered investment advisor with the Securities and Exchange Commission (“SEC”) and founded in 2007. The firm’s institutional investor base is diversified geographically and includes sovereign
wealth funds, insurance companies, financial institutions, foundations, endowments and family offices for which it has invested approximately $6.0 billion in over 115 transactions across North America, Europe, Latin America, Africa, Southeast
Asia and Oceania. As part of those investments, VPC has provided financing to technology businesses backed by some of the world’s leading venture capital firms and has a long track record of executing debt and equity financing transactions with
some of the largest global technology companies, including Square (U.S. NYSE:SQ), iZettle (Sweden, acquired by PayPal in 2018), and Zip Co (Australia ASX:Z1P). VPC’s investments have enabled portfolio companies to scale quickly and capture
leading market positions.
VPC’s senior investment team averages 15+ years of relevant experience, and has more than 20 investment professionals focused on underwriting and structuring. Moreover, the firm has a dedicated staff of 10 employees focused on operations and
risk management which facilitates robust monitoring, detailed reporting and customized data analytics to supplement traditional asset management. VPC has exemplified a disciplined underwriting process, including formal deal team and investment
committee procedures, to evaluate more than 1,000 opportunities since 2018. In evaluating a potential business combination, we will adhere to VPC’s stringent underwriting requirements and risk management procedures, and we will be supported at
all times by the firm’s institutional platform and resources.
Our Sponsor
Our sponsor, JAR Sponsor, LLC, is a recently organized special purpose vehicle capitalized equally by, and under the common control of entities affiliated with our Chairman, our CEO, and VPC. Over the course of their careers, members of our
management team and VPC have partnered together on several occasions to exploit inefficiencies, opportunities, and secular trends in the areas of law, finance, and technology. VPC has been a long-standing client of K&E across a variety of
funds and investment strategies, and Mr. Gerchen and VPC have successfully structured equity, credit, and derivative instruments in partnership across multiple businesses.
Business Strategy
Our business strategy is to leverage our team’s industry knowledge, strategic vision, operational expertise, and proprietary deal sourcing channels and relationships across the GRCL landscape to identify and complete our initial business
combination.
We have witnessed first-hand the secular shift towards digital transformation in the GRCL sector and have leveraged these tailwinds to deliver meaningful growth to our respective organizations.
The convergence of data, technology, and services to identify, assess and mitigate risk across the enterprise is a key theme and serves as the platform of our investment thesis. In building our respective enterprises, we have developed
widespread industry contacts and relationships, ranging from owners of private and public companies in our target universe, private equity funds, venture capital firms, investment bankers, and leading law firms and attorneys, which in the event
that the Business Combination is not consummated, will allow us to generate alternative attractive transaction targets for our shareholders.
Market Opportunity
The GRCL landscape represents an approximately $50 billion addressable market that has continued to show robust growth over the last decade according to MarkestandMarkets and ComplexDiscovery. As importantly, the industry has demonstrated
resiliency through market and economic cycles, including some subsectors that have displayed countercyclical dynamics.
We believe growth is driven by increasing complexity across an ever-evolving regulatory backdrop that continues to drive automation of legacy platforms from analog and manual processes to digital workflows. Moreover, the exponential growth in
data and the government-mandated compliance obligations related thereto (e.g., General Data Protection Regulation, or “GDPR”) has created meaningful industry tailwinds, propelling companies to innovate, disintermediate, and outsource services
historically provided by incumbent institutions. Lastly, we believe the recent coronavirus (“COVID-19”) outbreak has been, and will continue to be, an accelerant to technological adoption rates for GRCL products.
Within the broader GRCL landscape, specific areas of focus will include software and tech-enabled services firms providing anti-money laundering, know your customer, financial and tax compliance, information risk management, environment health
and safety compliance, ESG and ethics, vendor and supplier risk management, enterprise risk management and regulatory compliance, as well as alternative legal service providers (“ALSPs”) and other process outsourcers, bankruptcy and class action
administrators, litigation support vendors, including e-Discovery and court reporting businesses, legal and regulatory consultants, IP, and enterprise legal management.
We believe that GRCL companies across these sectors are largely underrepresented in the publicly-traded markets in the U.S. relative to the size of the industry. Since 2015, more than $15 billion of equity capital has been invested into the
industry according to Tracxn, creating significant pent up demand by private companies seeking to become public. For the companies in this sector which have become public, many have outperformed market indices on the basis of stock price
appreciation.
Acquisition Criteria
We will complete the Business Combination, or if the Business Combination is not consummated, our business combination efforts will focus on identifying high-growth businesses in the GRCL sector with enterprise values between $750 million and
$2.0 billion. Consistent with our business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating a prospective business target. We have used and, if the Business Combination is not
consummated, will use these criteria and guidelines in evaluating acquisition opportunities, but these are not intended to be exhaustive and management will independently review the merits of an initial business combination. We expect that no
individual criterion will entirely determine a decision to pursue an opportunity, but we intend to acquire a company that we believe possess the following characteristics:
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Exceptional Management Team with Public Market Experience: Best-in-class management with experience running a public company and a track record of success in driving growth and profitability.
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Established Market Leader: Scaled platform with unique solutions that create barriers to entry with defensible, market-leading positions, as well as a business operating within large and expanding markets with significant whitespace
opportunities.
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Attractive Financial Characteristics: Consistent organic revenue growth with high, recurring-subscription revenue base and operating leverage, as well as an ability to generate attractive unit economics and returns on capital.
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Sector Momentum with Multiple Growth Levers: Industry tailwinds that drive accelerated growth and further adoption of products and solutions, as well as a platform built to capitalize on numerous, tangible growth initiatives.
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Digital Transformation: Facilitator of digital transformation across enterprises in sectors that have historically relied on legacy processes, as well as a company that we can leverage our deep industry relationships, distribution
capabilities and sector knowledge to drive additional growth in the business.
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These criteria and guidelines are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other
considerations, factors, and criteria that our management may deem relevant. In the event that the Business Combination is not consummated and we decide to enter into our initial business combination with a target business that does not meet the
above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our shareholder communications related to our initial business combination, which, as discussed in this Report, would be in the form of
proxy solicitation materials or tender offer documents that we would file with the SEC.
Initial Business Combination
In accordance with the rules of the NYSE, the Business Combination, or an alternative initial business combination must occur with one or more target businesses that together have an aggregate fair market value equal to at least 80% of the
value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial
business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial
business combination (including with the assistance of financial advisors), we will obtain an opinion from an independent investment banking firm which is a member of FINRA or a valuation or appraisal firm with respect to the satisfaction of such
criteria. While we consider it likely that our board of directors will be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with
the business of a particular target or if there is a significant amount of uncertainty as to the value of the target’s assets or prospects.
We anticipate structuring our initial business combination so that the post transaction company in which our public shareholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses, such
as in connection with the Business Combination. In the event the Business Combination is not consummated, we may 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 shareholders or for other reasons, but we will only complete such business combination if the post transaction company owns or acquires 50% or
more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, 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 shareholders prior to the business combination may collectively own a minority interest in the post
transaction company, depending on valuations ascribed to the target and us in the business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital
stock, shares or other equity interests 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 shareholders immediately prior to our
initial business combination could own less than a majority of our issued and outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or
acquired by the post transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of the 80% of assets test described above. If the business combination involves more
than one target business, the 80% of assets test will be based on the aggregate value of all of the target businesses. In addition, we have agreed not to enter into a definitive agreement regarding an initial business combination without the
prior consent of our sponsor.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors, or completing the business combination through a joint venture or other form of shared ownership
with our sponsor, officers or directors. In the event that the Business Combination is not consummated and we seek to complete an initial business combination with a target that is affiliated with our sponsor, officers or directors, we, or a
committee of independent directors, would obtain an opinion from an independent investment banking firm that is a member of FINRA or a valuation or appraisal firm that such an initial business combination is fair to our company from a financial
point of view.
Members of our management team and our independent directors directly or indirectly own founder shares and/or private placement warrants following our initial public offering and, accordingly, may have a conflict of interest in determining
whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular
business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to at least one other entity pursuant to which such officer or director is or will be required to present
a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual
obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity, subject to their fiduciary duties under Cayman Islands law. Our amended and restated
memorandum and articles of association provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director
or officer of the company and it is an opportunity that we are able to complete on a reasonable basis. 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.
In addition, our sponsor and our officers and directors may sponsor or form other special purpose acquisition companies similar to ours or may pursue other business or investment ventures during the period in which we are seeking an initial
business combination. Any such companies, businesses or investments may present additional conflicts of interest in pursuing an initial business combination. However, we do not believe that any such potential conflicts would materially affect our
ability to complete our initial business combination. We are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the
Exchange Act prior or subsequent to the consummation of our initial business combination.
Sourcing of Potential Business Combination Targets
In the event the Business Combination is not consummated, our team’s significant operating and transaction experience and relationships will provide us with a substantial number of alternative initial 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 and
financing businesses, the reputation of our management team for integrity and fair dealing 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.
This network has provided our management team with a flow of referrals, which in the past has resulted in numerous transactions which were proprietary or where a limited group of investors were invited to participate in the sale process. In
the event the Business Combination is not consummated, we believe that this network of contacts and relationships of our management team will provide us important sources of investment opportunities. In addition, we anticipate that target
business combination candidates will be 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 company that is affiliated with our sponsor, officers or directors, or completing the business combination through a joint venture or other form of shared ownership
with our sponsor, officers or directors. In the event the Business Combination is not consummated and we seek to complete an initial business combination with a target that is affiliated with our sponsor, officers or directors, we, or a committee
of independent directors, would obtain an opinion from an independent investment banking firm or a valuation or appraisal firm that such an initial business combination is fair to our company from a financial point of view. We are not required to
obtain, and have not obtained, a fairness opinion in connection with the Business Combination.
Members of our management team and our independent directors will directly or indirectly own founder shares and/ or private placement warrants following our initial public offering and, accordingly, may have a conflict of interest in
determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a
particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. For example, it is anticipated
that Adam Gerchen will be elected as director of the combined company in connection with the consummation of the Business Combination.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations at least one other entity pursuant to which such officer or director is or will be required to present a
business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual
obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity, subject to their fiduciary duties under Cayman Islands law. Our amended and restated
memorandum and articles of association provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director
or officer of the company and it is an opportunity that we are able to complete on a reasonable basis. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our
ability to complete the Business Combination or an alternative initial business combination.
In addition, our sponsor and our officers and directors may sponsor or form other special purpose acquisition companies similar to ours or may pursue other business or investment ventures during the period in which we are seeking an initial
business combination. Any such companies, businesses or investments may present additional conflicts of interest in pursuing an initial business combination. However, we do not believe that any such potential conflicts would materially affect our
ability to complete the Business Combination or an alternative initial business combination.
We are subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of
our initial business combination.
Financial Position
With funds available for a business combination initially in the amount of $175,087,500 after payment of $6,037,500 of deferred underwriting fees, we offer a target business a variety of options, such as creating a liquidity event for its
owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt 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.
Sources of Target Businesses
In the event the Business Combination is not consummated, we anticipate that target business candidates may be brought to our attention from various unaffiliated sources, including investment bankers and private investment funds. Target
businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an
unsolicited basis, since many of these sources will have read this Report and know what types of businesses we are targeting. Our officers and directors, as well as their affiliates, may also bring to our attention target business candidates of
which they become aware through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions.
In addition, in the event the Business Combination is not consummated, we expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the track record and business
relationships of our officers and directors. In the event the Business Combination is not consummated, we may engage the services of professional firms or other individuals that specialize in business acquisitions, in which event we may pay a
finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring
opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of a finder’s fee is
customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors, or any entity with which
they are affiliated, be paid any finder’s fee, consulting fee or other compensation by the company prior to, or for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of
transaction that it is). We pay our sponsor $10,000 per month for office space, utilities, secretarial and administrative support services provided to members of our management team. We may also elect to make payment of customary fees to members
of our board of directors for director service. Any such payments prior to our initial business combination will be made from funds held outside the trust account. Other than the foregoing, there will be no finder’s fees, reimbursement,
consulting fee, monies in respect of any payment of a loan or other compensation paid by us to our sponsor, officers or directors, or any affiliate of our sponsor or officers prior to, or in connection with any services rendered in order to
effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is).
We are not prohibited from pursuing an initial business combination with a business combination target that is affiliated with our sponsor, officers or directors or completing the business combination through a joint venture or other form of
shared ownership with our sponsor, officers or directors. In the event the Business Combination is not consummated and we seek to complete our initial business combination with a business combination target that is affiliated with our sponsor,
officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking or a valuation or appraisal firm, that such 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. We are not required to obtain, and have not obtained, a fairness opinion in connection with the Business Combination.
Evaluation of a Target Business and Structuring of Our Initial Business Combination
In the event the Business Combination is not consummated, in evaluating a prospective alternative target business, we will conduct a due diligence review which may encompass, among other things, meetings with incumbent management and
employees, document reviews, interviews of customers and suppliers, inspection of facilities, as applicable, as well as a review of financial, operational, legal and other information which will be made available to us. If we determine to move
forward with a particular alternative target, we will proceed to structure and negotiate the terms of the alternative business combination transaction.
In the event the Business Combination is not consummated, the time required to select and evaluate an alternative target business and to structure and complete an alternative initial business
combination, and the costs associated with that process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of, and negotiation with, a prospective target business
with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination. The company will not pay any consulting fees to members of
our management team, or any of their respective affiliates, for services rendered to or in connection with our initial business combination. In addition, we have agreed not to enter into a definitive agreement regarding an initial business
combination without the prior consent of our sponsor.
Lack of Business Diversification
Upon consummation of the Business Combination, the prospects of our success will depend entirely on ZeroFox and IDX. In the event the Business Combination is not consummated and we complete an alternative initial business combination, 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 closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’s management may not prove
to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot
presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or
more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination.
Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business. In the event the Business Combination is consummated, it is anticipated
that Adam Gerchen will be serve as a director of the combined company following the consummation of the Business Combination.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at
the time of our initial business combination.
Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional
managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Shareholders May Not Have the Ability to Approve Our Initial Business Combination
The Business Combination requires the approval of our shareholders. However, in the event the Business Combination is not consummated, in connection with any alternative proposed business combination, we may conduct redemptions without a
shareholder vote pursuant to the tender offer rules of the SEC subject to the provisions of our amended and restated memorandum and articles of association. However, we will seek shareholder approval if it is required by applicable law or stock
exchange listing requirement, or we may decide to seek shareholder approval for business or other reasons. Under the NYSE’s listing rules, shareholder approval is required in connection with the Business Combination. In the event the Business
Combination is not consummated, in connection with any alternative proposed business combination, shareholder approval would typically be required under NYSE’s rules if, for example:
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we issue (other than in a public offering for cash) ordinary shares that will either (a) be equal to or in excess of 20% of the number of Class A ordinary shares 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 or otherwise and the present or
potential issuance of ordinary shares could result in an increase in outstanding ordinary shares or voting power of 1% or more (or 5% or more if the related party involved is classified as such solely because such person is a
substantial security holder); or
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the issuance or potential issuance of ordinary shares will result in our undergoing a change of control.
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In the event the Business Combination is not consummated, in connection with any alternative proposed business combination, the decision as to whether we will seek shareholder approval of a proposed business combination in those instances in
which shareholder approval is not required by applicable law or stock exchange listing requirements will be made by us, solely in our discretion, and will be based on business and other reasons, which include a variety of factors, including, but
not limited to: (i) the timing of the transaction, including in the event we determine shareholder approval would require additional time and there is either not enough time to seek shareholder approval or doing so would place the company at a
disadvantage in the transaction or result in other additional burdens on the company; (ii) the expected cost of holding a shareholder vote; (iii) the risk that the shareholders would fail to approve the proposed business combination; (iv) other
time and budget constraints of the company; and (v) additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to shareholders.
Permitted Purchases of Our Securities
In connection with the Business Combination, or if the Business Combination is not consummated, and we seek shareholder approval of an alternative proposed initial business combination and we do not conduct redemptions in connection with our
initial business combination pursuant to the tender offer rules, our sponsor, initial shareholders, directors, officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open
market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial shareholders, directors, officers, advisors or their affiliates may purchase in such transactions,
subject to compliance with applicable law and the NYSE rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the
funds in the trust account will be used to purchase shares or public warrants in such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material non-public information not
disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act.
In the event that our sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling
shareholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a
going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
The purpose of any such purchases of shares could be to (i) vote such shares in favor of the Business Combination or an alternative business combination, in the event Business Combination is not consummated, and thereby increase the likelihood
of obtaining shareholder approval of the business combination or (ii) to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business
combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to
the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our Class A ordinary shares or public warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or
obtain the quotation, listing or trading of our securities on a national securities exchange.
Our sponsor, officers, directors and/or their affiliates may identify the shareholders with whom our initial shareholders, officers, directors or their affiliates may pursue privately negotiated purchases by either the shareholders contacting
us directly or by our receipt of redemption requests submitted by shareholders (in the case of Class A ordinary shares) following our mailing of proxy materials in connection with the Business Combination or an alternative proposed initial
business combination in the event the Business Combination is not consummated. To the extent that our sponsor, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling
shareholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such shareholder has already submitted a proxy with respect to our
initial business combination but only if such shares have not already been voted at the general meeting related to our initial business combination. Our sponsor, officers, directors, advisors or any of their affiliates will select which
shareholders to purchase shares from based on a negotiated price and number of shares and any other factors that they may deem relevant, and will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other
federal securities laws. Our sponsor, officers, directors and/or their affiliates will not make purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. Any such purchases will be reported pursuant to
Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
Redemption Rights for Public Shareholders upon Completion of Our Initial Business Combination
We will provide our public shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares 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 and on the conditions described herein. The amount in the trust account is initially anticipated to be $10.15 per public share. The per share
amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriter. Our sponsor, officers and directors have entered into a letter agreement with us,
pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares they may hold in connection with the completion of our initial business combination.
Limitations on Redemptions
Our amended and restated memorandum and articles of association provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001. In connection with the Business
Combination, we will submit to our shareholders a proposal to amend our amended and restated memorandum and articles of association to remove this requirement.In addition, pursuant to the Business Combination Agreement, the parties’ obligation to
consummate the Business Combination is subject to the condition that there will be not less than $170,000,000 of available closing acquiror cash, comprised of the aggregate cash proceeds from our trust account, together with the net cash proceeds
from the common equity PIPE financing and the convertible notes financing (each as described in the Form S-4), after deducting any amounts paid to our public shareholders that exercise their redemption rights in connection with the Business
Combination. In the event the Business Combination is not is not consummated, an alternative proposed initial business combination may impose a minimum cash requirement for (i) cash consideration to be paid to the target or its owners, (ii) cash
for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions. In the event the aggregate cash consideration we would be required to pay for all Class A ordinary shares that are validly
submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business
combination or redeem any shares, and all Class A ordinary shares submitted for redemption will be returned to the holders thereof. We may, however, raise funds through the issuance of equity-linked securities or through loans, advances or other
indebtedness in connection with our initial business combination, including pursuant to forward purchase agreements or backstop arrangements we may enter into following consummation of our initial public offering, in order to, among other
reasons, satisfy such net tangible assets or minimum cash requirements.
Manner of Conducting Redemptions
In connection with the Business Combination we will provide our public shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares upon the completion of the Business Combination in connection with a
shareholder meeting called to approve the Business Combination. In the event the Business Combination is not consummated, in connection with an alternative proposed initial business combination we will provide our public shareholders with the
opportunity to redeem all or a portion of their public shares upon the completion of an alternative business combination either (i) in connection with a general meeting called to approve the business combination or (ii) without a shareholder vote
by means of a tender offer. The decision as to whether we will seek shareholder 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 shareholder approval under applicable law or stock exchange listing requirement or whether we were deemed to be a foreign private issuer (which would
require a tender offer rather than seeking shareholder approval under SEC rules). Asset acquisitions and share purchases would not typically require shareholder approval while direct mergers with our company where we do not survive and any
transactions where we issue more than 20% of our issued and outstanding ordinary shares or seek to amend our amended and restated memorandum and articles of association would require shareholder approval. So long as we obtain and maintain a
listing for our securities on the NYSE, we will be required to comply with NYSE’s shareholder approval rules.
The requirement that we provide our public shareholders with the opportunity to redeem their public shares by one of the two methods listed above are contained in provisions of our amended and restated memorandum and articles of association
and apply whether or not we maintain our registration under the Exchange Act or our listing on the NYSE. Such provisions may be amended if approved by a special resolution of our shareholders as a matter of Cayman Islands law, being the
affirmative vote of a majority of at least two-thirds of the shareholders who attend and vote at a general meeting of the company, so long as we offer redemption in connection with such amendment.
If we provide our public shareholders with the opportunity to redeem their public shares in connection with a general meeting, we will, pursuant to our amended and restated memorandum and articles of association:
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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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The Business Combination requires the approval of our shareholders. We will distribute proxy materials and, in connection therewith, provide our public shareholders with the redemption rights described above upon completion of the Business
Combination. If the Business Combination is not consummated, and we seek shareholder approval of an alternative initial business combination, we will distribute proxy materials and, in connection therewith, provide our public shareholders with
the redemption rights described above upon completion of the initial business combination.
The Business Combination requires the approval of our shareholders and we will complete the Business Combination only if approved by our shareholders as an ordinary resolution under Cayman Islands law, which requires the affirmative vote of a
majority of the shareholders who attend and vote at a general meeting of the company. If the Business Combination is not consummated and we seek shareholder approval in connection with a proposed alternative initial business combination, we will
complete our initial business combination only if approved by our shareholders as an ordinary resolution under Cayman Islands law. A quorum for such meeting will be present if the holders of a majority of issued and outstanding shares entitled to
vote at the meeting are represented in person or by proxy. Our sponsor, officers and directors will count toward this quorum and, pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote their founder shares,
private placement shares and any public shares purchased during or after our initial public offering (including in open market and privately-negotiated transactions) in favor of our initial business combination. For purposes of seeking approval
of an ordinary resolution, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial shareholders’ founder shares, we would need 6,468,751 or 37.5%, of the
17,250,000 public shares sold in our initial public offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming all outstanding shares are voted). This quorum and voting
thresholds, and the voting agreement of our sponsor, officers and directors, may make it more likely that we will consummate our initial business combination. Each public shareholder may elect to redeem their public shares irrespective of whether
they vote for or against the proposed transaction or whether they were a public shareholder on the record date for the general meeting held to approve the proposed transaction.
If the Business Combination is not consummated and if in connection with an alternative proposed business combination a shareholder vote is not required and we do not decide to hold a shareholder vote for business or other legal reasons, we
will:
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conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and
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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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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 shareholders not tendering more than the number of public shares we are permitted to redeem. If public
shareholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
If the Business Combination is not consummated and upon the public announcement of an alternative initial business combination, if we elect to conduct redemption pursuant to the tender offer rules, we or our sponsor will terminate any plan
established in accordance with Rule 10b5-1 to purchase our Class A ordinary shares in the open market, in order to comply with Rule 14e-5 under the Exchange Act.
We intend to require our public shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to, at the holder’s option, either deliver their share certificates to our
transfer agent or deliver their shares to our transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) system, prior to the date set forth in the proxy materials or tender offer documents, as
applicable. In the case of proxy materials, this date may be up to two business days prior to the initially scheduled vote on the proposal to approve the initial business combination. In addition, if we conduct redemptions in connection with a
shareholder vote, we intend to require a public shareholder seeking redemption of its public shares to also submit a written request for redemption to our transfer agent two business days prior to the initially scheduled vote in which the name of
the beneficial owner of such shares is included. The proxy materials or tender offer documents, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are
requiring public shareholders to satisfy such delivery requirements. We believe that this will allow our transfer agent to efficiently process any redemptions without the need for further communication or action from the redeeming public
shareholders, which could delay redemptions and result in additional administrative cost. If the proposed initial business combination is not approved and we continue to search for a target company, we will promptly return any certificates or
shares delivered by public shareholders who elected to redeem their shares.
Limitation on Redemption Upon Completion of Our Initial Business Combination If We Seek Shareholder Approval
The Business Combination requires the approval of the shareholders. In connection with the shareholder approval of the Business Combination, or if the Business Combination is not consummated and we seek shareholder approval of a proposed
alternative 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 memorandum and articles of association provide that a public
shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights
with respect to Excess Shares without our prior consent. We believe this restriction will discourage shareholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption
rights against a proposed business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public shareholder
holding more than an aggregate of 15% of the shares sold in our initial public offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us, our sponsor or our management at a premium to the
then-current market price or on other undesirable terms. By limiting our shareholders’ ability to redeem no more than 15% of the shares sold in our initial public offering, we believe we will limit the ability of a small group of shareholders 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 shareholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Delivering Share Certificates in Connection with the Exercise of Redemption Rights
As described above, we intend to require our public shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to, at the holder’s option, either deliver their share
certificates to our transfer agent or deliver their shares to our transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) system, prior to the date set forth in the proxy materials or tender offer
documents, as applicable. In the case of proxy materials, this date may be up to two business days prior to the initially scheduled vote on the proposal to approve the initial business combination. In addition, if we conduct redemptions in
connection with a shareholder vote, we intend to require a public shareholder seeking redemption of its public shares to also submit a written request for redemption to our transfer agent two business days prior to the initially scheduled vote in
which the name of the beneficial owner of such shares is included. The proxy materials or tender offer documents, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will
indicate whether we are requiring public shareholders to satisfy such delivery requirements. Accordingly, a public shareholder would have up to two business days prior to the initially scheduled vote on the initial business combination if we
distribute proxy materials, or from the time we send out our tender offer materials until the close of the tender offer period, as applicable, to submit or tender its shares if it wishes to seek to exercise its redemption rights. In the event
that a shareholder fails to comply with these or any other procedures disclosed in the proxy or tender offer materials, as applicable, its shares may not be redeemed. Given the relatively short exercise period, it is advisable for shareholders to
use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the broker submitting or tendering shares 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
submit or 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.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the proxy materials or tender offer documents, as applicable. 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 the Business Combination or an alternative proposed initial business combination is not approved or completed for any reason, then our public shareholders 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 the Business Combination is not completed, we may continue to try to complete an alternative proposed initial business combination with a different target until May 23, 2022.
Redemption of Public Shares and Liquidation if No Initial Business Combination
Our amended and restated memorandum and articles of association provide that we we will have until May 23, 2022 to complete our initial business combination. If we are unable to complete our initial business combination by May 23, 2022, we
will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account, including interest earned on the funds held in the trust account (less taxes payable and 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 shareholders’ rights as shareholders (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 shareholders and our board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii) to our obligations under Cayman Islands law to provide for claims of creditors and in all
cases subject to the other requirements of applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by May
23, 2022.
Our sponsor, 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 any founder shares held by them if we fail to
complete our initial business combination within 18 months from the closing of our initial public offering. However, if our sponsor or management team acquire public shares in or after our initial public offering, 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 by May 23, 2022.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated memorandum and articles of association (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 by May 23, 2022 or (B) with respect to any other material provisions
relating to shareholders’ rights or pre-initial business combination activity, unless we provide our public shareholders with the opportunity to redeem their public shares upon approval of any such amendment at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, 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. If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot
satisfy the net tangible asset requirement, we would not proceed with the amendment or the related redemption of our public shares at such time.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $1,500,000 of proceeds held outside the trust
account, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there
is any interest accrued in the trust account not required to pay income taxes on interest income earned on the trust account balance, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to
pay those costs and expenses.
If we were to expend all of the net proceeds of our initial public offering 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 shareholders upon our dissolution would be approximately $10.15. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have
higher priority than the claims of our public shareholders. We cannot assure you that the actual per-share redemption amount received by shareholders will not be substantially less than $10.15. While we intend to pay such amounts, if any, we
cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors, service providers, prospective target businesses 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 shareholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account
including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim
against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will consider whether competitive alternatives are
reasonably available to us and will only enter into an agreement with such third party if management believes that such third party’s engagement would be in the best interests of the company under the circumstances. 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. WithumSmith+Brown, PC, our independent registered public accounting firm, and the underwriter of our initial public
offering will not execute agreements with us waiving such claims to the monies held in the trust account.
In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust
account for any reason. In order to protect the amounts held in the trust account, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective
target business with which we have entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.15 per public
share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.15 per share due to reductions in the value of the trust assets, less taxes payable, provided
that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to
any claims under our indemnity of the underwriter of our initial public offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations,
nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and we believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would
be able to satisfy those obligations. As a result, if any such claims were successfully made against the trust account, the funds available for our initial business combination and redemptions could be reduced to less than $10.15 per public
share. In such event, we may not be able to complete our initial business combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify us
for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.15 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if
less than $10.15 per share due to reductions in the value of the trust assets, in each case less taxes payable, and our sponsor asserts that it is unable to satisfy its 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 if, for example, the cost
of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. Accordingly, we cannot assure you that due to claims
of creditors the actual value of the per-share redemption price will not be less than $10.15 per share.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do
business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriter of our initial
public offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately $1,500,000 from the proceeds of our initial public offering with which to pay any such potential claims
(including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and
liabilities is insufficient, shareholders who received funds from our trust account could be liable for claims made by creditors. In the event that our offering expenses exceed our estimate of $1,000,000, we may fund such excess with funds from
the funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our
estimate of $1,000,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount.
If we file a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency 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 shareholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.15
per share to our public shareholders. Additionally, if we file a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against us that is not dismissed, any distributions received by shareholders 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 or insolvency court could seek to recover some or all amounts received by our shareholders.
Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public shareholders
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 shareholders are entitled to receive funds from the trust account only (i) in the event of the redemption of our public shares if we do not complete our initial business combination within 18 months from the closing of our initial
public offering; (ii) in connection with a shareholder vote to amend our amended and restated memorandum and articles of association (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 18 months from the closing of our initial public offering or (B) with respect to any other material provisions relating to
shareholders’ rights or pre-initial business combination activity; or (iii) if they redeem their respective shares for cash upon the completion of our initial business combination. In no other circumstances will a shareholder have any right or
interest of any kind to or in the trust account. In the event we seek shareholder approval in connection with our initial business combination, a shareholder’s voting in connection with the business combination alone will not result in a
shareholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such shareholder must have also exercised its redemption rights described above. These provisions of our amended and restated memorandum and articles
of association, like all provisions of our amended and restated memorandum and articles of association, may be amended with a shareholder vote.
Competition
In the event the Business Combination is not consummated, in identifying, evaluating and selecting a target business for an alternative proposed initial business combination, we may encounter competition from other entities having a business
objective similar to ours, including other special purpose acquisition companies, private equity groups and leveraged buyout funds, public companies and operating businesses seeking strategic acquisitions. Many of these entities are well
established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess similar or greater financial, technical, human and other resources than us. Our
ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in
connection with our public shareholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our issued and outstanding warrants, and the future dilution they potentially
represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Facilities
We currently utilize office space at 150 North Riverside Plaza, Suite 5200, Chicago, Illinois 60606 from an affiliate of our sponsor as our executive offices. We consider our current office space adequate for our current operations.
Employees
We currently have two officers. These individuals are not obligated to devote any specific number of hours to our matters, but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our
initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the business combination process we are in.
We do not intend to have any full-time employees prior to the completion of our initial business combination.
Periodic Reporting and Financial Information
Our units, Class A ordinary shares and warrants are registered under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the
requirements of the Exchange Act, our annual reports contain financial statements audited and reported on by our independent registered public accountants.
We will provide shareholders with audited financial statements of the prospective target business as part of the proxy solicitation materials or tender offer documents sent to shareholders to assist them in assessing the target business. In
all likelihood, these financial statements will need to be prepared in accordance with, or reconciled to, GAAP or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the
standards of the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may conduct an initial business combination with because some targets may be unable to provide such statements in time for us to
disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential business
combination candidate will have financial statements prepared in accordance with the requirements outlined above, or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined
above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be
material.
We are 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, and no
longer qualify as an emerging growth company, will we be required to have our internal control procedures audited. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal
controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
Prior to the date of this Report, we filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we are subject to the rules and regulations promulgated
under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.
We are a Cayman Islands exempted company. Exempted companies are Cayman Islands companies conducting business mainly outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Law. As an
exempted company, we applied for and received a tax exemption undertaking from the Cayman Islands government that, in accordance with Section 6 of the Tax Concessions Act (2018 Revision) of the Cayman Islands, for a period of 20 years from the
date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations will apply to us or our operations and, in addition, that no tax to be levied on profits, income,
gains or appreciations or which is in the nature of estate duty or inheritance tax will be payable (i) on or in respect of our shares, debentures or other obligations or (ii) by way of the withholding in whole or in part of a payment of dividend
or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to
other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not
previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended
transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at
least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A ordinary shares that are held by non-affiliates exceeds $700,000,000 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 ordinary shares held by non-affiliates exceeds $250,000,000 as of the prior June 30th, or (2)
our annual revenues exceeded $100,000,000 during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700,000,000 as of the prior June 30.
Legal Proceedings
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacities as such.
As a smaller reporting company, we are not required to include risk factors in this annual report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on the Company and its
operations. Risks associated with the Business Combination, ZeroFox and IDX are more fully discussed in the Form S-4.
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•
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we are an early stage Company with no revenue or basis to evaluate our ability to select a suitable business target;
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•
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if the Business Combination is not consummated, we may not be able to select an appropriate alternative target business or businesses and complete our initial business combination in the prescribed time frame;
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•
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our expectations around the performance of a prospective target business or businesses may not be realized;
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•
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we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination;
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•
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our officers and directors may have difficulties allocating their time between the company and other businesses and may potentially have conflicts of interest with our business following the Business Combination or in approving our
initial business combination if the Business Combination is not consummated and we pursue an alternative proposed initial business combination;
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•
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if the Business Combination is not consummated, we may not obtain additional financing to complete an alternative initial business combination or reduce number of shareholders requesting redemption;
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•
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if is not consummated, you may not be given the opportunity to vote on an alternative proposed initial business combination;
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•
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trust account funds may not be protected against third party claims or bankruptcy;
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•
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an active market for our public securities' may not develop and you will have limited liquidity and trading;
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•
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the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination; and
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•
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our financial performance following the Business Combination or an alternative proposed initial business combination with an entity may be negatively affected by their lack an established record of revenue, cash flows and experienced
management.
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For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our prospectus dated November 18, 2020 and in our Form S-4, initially filed on February 7, 2022.
None.
| ITEM 2. |
PROPERTIES
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Our executive offices are located at 150 North Riverside Plaza, Suite 5200, Chicago, Illinois 60606. 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, utilities,
secretarial support and administrative services. We consider our current office space adequate for our current operations.
| ITEM 3. |
LEGAL PROCEEDINGS
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There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacities as such.
| ITEM 4. |
MINE SAFETY DISCLOSURES
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Not applicable.
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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(a)
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Market Information
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Our units, Class A ordinary shares and warrants are each traded on the NYSE under the symbol “LNFA.U”, “LNFA” and “LNFA WS” respectively. Our units commenced public trading on November 19, 2020. Our Class A ordinary shares and warrants began
separate trading on January 7, 2021.
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(b)
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Holders
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On December 31, 2021, there was one holder of record for our units, one holder of record for our Class A ordinary shares, three holders of our Class B ordinary shares and three holders of our warrants.
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(c)
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Dividends
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We have not paid any cash dividends on our ordinary shares to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be dependent upon our revenues and
earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any cash dividends subsequent to a business combination will be within the discretion of our board of
directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any share dividends in the foreseeable future. Further, if we incur any indebtedness, our ability to declare dividends
may be limited by restrictive covenants we may agree to in connection therewith.
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(d)
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Securities Authorized for Issuance Under Equity Compensation Plans
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None.
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(e)
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Performance Graph
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Not applicable.
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(f)
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Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
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Unregistered Sales and Use of Proceeds
On August 28, 2020, our sponsor, paid $25,000, or approximately $0.004 per share, to cover certain of our offering costs in exchange for 5,750,000 Class B ordinary shares. Such securities were issued in connection with our organization
pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. On November 13, 2020, the sponsor effected a surrender of 1,437,500 Founder Shares to the Company for no consideration, resulting in a decrease in the
total number of Class B ordinary shares outstanding to 4,312,500 shares.
On November 23, 2020, we consummated an initial public offering of 15,000,000 units, at an offering price of $10.00 per Unit, and private placements with (i) JAR Sponsor, LLC of 5,000,000 private placement warrants at a price of $1.00 per
warrant and (ii) Jefferies of 1,859,505 private placement warrants at a price of approximately $1.21 per warrant. The company granted the Jefferies a 45-day option to purchase up to 2,250,000 additional units at the public offering price to cover
over-allotments, if any. On November 23, 2020, Jefferies exercised the over-allotment option in full. Concurrently with the closing of the over-allotment option on November 25, 2020, the company consummated private placements with (a) the sponsor
of an additional 450,000 private placement warrants at a price of $1.00 per unit and (ii) Jefferies of an additional 278,925 private placement warrants at a price of approximately $1.21 per unit. The net proceeds from the initial public offering,
including the over-allotment option, and certain of the proceeds from the private placement and the option private placement, $175,087,500 in the aggregate, were placed in a trust account established for the benefit of the Company’s public
shareholders and Jefferies with Continental Stock Transfer & Trust Company acting as trustee.
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(g)
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
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None.
Not applicable.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes
related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our
actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and
elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated in the Cayman Islands on August 20, 2020 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase,
reorganization or other similar business combination with one or more businesses. We intend to effectuate our business combination using cash derived from the proceeds of the initial public offering and the sale of the private placement warrants,
our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
The Business Combination
The Business Combination Agreement provides for, among other things, the following transactions on the date of Closing: (i) the ZF Merger, with ZeroFox being the surviving company in the ZF
Merger and, after giving effect to such merger, continuing as a wholly-owned subsidiary of L&F Holdings, (ii) the IDX Merger, with IDX being the Transitional IDX Entity and, after giving effect to such merger, continuing as a wholly-owned
subsidiary of L&F Holdings, and (iii) the IDX Forward Merger, with IDX Forward Merger Sub being the surviving company in the IDX Forward Merger and, after giving effect to such merger, continuing as a wholly-owned subsidiary of L&F
Holdings (the “Mergers”).
Business Combination Consideration
In accordance with the terms and subject to the conditions of the Business Combination Agreement, at the effective times of the Mergers, among other things, (i) each outstanding share of common stock (including
shares of common stock issued upon the mandatory conversion of shares of preferred stock) of ZeroFox, other than ZF Dissenting Shares (as defined in the Business Combination Agreement) and ZF Cancelled Shares (as defined in the Business
Combination Agreement), will be automatically cancelled and converted into a right to receive a fraction of a share of LNFA Common Stock determined in accordance with the Business Combination Agreement on the basis of a pre-money enterprise value
of ZeroFox of $866,250,000 and a price of $10.00 per share of LNFA Common Stock and (ii) each outstanding share of common stock and preferred stock of IDX, other than IDX Dissenting Shares (as defined in the Business Combination Agreement) and
IDX Cancelled Shares (as defined in the Business Combination Agreement), will be automatically cancelled and converted into a right to receive (x) for common stock and series a-1 and series a-2 preferred stock, a fraction of a share of LNFA
Common Stock, (y) for common stock and series a-1 and series a-2 preferred stock, a portion of $50,000,000 in cash consideration (subject to certain adjustments for cash, working capital, debt and transaction expenses, and net of liquidation
preferences, as provided in the Business Combination Agreement), and (z) for series a-1, series a-2 and series b preferred stock, a liquidation preference amount of $0.361, in each case, in accordance with the Business Combination Agreement and
on the basis of a pre-money enterprise value of IDX of $338,750,000 and a price of $10.00 per share of LNFA Common Stock.
Common Equity Investment
Concurrently with the execution of the Business Combination Agreement, LNFA entered into subscription agreements (the “Common Equity Subscription Agreements”) with certain investors, including, among others, Victory Park Capital, certain
existing stockholders of ZeroFox (certain funds affiliated with New Enterprise Associates, Highland Capital and Alsop Louie Partners (the “ZF Investors”)), and certain existing stockholders of IDX (certain funds affiliated with Blue Venture Fund,
Peloton Equity and ForgePoint Capital (the “IDX Investors”)). Pursuant to the Common Equity Subscription Agreements, the investors agreed to subscribe for and purchase, and LNFA agreed to issue and sell to such investors, on the Closing Date (as
defined in the Business Combination Agreement), an aggregate of 2,000,000 shares of LNFA Common Stock in exchange for an aggregate purchase price of $20,000,000 (the “Common Equity PIPE Financing”).
In addition, on December 16, 2021, the ZF Investors purchased PIK promissory notes issued by ZeroFox (the “ZF PIK Promissory Notes”) for an aggregate purchase price of $5,000,000. Such ZF PIK Promissory Notes accrue interest that will be
paid-in-kind at a rate of 5.0% per annum. If the Closing occurs, the repayment of the original principal amount of the ZF PIK Promissory Notes may be offset against amounts owed by the ZF investors under their Common Equity Subscription
Agreements.
In addition, if the Closing occurs, any portion of closing cash consideration to which the IDX Investors are entitled in connection with the consummation of the Business Combination may be reduced to fund the subscription amount the IDX
Investors would otherwise be required to pay pursuant to the Common Equity Subscription Agreements.
The closing of the Common Equity PIPE Financing is contingent upon, among other things, the substantially concurrent consummation of the Business Combination. The Common Equity Subscription Agreements provide that LNFA will grant the investors
in the Common Equity PIPE Financing certain customary registration rights.
The foregoing description of the Common Equity Subscription Agreements and the Common Equity PIPE Financing is subject to and qualified in its entirety by reference to the full text of the form of Common Equity Subscription Agreement, a copy
of which is attached as Exhibit 10.8 hereto and the terms of which are incorporated herein by reference.
Convertible Notes Investment
In connection with signing the Business Combination Agreement, LNFA entered into convertible note subscription agreements (the “Convertible Note Subscription Agreements”) with affiliates of Monarch Alternative Capital LP, Victory Park Capital
and Corbin Capital (the “Note Investors”), in respect of $150,000,000 aggregate principal amount of unsecured convertible notes due in 2025 (the “Notes”) to be issued in connection with the closing of the Business Combination (the “Convertible
Notes Financing”). The principal terms of the Notes are set forth in the form of indenture attached as an exhibit to the Convertible Note Subscription Agreements, which indenture shall be entered into by LNFA, the guarantors party thereto and the
indenture trustee (the “Indenture”), and the form of global note attached thereto. The Notes will bear interest at a rate of 7.00% per annum, payable quarterly in cash; provided, that the issuer may elect to pay interest in kind at 8.75% per
annum, and the Notes will be convertible at an initial conversion price of $11.50, subject to customary anti-dilution adjustments, including with respect to stock-splits and stock dividends, dividends and other distributions, above-market tender
offers, below-market rights offerings and spin-offs (the “Conversion Price”), and shall mature on the date that is three years following the closing of the Convertible Notes Financing.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through December 31, 2021 were organizational activities and those
necessary to prepare for the initial public offering, described below and identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination.
We expect to generate non-operating income in the form of interest income on marketable investments held in trust account after the initial public offering. We expect that we will incur increased expenses as a result of being a public company
(for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a business combination.
For the year ended December 31, 2021, we had a net income of $5,598,086, which consists of change in fair value of warrant liabilities of $9,425,504 and interest earned on
marketable investments held in Trust Account of $20,498, offset by operating costs of $3,847,916.
For the period from August 20, 2020 (inception) through December 31, 2020, we had a net loss of $7,798,760, which consists of change in fair value of warrant liabilities of $6,829,174,
transaction costs of $807,424 and interest earned on marketable investments held in Trust Account of $2,030, offset by operating costs of $164,192.
Liquidity and Capital Resources
On November 23, 2020, we consummated the initial public offering of 15,000,000 units, at a price of $10.00 per unit, generating gross proceeds of $150,000,000. Simultaneously with the closing of
the initial public offering, we consummated the sale of 6,859,505 private placement warrants to the Sponsor and Jefferies LLC at a price of $1.00 per private placement warrant and approximately $1.21 per private placement warrant, respectively,
generating gross proceeds of approximately $7,250,002.
On November 25, 2020, the company sold an additional 2,250,000 Units for total gross proceeds of $22,500,000 in connection with the underwriters’ full exercise of their
over-allotment option. Simultaneously with the closing of the over-allotment option, we also consummated the sale of an additional 728,925 private placement warrants to the sponsor and Jefferies LLC at $1.00 per private placement warrant and
approximately $1.21 per private placement warrant, respectively, generating total proceeds of $787,500.
Following the initial public offering, the full exercise of the over-allotment option, and the sale of the private placement warrants, a total of $175,087,500 was placed in
the trust account, and we had $1,480,035 of cash held outside of the trust account, after payment of costs related to the initial public offering, and available for working capital purposes. We incurred $10,050,665 in transaction costs, including
$3,450,000 of underwriting fees, $6,037,500 of deferred underwriting fees and $563,165 of other offering costs.
For the year ended December 31, 2021, net cash used in operating activities was $903,189. Net income of $5,598,086 was affected by change in fair value of warrant liabilities of $9,425,504 and
interest earned on marketable investments held in trust account of $20,498. Changes in operating assets and liabilities, provided $2,944,727 of cash from operating activities.
For the period from August 20, 2020 (inception) through December 31, 2020, net cash used in operating activities was $327,906. Net loss of $7,798,760 was affected by formation costs paid by the
Sponsor of $5,000, interest earned on marketable investments of $2,030, change in fair value of warrant liabilities of $6,829,174, and transaction costs of $807,424. Changes in operating assets and liabilities used $168,714 of cash from operating
activities.
At December 31, 2021, we had cash and marketable securities held in the trust account of $175,110,029. We intend to use substantially all of the funds held in the trust account, including any
amounts representing interest earned on the trust account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our business combination. We may withdraw interest from the trust account to pay
taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a business combination, the remaining proceeds held in the trust account will be used as working capital to finance the
operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
At December 31, 2021, we had cash of $575,739 held outside of the trust account. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements
of prospective target businesses, structure, negotiate and complete a business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our sponsor or an affiliate of our sponsor or certain of our officers and
directors may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that a business combination
does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible
into warrants, at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the private placement warrants.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of
Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until May 23, 2022 to consummate a business combination. It is uncertain that the Company will be able to consummate a business combination by this time. If
a business combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation,
should a business combination not occur and an extension is not requested by the Sponsor, and potential subsequent dissolution raises 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 May 23, 2022.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2021. We do not participate in transactions
that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not
entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could
materially differ from those estimates. We have identified the following critical accounting policies:
Class A Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
Class A Ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that is 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, ordinary shares are classified as shareholders’ equity. Our
Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption is presented as
temporary equity, outside of the shareholders’ equity section of our balance sheets.
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are
indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly
period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of
issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes
in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
Net (Loss) Income per Ordinary Share
Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period. Accretion associated with the redeemable shares of
Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
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. We adopted ASU 2020-06 effective as of January 1, 2021. The adoption of ASU 2020-06 did not have an impact on our consolidated financial
statements.
| ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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As of December 31, 2021, we were not subject to any market or interest rate risk. Following the consummation of our initial public offering, the net proceeds of our initial public offering, including amounts in the trust account, have been
invested in certain U.S. government obligations with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. 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 (RESTATED)
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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
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None.
| ITEM 9A. |
CONTROLS AND PROCEDURES (RESTATED)
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Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and
reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive
officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief 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 Chief Executive Officer and Chief 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, we 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 present fairly in all material respects our financial position,
results of operations and cash flows for the period 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.
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 consolidated financial statements for external reporting purposes in accordance with
GAAP. Our internal control over financial reporting includes those policies and procedures that:
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pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,
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provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors, and
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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 consolidated financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated 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.
Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting
standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with
the requisite experience and training to supplement existing accounting professionals.
This Annual Report on 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’s Report on Internal Controls Over Financial Reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period
established by rules of the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
The Company has made changes in its 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 condensed consolidated 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
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None.
| ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS.
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Not applicable.
Directors and Executive Officers
As of the date of this Report, our directors and officers are as follows:
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Name
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Age
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Position
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Jeffrey C. Hammes
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63 |
Chairman
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Adam Gerchen
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40
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Chief Executive Officer and Director
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Richard Levy
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49
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Director
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Tom Gazdziak
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34 |
Chief Financial Officer
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Senator Joseph Lieberman
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80
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Director
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Albert Goldstein
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41
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Director
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Kurt Summers
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42
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Director
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Jeffrey C. Hammes serves as the Chairman of the company and is on the board of directors. Mr. Hammes served as the Chairman of Kirkland & Ellis LLP and Kirkland & Ellis International LLP
(collectively, “K&E”) from 2010 until retiring in 2019. During his tenure as Chairman of K&E, K&E revenues grew from $1.4 billion to more than $4.0 billion, and net income rose from less than $700,000,000 to more than $2,000,000,000
according to the American Lawyer. Under Mr. Hammes’ leadership, in 2019, K&E ranked first in total revenue and aggregate net income among the world’s top large law firms according to Bloomberg. That growth came across a variety of verticals
where K&E has built leading franchises, including private equity and M&A, restructuring and litigation, a breadth of expertise that affords valuable insight into various product categories as one of the largest consumers of the
tech-enabled services offered by companies in our target universe. In addition, K&E currently services more than 400 private equity clients around the world and Mr. Hammes maintains relationships at the senior levels of many of those firms.
Mr. Hammes received a B.B.A. in accounting from the University of Wisconsin-Madison and received his J.D. from Northwestern Pritzker School of Law. He is a member of the Illinois bar (inactive).
Adam Gerchen is the Chief Executive Officer of the company and serves on the board of directors and has served in both roles since 2020. Mr. Gerchen has also served as co-founder and Chief Executive
Officer of Keller Lenkner, a law firm that has developed unique arbitration strategies and other innovations in mass actions since 2018. Additionally, in order to serve the large number of firm clients, and address the complexity of various areas
of law, Mr. Gerchen also built a separate servicing business at Keller Lenkner in 2018 that combines client origination, intake, customer relationship management, IT, and settlement administration. From 2016 to 2017, Mr. Gerchen served as
President of Burford Capital Limited (LSE: BUR) (“Burford”), the leading global finance firm focused on law. Previously, Mr. Gerchen co-founded and served as Chief Executive Officer of Gerchen Keller Capital (“GKC”) from 2013 until GKC’s sale in
2016 to Buford. Prior to its acquisition, GKC grew into the largest private investment and advisory firm focused exclusively on legal and regulatory risk, raising $1.4 billion of institutional capital. Across both organizations, products
developed for and deployed into the legal sector included single-case litigation finance, portfolio funding, risk management & insurance, claim monetization, post-settlement, bankruptcy & insolvency, international arbitration, and patent
and intellectual property. Mr. Gerchen received a B.A. in Business Economics and graduated Magna Cum Laude from Brown University and a J.D. from Harvard Law School.
Richard Levy serves on the board of directors of the company. Mr. Levy is the Chief Executive Officer and Founder of VPC. Mr. Levy oversees VPC’s investment and operational activities. Mr. Levy is also
the chairman of VPC’s Senior Leadership Team and Investment Committee. Mr. Levy serves as chairman of the board of directors of VPC portfolio company, Giordano’s. He also serves as a member of the board of directors of the following VPC portfolio
companies: Caribbean Financial Group since 2018, VPC Pizza Operating Corp. since 2011 and United Automobile Insurance Company since 2018. Previously, Mr. Levy served as head of the Small Cap Structured Products Group and co-head of the Solutions
Group at Magnetar Capital. Mr. Levy also co-founded and served as managing partner at Crestview Capital Partners. Mr. Levy received a B.A. in political science from The Ohio State University, an M.B.A. from the Illinois Institute of Technology’s
Stuart School of Business and a J.D. from Chicago-Kent College of Law. He is a member of the Illinois bar (inactive). Mr. Levy is also chairman of the board of nonprofit, Gardeneers, an active board member of Camp Kesem and he sits on the Board
of Trustees for the Illinois Institute of Technology.
Tom Gazdziak is the Chief Financial Officer of the company. Mr. Gazdziak joined VPC in 2015 and currently serves as Senior Vice President. He oversees VPC’s accounting team in the execution of
accounting, finance, tax, audit, reporting and treasury related activities for the VPC funds, including VPC Specialty Lending Investments PLC (LSE: VSL), a VPC managed UK publicly listed investment trust focused on opportunities in the litigation
and fintech markets. Mr. Gazdziak joined VPC from PricewaterhouseCoopers LLP where he progressed through several accounting roles since 2011 within the financial services practice specializing in the banking and capital markets industry. Mr.
Gazdziak received a B.S. in accountancy and finance and an M.B.A. in accountancy and financial analysis from the Kelley School of Business at Indiana University. He is a Certified Public Accountant (inactive).
Senator Joseph I. Lieberman serves on our board of directors. Senator Lieberman has served as Senior Counsel at Kasowitz, Benson & Torres LLP since 2013. Prior to joining Kasowitz, Senator Lieberman,
the Democratic Vice Presidential nominee in 2000, served 24 years in the U.S. Senate, retiring in January 2013 following the end of his fourth term. During his tenure with the U.S. Senate, Senator Lieberman served as the Chairman of the Committee
on Homeland Security and Governmental Affairs and helped shape legislation for homeland security, foreign policy, fiscal policy, environmental protection, human rights, health care, trade, energy, cyber security and taxes. Prior to being elected
to the U.S. Senate, Senator Lieberman served as the Attorney General of the State of Connecticut from 1983 until 1988. From 1970 until 1980, Senator Lieberman also served in the Connecticut State Senate, including three terms as majority leader.
Senator Lieberman currently serves on the board of directors of Park Hotels and Resorts Inc. (NASDAQ: PK). Senator Lieberman received his Bachelor of Arts degree in Political Science and Economics and his Juris Doctorate degree from Yale
University.
Albert Goldstein serves on our board of directors. Mr. Goldstein is the Founder, Chairman & CEO of StoicLane Holdings, Inc., an investment holding company that is making strategic long-term
investments in the digitization of the FIRE verticals (Finance, Insurance & Real Estate). Prior to StoicLane, he co-founded Avant Inc in 2013, a digital bank for middle-income consumers, and Amount Inc in 2016, a Banking-as-a-Service (BaaS)
company helping the largest financial institutions in the world to digitize and deliver a seamless digital and mobile customer experience. Avant and Amount have raised over $750,000,000 of equity capital from leading investors including Goldman
Sachs, Tiger Global and General Atlantic and JP Morgan. Mr. Goldstein is currently a board member of Spring Labs, a blockchain company and I2R Holdings, a supplier of electricity and solar power. Goldstein has been the recipient of multiple
awards for entrepreneurship including winning the Ernst & Young Midwest Entrepreneur of the Year Award twice and being named to the Crain’s Chicago Business 40 Under 40 list. Mr. Goldstein holds a B.S. in finance and mathematics from the
University of Illinois Urbana — Champaign.
Kurt Summers serves on our board of directors. Kurt has twenty years of experience in both private and public sector finance. Kurt has been a Senior Advisor at Blackstone, Ullico and Bridgewater since
November 2019, January 2020 and November 2020, respectively, where he provides insight and strategic direction around various investment opportunities and existing holdings. From March 2021 to January 2020, Kurt served as Amendment No. 4 to Employment Agreement between Identity Theft Guard Solutions, Inc. and Thomas F. Kelly, dated December 17, 2021. a member of the Board of Directors of VPC Impact Acquisitions Holdings III, Inc. prior to its
business combination with Dave Inc. From September 2020 to October 2021, Kurt served as a member of the Board of Directors of VPC Impact Acquisition Holdings prior to its business combination with Bakkt Holdings, Inc. From 2014 to 2019, Kurt
served as Treasurer of the City of Chicago, where he managed the city’s more than $8 billion investment portfolio and served as a trustee or fiduciary of five local pension boards with nearly $25 billion under management. As Treasurer of Chicago,
Kurt and his team more than tripled the returns on the city’s portfolio, which now generates more than $100,000,000 of incremental revenu to Chicago’s taxpayers, bondholders and other stakeholders each year. From 2012 to 2014, Kurt served as
Senior Vice President at Grosvenor Capital Management where he helped lead the firm’s strategy and business development efforts and served as a member of the Office of the Chairman. From 2010 to 2012, Kurt served as Chief of Staff to the Cook
County Board President where he was the architect of a turnaround of the second largest county in the country. From 2009 to 2010, Kurt served as Managi g Director at Ryan Specialty Group, an international specialty insurance organization. Kurt
began his career at McKinsey & Company, a preeminent global strategy-consulting firm, and also worked as an investment banker at Goldman Sachs. Kurt received a B.S.B.A. in finance and international business with high honors from Washington
University and an M.B.A. from Harvard Business School.
Number and Terms of Office of Officers and Directors
Our board of directors consists of six members and is divided into three classes with only one class of directors being appointed in each year, and with each class (except for those directors appointed prior to our first annual general
meeting) serving a three-year term. In accordance with NYSE corporate governance requirements, we are not required to hold an annual general meeting until one year after our first fiscal year end following our listing on NYSE. The term of office
of the first class of directors, consisting of Senator Joseph Lieberman and Albert Goldstein, will expire at our first annual general meeting. The term of office of the second class of directors, consisting of Richard Levy and Kurt Summers, will
expire at the second annual general meeting. The term of office of the third class of directors, consisting of Jeffrey C. Hammes and Adam Gerchen, will expire at the third annual general meeting.
Prior to the completion of an initial business combination, any vacancy on the board of directors may be filled by a nominee chosen by holders of a majority of our Class B ordinary shares. In addition, prior to the completion of an initial
business combination, holders of a majority of our Class B ordinary shares may remove a member of the board of directors for any reason.
Pursuant to an agreement entered into concurrently with the issuance and sale of the securities in our initial public offering, our sponsor, upon consummation of an initial business combination, will be entitled to nominate three individuals
for election to our board of directors, as long as the sponsor holds any securities covered by the registration and shareholder rights agreement.
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 officers as it deems appropriate pursuant to
our amended and restated memorandum and articles of association.
Director Independence
The rules of the NYSE require that a majority of our board of directors be independent. Our board of directors has determined that Richard Levy, Senator Joseph Lieberman, Kurt Summers and Albert Goldstein 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.
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. Subject to phase-in rules and a limited exception, the rules of the NYSE and Rule 10A of
the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors. Subject to phase-in rules and a limited exception, the rules of the NYSE require that the compensation committee and the
nominating and corporate governance committee of a listed company be comprised solely of independent directors.
Audit Committee
We have established an audit committee of the board of directors. Senator Joseph Lieberman, Albert Goldstein and Kurt Summers serve as members of our audit committee. Under the NYSE listing standards and applicable SEC rules, we are required
to have at least three members of the audit committee, all of whom must be independent. Senator Joseph Lieberman, Albert Goldstein and Kurt Summers are independent.
Albert Goldstein serves as chair of the audit committee. Each member of the audit committee is financially literate and our board of directors has determined that Albert Goldstein qualifies as an “audit committee financial expert” as defined
in applicable SEC rules.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
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•
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assisting board oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm’s qualifications and independence, and (4)
the performance of our internal audit function and independent registered public accounting firm; the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and
any other independent registered public accounting firm engaged by us;
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•
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pre-approving all audit and non-audit services to be provided by the independent registered public accounting firm or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
reviewing and discussing with the independent registered public accounting firm all relationships the firm has with us in order to evaluate their continued independence;
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•
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setting clear policies for audit partner rotation in compliance with applicable laws and regulations; obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (1) the
independent auditor’s internal quality-control procedures and (2) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;
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•
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meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent auditor, including reviewing our specific disclosures under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such
transaction; and
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•
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reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies
and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting
Standards Board, the SEC or other regulatory authorities.
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Compensation Committee
We have established a compensation committee of the board of directors. Senator Joseph Lieberman and Albert Goldstein serve as members of our compensation committee. Under the NYSE listing standards and applicable SEC rules, we are required to
have at least two members of the compensation committee, all of whom must be independent. Senator Joseph Lieberman and Albert Goldstein are independent. Senator Joseph Lieberman serves as chair of the compensation committee.
We have adopted a compensation committee charter, which will detail the principal functions of the compensation committee, including:
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•
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reviewing and approving on an annual basis the corporate goals and objectives relevant to our chief executive officer’s compensation, evaluating our chief executive officer’s performance in light of such goals and objectives and
determining and approving the remuneration (if any) of our chief executive officer’s based on such evaluation;
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•
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reviewing and making recommendations to our board of directors with respect to the compensation, and any incentive compensation and equity based plans that are subject to board approval of all of our other officers;
|
|
•
|
reviewing our executive compensation policies and plans;
|
|
•
|
implementing and administering our incentive compensation equity-based remuneration plans;
|
|
•
|
assisting management in complying with our proxy statement and annual report disclosure requirements;
|
|
•
|
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
|
|
•
|
producing a report on executive compensation to be included in our annual proxy statement; and
|
|
•
|
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
|
Notwithstanding the foregoing, as indicated above, other than the payment of customary fees we make to members of our board of directors for director service and payment to an affiliate of our sponsor of $10,000 per month, for up to 18 months,
for office space, utilities and secretarial and administrative support and reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing shareholders, officers,
directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business
combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter will also provide that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser and will be directly responsible for the
appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the
independence of each such adviser, including the factors required by the NYSE and the SEC.
Nominating and Corporate Governance Committee
Prior to the consummation of our initial public offering, we established a nominating and corporate governance committee of the board of directors. Senator Joseph Lieberman and Albert Goldstein serves on our nominating and corporate governance
committee. Senator Joseph Lieberman serves as chair of the nominating and corporate governance committee.
The primary purposes of our nominating and corporate governance committee is to assist the board in:
|
•
|
identifying, screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by the board, and recommending to the board of directors candidates for nomination for election at the annual general
meeting or to fill vacancies on the board of directors
|
|
•
|
developing and 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 will be governed by a charter that complies with the rules of the NYSE.
Code of Ethics
We have adopted a code of ethics that applies to our officers and directors. In addition, a copy of the code of ethics will be provided without charge upon request to us and is posted on our website: https://lfacquisitioncorp.com/about/.
Corporate Governance Guidelines
Our board of directors has adopted corporate governance guidelines in accordance with the corporate governance rules of the NYSE that serve as a flexible framework within which our board of directors and its committees operate. These
guidelines cover a number of areas including board membership criteria and director qualifications, director responsibilities, board +agenda, roles of the chairman of the board, chief executive officer and presiding director, meetings of
independent directors, committee responsibilities and assignments, board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education,
evaluation of senior management and management succession planning. A copy of our corporate governance guidelines is posted on our website.
Conflicts of Interest
Under Cayman Islands law, directors and officers owe the following fiduciary duties:
(i) duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole;
(ii) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose;
(iii) directors should not improperly fetter the exercise of future discretion;
(iv) duty to exercise powers fairly as between different sections of shareholders;
(v) duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests; and
(vi) duty to exercise independent judgment.
In addition to the above, directors also owe a duty of care which is not fiduciary in nature. This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may
reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge skill and experience of that director.
As set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position. However, in some instances what would
otherwise be a breach of this duty can be forgiven and/or authorized in advance by the shareholders provided that there is full disclosure by the directors. This can be done by way of permission granted in the memorandum and articles of
association or alternatively by shareholder approval at general meetings.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to at least one other entity pursuant to which such officer or director is or will be required to present
a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then- current fiduciary or contractual
obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Cayman Islands law. Our amended and restated memorandum and
articles of association provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of
the company and it is an opportunity that we are able to complete on a reasonable basis. 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.
Below is a table summarizing the entities to which our executive officers and directors currently have fiduciary duties, contractual obligations or other material management relationships.
|
Individuals
|
Entity
|
Entity’s Business
|
Affiliation
|
|||
|
Jeffrey C. Hammes
|
Kirkland & Ellis LLP
|
Law Practice
|
Chair Emeritus
|
|||
|
Adam Gerchen
|
Keller Lenker
|
Law Practice
|
Chief Executive Officer
|
|||
|
Bridge Legal
|
Billing Platform
|
Owner and Board Director
|
||||
|
Chairman of Thora Capital
|
Alternative Investment Advising
|
Co-Founder and Chairman
|
||||
|
Heyday Technologies, Inc.
|
E-Commerce
|
Co-Founder and Executive Chairman
|
||||
|
Richard Levy
|
Victory Park Capital Advisors, LLC
|
Registered investment advisor
|
Chief Executive Officer and Founder
|
|||
|
Giordano’s
|
Food & Beverage
|
Director
|
||||
|
Caribbean Financial Group
|
Consumer Finance
|
Director
|
||||
|
United Automobile Insurance Company
|
Insurance
|
Director
|
||||
|
Tom Gazdziak
|
Victory Park Capital Advisors, LLC
|
Registered investment advisor
|
Senior Vice President
|
|||
|
Senator Joseph Lieberman
|
Kasowitz, Benson & Torres LLP
|
Law Firm
|
Law Firm
|
|||
|
Park Hotels & Resorts, Inc.
|
Real Estate Investment Trust
|
Director
|
||||
|
Albert Goldstein
|
StoicLane Holdings, Inc.
|
Investment Holding Company
|
Chairman, CEO
|
|||
|
Avant, Inc.
|
Challenger Bank
|
Chairman
|
||||
|
Amount, Inc
|
Technology Platform
|
Director/Chairman
|
||||
|
SpringCoin, Inc. dba Spring Labs
|
Blockchain
|
Director
|
||||
|
I2R Holdings, LLC
|
Electricity and Solar Power Provider
|
Director
|
||||
|
Kurt Summers
|
||||||
|
Blackstone
|
Senior Advisor
|
|||||
|
Ulico
|
Senior Advisor
|
|||||
|
Bridgewater
|
Senior Advisor
|
Jeffrey C. Hammes, our Chairman and Director, is party to agreements with K&E that, until December 31, 2024, limit, or provide financial disincentives on, Mr. Hammes’ ability to engage, directly or indirectly, in the practice of law or
operate or manage a law firm. We do not believe these limitations or disincentives will materially impact our prospects for a business combination or make us less attractive to target companies. However, if a court were to conclude that the
activities of our company caused Mr. Hammes to violate restrictions in these agreements, it could impose remedies that could materially harm our business and the trading prices of our securities, including limiting Mr. Hammes’ ability to
participate in our company. Even if ultimately resolved in our favor, any litigation associated with these restrictions could be time consuming, costly and distract management’s focus from locating suitable acquisition candidates and operating
our business. If we are unable to complete our initial business combination, our public shareholders may receive only approximately $10.15 per share, or less in certain circumstances, upon the liquidation of our trust account and our warrants
will expire worthless. In addition, our sponsor and our officers and directors may sponsor or form other special purpose acquisition companies similar to ours or may pursue other business or investment ventures during the period in which we are
seeking an initial business combination. Any such companies, businesses or investments may present additional conflicts of interest in pursuing an initial business combination. However, we do not believe that any such potential conflicts would
materially affect our ability to complete our initial business combination.
Potential investors should also be aware of the following other potential conflicts of interest:
Our officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their
other businesses. 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.
Our initial shareholders purchased founder shares prior to the date of our initial public offering and purchased private placement warrants in a transaction that closed simultaneously with the closing of our initial public offering. Our
sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and public shares in connection with the completion of our
initial business combination. Additionally, our sponsor, officers and directors have agreed to waive 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 the prescribed time frame. If we do not complete our initial business combination within the prescribed time frame, the private placement warrants will expire worthless. Furthermore, our sponsor, officers and directors have
agreed not to transfer, assign or sell any of their founder shares and any Class A ordinary shares issuable upon conversion thereof until the earlier to occur of: (i) one year after the completion of our initial business combination or (ii) the
date following the completion of our initial business combination on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our shareholders having the right to exchange their ordinary shares
for cash, securities or other property. Notwithstanding the foregoing, if the closing price of our Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, 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, the founder shares will be released from the lockup. The private placement warrants
(including the Class A ordinary shares issuable upon exercise of the private placement warrants) will not be transferable until 30 days following the completion of our initial business combination. Because each of our officers and directors own
ordinary shares or warrants directly or indirectly, they 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 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.
We are not prohibited from pursuing an initial business combination with a business combination target that is affiliated with our sponsor, officers or directors or completing the business combination through a joint venture or other form of
shared ownership with our sponsor, officers or directors. In the event the Business Combination is not consummated and we seek to complete our initial business combination with a business combination target that is affiliated with our sponsor,
officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking or a valuation or appraisal firm, that such 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. We are not required to obtain, and have not obtained, a fairness opinion in connection with the Business Combination. Furthermore, in no event will our sponsor or
any of our existing officers or directors, or any of their respective affiliates, be paid by the company any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the completion of
our initial business combination. Further, commencing on the date our securities are first listed on the NYSE, we will also pay our sponsor $10,000 per month for office space, utilities, secretarial and administrative services provided to members
of our management team.
We cannot assure you that any of the above-mentioned conflicts will be resolved in our favor.
In the event that we submit our initial business combination to our public shareholders for a vote, our sponsor, officers and directors have agreed to vote their founder shares, and they and the other members of our management team have agreed
to vote their founder shares and any shares purchased during or after the offering in favor of our initial business combination.
Limitation on Liability and Indemnification of Officers and Directors
Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands
courts to be contrary to public policy, such as to provide indemnification against willful default, fraud or the consequences of committing a crime. Our amended and restated memorandum and articles of association provide for indemnification of
our officers and directors to the maximum extent permitted by law, including for any liability incurred in their capacities as such, except through their own actual fraud, willful default or willful neglect. We expect to purchase a policy of
directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and
directors.
Our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account, and have agreed to waive any right, title, interest or claim of any kind they may have in the future as a
result of, or arising out of, any services provided to us and will not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will only be able to be satisfied by us if (i) we have sufficient
funds outside of the trust account or (ii) we consummate an initial business combination.
Our indemnification obligations may discourage shareholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative
litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our shareholders. Furthermore, a shareholder’s investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
| ITEM 11. |
EXECUTIVE COMPENSATION
|
Officer and Director Compensation
The following disclosure concerns the compensation of our executive officers and directors for the period from January 1, 2021 through December 31, 2021.
None of our officers or directors have received any cash compensation for services rendered to us. Commencing on the date that our securities are first listed on the NYSE through the earlier of consummation of our initial business combination
and our liquidation, we pay our sponsor $10,000 per month for office space, utilities, secretarial and administrative support services provided to members of our management team. We may elect to make payment of customary fees to members of our
board of directors for director service. In addition, our sponsor, officers and directors, or any of their respective affiliates are being reimbursed for any 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 to our sponsor, officers or directors, or our or their
affiliates. Any such payments prior to an initial business combination are made using funds held outside the trust account. Other than quarterly audit committee review of such reimbursements, we do not expect to have any additional controls in
place governing our reimbursement payments to our directors and officers for their out-of-pocket expenses incurred in connection with our activities on our behalf in connection with identifying and consummating an initial business combination.
Other than these payments and reimbursements, no compensation of any kind, including finder’s and consulting fees, is paid by the company to our sponsor, officers and directors, or any of their respective affiliates, prior to completion of our
initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to
shareholders, to the extent then known, in the proxy solicitation materials or tender offer materials furnished to our shareholders in connection with a proposed initial business combination. We have not established any limit on the amount of
such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the
post-combination business will be responsible for determining officer and director compensation.
Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent
directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and
directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us 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 SHAREHOLDER MATTERS
|
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of February 14, 2022 based on information obtained from the persons named below, with respect to the beneficial ownership of our ordinary
shares, by:
|
•
|
each person known by us to be the beneficial owner of more than 5% of our outstanding ordinary shares;
|
|
•
|
each of our executive officers and directors that beneficially owns our ordinary shares; and
|
|
•
|
all our executive officers and directors as a group.
|
In the table below, percentage ownership is based on 17,250,000 Class A ordinary shares (which includes Class A ordinary shares that are underlying the units) and 4,312,500 Class B ordinary shares outstanding as of December 31, 2021. The table
below does not include the Class A ordinary shares underlying the private placement warrants held by our sponsor because these securities are not exercisable within 60 days of this Report.
|
Class B ordinary shares
|
Class A ordinary shares
|
|||||||||||||||
|
Name of Beneficial Owners(1)
|
Number of
Shares
Beneficially
Owned
|
Approximate
Percentage
of Class(2)
|
Number of
Shares
Beneficially
Owned
|
Approximate
Percentage
of Class
|
||||||||||||
|
Five Percent Holders
|
||||||||||||||||
|
Corbin Capital Partners, L.P.(2)
|
—
|
—
|
1,485,000
|
8.6
|
%
|
|||||||||||
|
Citadel Advisors LLC(3)
|
—
|
—
|
880,289
|
5.1
|
%
|
|||||||||||
|
Sculptor Capital LP (4)
|
914,095
|
5.3
|
%
|
|||||||||||||
|
JAR Sponsor LLC(5) (our sponsor)
|
4,202,767
|
97.5
|
%
|
—
|
—
|
|||||||||||
|
Directors and Officers of L&F
|
||||||||||||||||
|
Jeffrey C. Hammes(5)
|
4,202,767
|
97.5
|
%
|
—
|
—
|
|||||||||||
|
Adam Gerchen(5)
|
4,202,767
|
97.5
|
%
|
—
|
—
|
|||||||||||
|
Richard Levy(5)
|
4,202,767
|
97.5
|
%
|
—
|
—
|
|||||||||||
|
Tom Gazdziak
|
—
|
—
|
—
|
—
|
||||||||||||
|
Senator Joseph Lieberman
|
50,000
|
*
|
—
|
—
|
||||||||||||
|
Albert Goldstein
|
20,000
|
*
|
—
|
—
|
||||||||||||
|
Kurt Summers
|
39,733
|
*
|
||||||||||||||
|
All officers and directors as a group (seven individuals)
|
4,312,500
|
100
|
%%
|
—
|
—
|
|||||||||||
| * |
Less than one percent.
|
| (1) |
Unless otherwise noted, the business address of each of our shareholders is 150 North Riverside Plaza, Suite 5200, Chicago, Illinois 60606.
|
| (2) |
Includes Class A ordinary shares held by Corbin Opportunity Fund, L.P. (“COF”), Corbin ERISA Opportunity Fund, Ltd. (“CEOF”), Corbin Capital Partners, L.P. (“CCP”) and Corbin Capital Partners GP, LLC (CCPGP). Based on Schedule 13G
filed jointly by COF, CEOF, CCP and CCPGP, with the SEC on December 14, 2021, COF beneficially owns 990,000 Class A ordinary shares, CEOF beneficially owns 495,000 Class A ordinary shares, CCP beneficially owns 1,485,000 Class A ordinary
shares and CCPGP beneficially owns 1,485,000 Class A ordinary shares. The address of COF, CEOF, CCP and CCPG is 590 Madison Avenue, 31st Floor, New York, NY 10022.
|
| (3) |
Includes Class A Ordinary Shares held by Citadel Advisors LLC (“CA”), Citadel Advisors Holdings LP (“CAH”), Citadel GP LLC (“CGP”), Citadel Securities LLC (“CS”), Citadel Securities Group LP (“CSG”), Citadel Securities GP LLC (“CSGP”)
and Mr. Kenneth Griffin. Based on Schedule 13G/A filed jointly by CA, CAH, CGP, CS, CALC4, CSGP and Mr. Kenneth Griffin on February 14, 2022, CA beneficially owns 866,937 Class A ordinary shares, CAH beneficially owns 866,937 Class A
ordinary shares, CGP beneficially owns 866,937 Class A ordinary shares, CS beneficially owns 13,352 Class A ordinary shares, CSG beneficially owns 13,352 Class A ordinary shares, CSGP beneficially owns 13,352 Class A ordinary shares and
Mr. Kenneth Griffin beneficially owns 880,289 Class A ordinary shares. The business address of each of the foregoing entities and Mr. Griffin is 131 S. Dearborn Street, 32nd Floor, Chicago, Illinois 60603.
|
| (4) |
Includes Class A Ordinary Shares held by Sculptor Capital LP (“SC”), Sculptor Capital II LP (“SCII”), Sculptor Capital Holding Corporation (“SCHC”), Sculptor Capital Holding II LLC (“SCHC-II”), Sculptor Capital Management, Inc.
(“SCU”), Sculptor Master Fund, Ltd. (“SCMF”),Sculptor Special Funding, LP (“NRMD”), Sculptor Credit Opportunities Master Fund, Ltd. (“SCCO”), Sculptor SC II LP (“NJGC”) Sculptor Enhanced Master Fund, Ltd. (“SCEN”). Based on Schedule 13G
filed jointly by SC, SCII, SCHC, SCHC-II, SCU, SCMF, NRMD, SCCO, NJGC and SCEN with the SEC on January 20, 2022, SC beneficially owns 914,095 Class A ordinary shares, SCII beneficially owns 914,095 Class A ordinary shares, SCHC
beneficially owns 914,095 Class A ordinary shares, SCHC-II beneficially owns 914,095 Class A ordinary shares, SCU beneficially owns 914,095 Class A ordinary shares, SCMF beneficially owns 489,917 Class A ordinary shares, NRMD beneficially
owns 489,917 Class A ordinary shares, SCCO beneficially owns 76,485 Class A ordinary shares, NJGC beneficially owns 266,446 Class A ordinary shares and SCEN beneficially owns 81,247 Class A ordinary shares. The business address of each of
the foregoing entities is 9 West 57 Street, 39th Floor, New York, NY 10019.
|
| (5) |
GCP-OI I, LLC, MSBD 2020 Series LLC and Victory Park Capital Advisors, LLC as the voting members of JAR Sponsor LLC will exercise voting control over 4,202,767 founder shares. Jeffrey C. Hammes, by virtue of his role as managing member
of MSBD 2020 Series LLC has voting and dispositive power over the Class B ordinary shares held by JAR Sponsor LLC, and therefore may be deemed to have beneficial ownership of the Class B ordinary shares held directly by the Sponsor. Adam
Gerchen, by virtue of his role as manager of GCP-OI I, LLC has voting and dispositive power over the founder shares held by JAR Sponsor LLC, and therefore may be deemed to have beneficial ownership of the founder shares held directly by
the Sponsor. Richard Levy has voting and dispositive power on behalf of Victory Park Capital, LLC over the founder shares held by JAR Sponsor LLC, and therefore may be deemed to have beneficial ownership of the founder shares held
directly by the Sponsor. The address of JAR Sponsor LLC is 150 North Riverside Plaza, Suite 5200 Chicago, IL 60606.
|
Our sponsor, officers and directors are deemed to be our “promoter” as such term is defined under the federal securities laws.
Changes in Control
None.
| ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
Class B Ordinary Shares
On August 28, 2020, our sponsor paid $25,000, or approximately $0.004 per share, to cover certain of our offering and formation costs in exchange for 5,750,000 founder shares. On November 13, 2020, the Sponsor effected a surrender of 1,437,500
Founder Shares to the Company for no consideration, resulting in a decrease in the total number of Class B ordinary shares outstanding to 4,312,500 shares and our sponsor transferred an aggregate of 70,000 founder shares to our independent
directors. The number of founder shares outstanding was determined based on the expectation that the total size of our initial public offering would be 17,250,000 units, and therefore that such founder shares represent 20% of the outstanding
shares after our initial public offering.
Private Placement Warrants
Simultaneously with the consummation of the initial public offering and the issuance and sale of the units, the company consummated the private placement of 5,000,000 sponsor private placement warrants and the private placement of 1,859,505
Jefferies private placement warrants generating total proceeds of approximately $7,250,001. In connection with the underwriter’s full exercise of its over-allotment option, the company also consummated the sale of an additional 728,925 private
placement warrants, 450,000 of which were sold to the sponsor and 278,925 of which were sold to Jefferies, generating total proceeds of approximately $787,500. The private placement warrants are substantially similar to the public warrants,
except that if held by the sponsor, Jefferies or their permitted transferees, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption (except in certain circumstances when the public warrants
are called for redemption and a certain price per Class A Ordinary Share threshold is met) and (iii) together with the Class A ordinary shares issuable upon exercise of the private placement warrants, subject to certain limited exceptions, will
be subject to transfer restrictions until 30 days following the consummation of the company’s initial business combination. Notwithstanding anything to the contrary, the Jefferies private placement warrants are not exercisable until five years
from the effective date. If the private placement warrants are held by holders other than the sponsor, the Jefferies or their permitted transferees, the private placement warrants will be redeemable by the company in all redemption scenarios and
exercisable by holders on the same basis as the public warrants. The private placement warrants have been issued pursuant to the private placement warrants agreements and have been issued pursuant to, and are governed by the warrant agreement.
The sponsor agreed, subject to limited exceptions, not to transfer, assign or sell any of its private placement warrants until thirty (30) days after the completion of our initial business combination.
Administrative Support Agreement
We pay $10,000 a month for office space, utilities, and secretarial and administrative support to the sponsor. Services commenced on the date the securities were first listed on the NYSE and will terminate upon the earlier of our initial
business combination or our liquidation.
Related Party Loans
On August 28, 2020, our sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses related to our initial public offering pursuant to a promissory note (the “Promissory Note”). This loan was non-interest bearing and payable
upon the completion of our initial public offering. Prior to the consummation of our initial public offering, we borrowed approximately $64,126 under the Promissory Note. On November 23, 2020, we repaid the Promissory Note in full to the sponsor.
In addition, in order to finance transaction costs in connection with the Business Combination, or if the Business Combination is not consummated, an alternative business combination, the sponsor or an affiliate of the sponsor, or certain of
our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete the Business Combination, or if the Business Combination is not consummated, upon completion of an alternative
initial business combination, we would repay the Working Capital Loans out of the proceeds of the trust account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the trust account. In the event
that the Business Combination or an alternative initial business combination does not close, we may use a portion of proceeds held outside the trust account to repay the Working Capital Loans but no proceeds held in the trust account would be
used to repay the Working Capital Loans. 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 the Business Combination, or if the Business Combination is not consummated, upon consummation of an alternative an initial business combination or, at the lender’s discretion, up to $1,500,000 of such Working Capital
Loans may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the private placement warrants. To date, LNFA had no borrowings under the Working Capital Loans.
Registration Rights Agreement
In connection with the closing of the Business Combination, the post-Business Combination company will enter into a registration rights agreement with the sponsor, Jefferies and certain shareholders of
ZeroFox and IDX, pursuant to which, among other things, the post-Business Combination company will grant the other parties customary registration rights with respect to our shares, and former shareholders of
ZeroFox and IDX will be subject to a 180-day lock-up period following execution of the registration rights agreement during which such shareholders may not transfer their shares (subject to customary exceptions).
Common Equity PIPE Financing
Concurrently with the execution of the Business Combination Agreement, the company entered into common equity subscription agreements with certain investors. Pursuant to the common equity subscription agreements,
the investors agreed to subscribe for and purchase, and the company agreed to issue and sell to such investors, on the closing date of the Business Combination, an aggregate of 2,000,000 shares of common stock of the post-Business Combination
company in exchange for an aggregate purchase price of $20,000,000.
Several related parties to the company as summarized below entered into the common equity subscription agreements, pursuant to which they have collectively committed to subscribe for an aggregate of 1,000,000
shares of common stock of the post-Business Combination company for aggregate gross proceeds of $10,000,000 to be consummated in connection with closing of the Business Combination.
|
Common Equity PIPE Investor
|
Shares
|
Amount
Subscribed
|
||||||
|
JCH Investments LLC(1)
|
50,000
|
$
|
500,000
|
|||||
|
GCP-OI I, LLC(2)
|
50,000
|
$
|
500,000
|
|||||
|
L&F Acquisition Holdings Fund, LLC(3)
|
150,000
|
$
|
1,500,000
|
|||||
|
Corbin Opportunity Fund, L.P.(4)
|
250,000
|
$
|
2,500,000
|
|||||
|
Corbin ERISA Opportunity Fund, L.P.(4)
|
500,000
|
$
|
5,000,000
|
|||||
| (1) |
JCH Investments LLC is an entity affiliated with Jeffrey C. Hammes, the chairman of our board of directors.
|
| (2) |
GCP-OI I, LLC is an entity affiliated with Adam Gerchen, our chief executive officer and a director of LNFA.
|
| (3) |
L&F Acquisition Holdings Fund, LLC is an affiliate of Victory Park Capital Advisors, LLC, an entity affiliated with Richard Levy, a director of LNFA.
|
| (4) |
Corbin Opportunity Fund, L.P. and Corbin ERISA Opportunity Fund, L.P. are affiliates of Corbin Capital Partners, LP, and such entities are significant security holders of LNFA.
|
Convertible Notes Financing
In connection with signing the Business Combination Agreement, the company entered into the convertible notes subscription agreements with certain investors, in respect of $150,000,000 aggregate principal amount
of unsecured convertible notes due in 2025 to be issued in connection with the closing of the Business Combination (the “Notes”). The principal terms of the Notes are set forth in the form of indenture attached as an exhibit to the convertible
notes subscription agreements, which indenture will be entered into by the company, the guarantors party thereto and the indenture trustee, and the form of global note attached thereto. The Notes will bear interest at a rate of 7.00% per annum,
payable quarterly in cash; provided, that the issuer may elect to pay interest in kind at a rate of 8.75% per annum, and the Notes will be convertible at an initial conversion price of $11.50 per share, subject to customary anti-dilution
adjustments, including with respect to stock-splits and stock dividends, dividends and other distributions, above-market tender offers, below-market rights offerings and spin-offs, and will mature on the date that is three years following the
closing of the convertible notes financing.
Several related parties to the company as summarized below entered into convertible notes subscription agreements, pursuant to which they collectively committed to subscribe for Notes in an aggregate principal
amount of $30,000,000, on the terms and subject to the conditions set forth in the convertible notes subscription agreements and the convertible notes indenture, to be consummated in connection with the closing of the Business Combination.
|
Convertible Notes Investor
|
Amount
Subscribed
|
|||
|
L&F Acquisition Holdings Fund, LLC(1)
|
$
|
7,500,000
|
||
|
Corbin Opportunity Fund, L.P.(2)
|
$
|
7,500,000
|
||
|
Corbin ERISA Opportunity Fund, L.P.(2)
|
$
|
15,000,000
|
||
| (1) |
L&F Acquisition Holdings Fund, LLC is an affiliate of Victory Park Capital Advisors, LLC, an entity affiliated with Richard Levy, a director of LNFA.
|
| (2) |
Corbin Opportunity Fund, L.P. and Corbin ERISA Opportunity Fund, L.P. are affiliates of Corbin Capital Partners, LP, and such entities are significant security holders of LNFA.
|
Second Amended and Restated Sponsor Support Letter Agreement
Concurrently with the execution of the Business Combination Agreement, (i) LNFA, (ii) the sponsor, Albert Goldstein and Joseph Lieberman, (iii) ZeroFox, (iv) IDX and (v) Jeffrey C. Hammes, Adam Gerchen, Tom
Gazdziak and Richard Levy (solely for the limited purposes set forth therein), entered into an Amended and Restated Sponsor Support Letter Agreement. On January 31, 2022, (i) LNFA, (ii) the Sponsor, Albert Goldstein, Joseph Lieberman and Kurt
Summers, Jr. (together with the sponsor, the “Sponsor Holders”), (iii) ZeroFox, (iv) IDX and (v) Jeffrey C. Hammes, Adam Gerchen, Tom Gazdziak and Richard Levy (solely for the limited purposes set forth therein), entered into a Second Amended
and Restated Sponsor Support Letter Agreement (the “Sponsor Support Letter Agreement”). Pursuant to the Sponsor Support Letter Agreement, the Sponsor Holders have agreed to subject an aggregate of 1,293,750 shares of common stock of the
post-Business Combination company held by such Sponsor Holders to an earnout, whereby such shares will be forfeited unless certain volume-weighted average share price thresholds are met in trading or are deemed to occur in connection with a
change of control within five years from the closing of the Business Combination.
Related Person Transactions Policy
We operate under a Code of Ethics that encourages the avoidance of “related-party transactions” or conflicts of interest, wherever possible, except under guidelines or resolutions approved by our board of directors (or the appropriate
committee thereof).
Policy for Approval of Related Party Transactions
Our audit committee must review and approval or ratification of “related party transactions.” A “related party transaction” is any consummated or proposed transaction or series of transactions: (i) in which the company was or is to be a
participant; (ii) the amount of which exceeds (or is reasonably expected to exceed) the lesser of $120,000 or 1% of the average of the company’s total assets at year end for the prior two completed fiscal years in the aggregate over the duration
of the transaction (without regard to profit or loss); and (iii) in which a “related party” had, has or will have a direct or indirect material interest. “Related parties” under this policy will include: (i) our directors, nominees for director
or officers; (ii) any record or beneficial owner of more than 5% of any class of our voting securities; (iii) any immediate family member of any of the foregoing if the foregoing person is a natural person; and (iv) any other person who maybe a
“related person” pursuant to Item 404 of Regulation S-K under the Exchange Act. Pursuant to the policy, the audit committee will consider (i) the relevant facts and circumstances of each related party transaction, including if the transaction is
on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party; (ii) the extent of the related party’s interest in the transaction; (iii) whether the transaction contravenes our code of ethics or other
policies; (iv) whether the audit committee believes the relationship underlying the transaction to be in the best interests of the company and its shareholders; and (v) the effect that the transaction may have on a director’s status as an
independent member of the board and on his or her eligibility to serve on the board’s committees. Management will present to the audit committee each proposed related party transaction, including all relevant facts and circumstances relating
thereto. Under the policy, we may consummate related party transactions only if our audit committee approves or ratifies the transaction in accordance with the guidelines set forth in the policy. The policy will not permit any director or officer
to participate in the discussion of, or decision concerning, a related person transaction in which he or she is the related party.
The firm of WithumSmith+Brown, PC, or Withum, acts as our independent registered public accounting firm. The following is a summary of fees paid to Withum for services rendered.
Audit Fees. During the year ended December 31, 2021 and for the period from August 20, 2020 (inception) through December 31, 2020, fees for our independent registered public accounting firm were
approximately $101,133 and $0, respectively, for the services Withum performed in connection with our Initial Public Offering and the audit of our December 31, 2021 financial statements included in this Annual Report on Form 10-K.
Audit-Related Fees. During the year ended December 31, 2021 and for the period from August 20, 2020 (inception) through December 31, 2020, our independent registered public accounting firm did not
render assurance and related services related to the performance of the audit or review of financial statements.
Tax Fees. During the year ended December 31, 2021 and for the period from August 20, 2020 (inception) through December 31, 2020, our independent registered public accounting firm did not render services
to us for tax compliance, tax advice and tax planning.
All Other Fees. During the year ended December 31, 2021 and for the period from August 20, 2020 (inception) through December 31, 2020, there were no fees billed for products and services provided by our
independent registered public accounting firm other than those set forth above.
Pre-Approval Policy
Our audit committee was formed upon the consummation of 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 our auditors, 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).
| ITEM 15. |
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
|
(a)
|
The following documents are filed as part of this Form 10-K:
|
|
(1)
|
Financial Statements:
|
The financial statements are found in a separate section of this Report starting on page F-1. See the “Index to Financial Statements” on page F-1.
|
(2)
|
Financial Statement Schedules:
|
None.
|
(3)
|
Exhibits
|
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.
|
Exhibit No.
|
Description
|
|
Business Combination Agreement, dated as of December 17, 2021, by and among L&F Acquisition Corp., L&F Acquisition Holdings, LLC, ZF Merger Sub, Inc., IDX Merger Sub, Inc., IDX Forward Merger Sub, LLC, ZeroFox, Inc., and ID
Experts Holdings, Inc. (1)
|
|
|
Amended and Restated Memorandum and Article of Association.(2)
|
|
|
Specimen Unit Certificate.(3)
|
|
|
Specimen Ordinary Share Certificate.(3)
|
|
|
Specimen Warrant Certificate.(3)
|
|
|
Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant.(2)
|
|
|
Description of Registrant’s Securities.(4)
|
|
Exhibit No.
|
Description
|
|
Sponsor Private Placement Warrants Purchase Agreement between the Registrant and the Sponsor.(2)
|
|
|
Private Placement Warrants Purchase Agreement between the Company and Jefferies.(2)
|
|
|
Investment Management Trust Account Agreement between Continental Stock Transfer & Trust Company and the Company.(2)
|
|
|
Registration and Shareholder Rights Agreement between the Registrant, the Sponsor Jefferies and certain directors of the Company.(2)
|
|
|
Second Amended and Restated Sponsor Support Letter Agreement, dated as of January 31, 2022, by and among L&F Acquisition Corp., JAR Sponsor, LLC, ZeroFox, Inc., ID Experts Holdings, Inc., Albert Goldstein, Joseph Lieberman, Kurt
Summers and certain other individuals named therein.(5)
|
|
|
Administrative Services Agreement between the Company and the Sponsor.(2)
|
|
|
Form of Indemnity Agreement.(3)
|
|
|
Form of Common Equity Subscription Agreement.(1)
|
|
|
Form of Convertible Note Subscription Agreement.(1)
|
|
|
List of Subsidiaries.*
|
|
|
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
|
|
|
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
|
|
|
Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.**
|
|
|
Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.**
|
|
|
101.INS
|
XBRL Instance Document
|
|
Exhibit No
|
Description
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
* Filed herewith
** Furnished herewith
|
(1)
|
Incorporated by reference to the registrant’s Current Report on Form 8-K, filed with the SEC on December 20, 2021.
|
|
(2)
|
Incorporated by reference to the registrant’s Current Report on Form 8-K, filed with the SEC on November 23, 2020.
|
|
(3)
|
Incorporated by reference to the registrant’s Registration Statement on Form S-1, filed with the SEC on November 12, 2020.
|
|
(4)
|
Incorporated by reference to Exhibit 4.5 to L&F Acquisition Corp.’s Annual Report on Form 10-K filed with the SEC on March 30, 2021.
|
|
(5)
|
Incorporated by reference to the registrant’s Registration Statement on Form S-4, filed with the SEC on February 7, 2022.
|
| ITEM 16. |
FORM 10-K SUMMARY
|
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
|
March 14, 2022
|
L&F ACQUISITION CORP.
|
|
/s/ Adam Gerchen
|
|
|
Name: Adam Gerchen
|
|
|
Title: Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Name
|
Position
|
Date
|
||
|
/s/ Jeffrey C. Hammes
|
Chairman
|
March 14, 2022
|
||
|
Jeffrey C. Hammes
|
||||
|
/s/ Adam Gerchen
|
Chief Executive Officer
|
March 14, 2022
|
||
|
Adam Gerchen
|
(Principal Executive Officer)
|
|||
|
/s/ Richard Levy
|
Director
|
March 14, 2022
|
||
|
Richard Levy
|
||||
|
/s/ Tom Gazdziak
|
Chief Financial Officer
|
March 14, 2022
|
||
|
Tom Gazdziak
|
(Principal Financial and Accounting Officer)
|
|||
|
/s/ Senator Joseph Lieberman
|
Director
|
March 14, 2022
|
||
|
Senator Joseph Lieberman
|
||||
|
/s/ Albert Goldstein
|
Director
|
March 14, 2022
|
||
|
Albert Goldstein
|
||||
|
/s/ Kurt Summers
|
Director
|
March 14, 2022
|
||
|
Kurt Summers
|
L&F ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
|
F-2
|
|
|
Consolidated Financial Statements:
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7 to F-27
|
To the Stockholders and the Board of Directors of
L&F Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of L&F Acquisition Corp. (the “Company”) as of December 31, 2021 and
2020, the related consolidated statements of operations, changes in shareholders’ deficit and cash flows for the year ended December 31, 2021 and for the period from August 20, 2020 through December 31, 2020, and the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December
31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021 and for the period from August 20, 2020 through December 31, 2020, in conformity with accounting principles generally accepted in the United States
of America.
Going Concern
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs and complete a business
combination by May 23, 2022 then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s
ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company's consolidated 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 consolidated 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 consolidated 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 include evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
PCAOB
We have served as the Company’s auditor since 2020.
New York, New York
March
14, 2022
L&F ACQUISITION CORP.
|
December 31,
2021 |
December 31,
2020
|
|||||||
|
ASSETS
|
||||||||
|
Current assets
|
||||||||
|
Cash
|
$
|
575,739
|
$ | 1,478,928 | ||||
|
Prepaid expenses
|
9,167
|
295,658 | ||||||
|
Total Current Assets
|
584,906
|
1,774,586 | ||||||
|
Marketable investments held in Trust Account
|
175,110,029
|
175,089,531 | ||||||
|
TOTAL ASSETS
|
$
|
175,694,935
|
$ | 176,864,117 | ||||
|
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
||||||||
|
Current liabilities
|
||||||||
|
Accrued expenses
|
$
|
2,785,180
|
$ | 126,944 | ||||
|
Accrued offering costs
|
350,000
|
350,000 | ||||||
|
Total Current Liabilities
|
3,135,180
|
476,944 | ||||||
|
Deferred underwriting fee payable
|
6,037,500
|
6,037,500 | ||||||
|
Warrant Liability
|
18,637,420
|
28,062,924 | ||||||
|
Total Liabilities
|
27,810,100
|
34,577,368 | ||||||
|
Commitments and Contingencies
|
|
|||||||
|
Class A ordinary shares subject to possible redemption, 17,250,000 shares
at $10.15 per share at December 31, 2021 and 2020
|
175,087,500
|
175,087,500 | ||||||
|
Shareholders’ Deficit
|
||||||||
|
Preference shares, $0.0001 par value; 1,000,000 shares authorized; no
shares issued and outstanding
|
—
|
— | ||||||
|
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; no
shares issued and outstanding at December 31, 2021 and 2020 (not including 17,250,000 shares subject to redemption)
|
—
|
— | ||||||
|
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 4,312,500
shares issued and outstanding at December 31, 2021 and 2020
|
431
|
431 | ||||||
|
Additional paid-in capital
|
—
|
— | ||||||
|
Accumulated deficit
|
(27,203,096
|
)
|
(32,801,182 | ) | ||||
|
Total Shareholders’ Deficit
|
(27,202,665
|
)
|
(32,800,751 | ) | ||||
|
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
$
|
175,694,935
|
$ | 176,864,117 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
L&F ACQUISITION CORP.
| Year Ended December 31, | For the Period from August 20, 2020 (Inception) through December 31, |
|||||||
| 2021 |
2020 |
|||||||
|
General and administrative expenses
|
$ | 3,847,916 |
$
|
164,192
|
||||
|
Loss from operations
|
(3,847,916 | ) |
(164,192
|
)
|
||||
|
Other income (loss):
|
||||||||
|
Change in fair value of warrant liabilities
|
9,425,504 |
(6,829,174
|
)
|
|||||
|
Transaction Costs allocable to warrant liabilities
|
— |
(807,424
|
)
|
|||||
|
Interest earned on marketable investments held in Trust Account
|
20,498 |
2,030
|
||||||
|
Total other income (loss), net
|
9,446,002 | (7,634,568 | ) | |||||
|
Net income (loss)
|
$ | 5,598,086 |
$
|
(7,798,760
|
)
|
|||
|
Weighted average shares outstanding of Class A ordinary shares
|
17,250,000 |
5,303,571
|
||||||
|
Basic and diluted net income (loss) per ordinary share, Class A ordinary shares
|
$ | 0.26 |
$
|
(0.85
|
)
|
|||
|
Weighted average shares outstanding of Class B ordinary shares
|
4,312,500 |
3,915,179
|
||||||
|
Basic and diluted net income (loss) per ordinary share, Class B ordinary shares
|
$ | 0.26 |
$
|
(0.85
|
)
|
|||
The accompanying notes are an integral part of these consolidated financial statements.
L&F ACQUISITION CORP.
|
Class A
Ordinary Shares
|
Class B
Ordinary Shares
|
Additional
Paid in
|
Accumulated
|
Total
Shareholders’
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||||||||
|
Balance — August 20, 2020 (inception)
|
—
|
$
|
—
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||||
|
Issuance of Class B ordinary shares to Sponsor
|
—
|
—
|
4,312,500
|
431
|
24,569
|
—
|
25,000
|
|||||||||||||||||||||
|
Accretion for Class A ordinary shares to redemption amount
|
—
|
—
|
—
|
—
|
(24,569
|
)
|
(25,002,422
|
)
|
(25,026,991
|
)
|
||||||||||||||||||
|
Net loss
|
—
|
—
|
—
|
—
|
—
|
(7,798,760
|
)
|
(7,798,760
|
)
|
|||||||||||||||||||
|
Balance — December 31, 2020
|
—
|
$ |
—
|
|
4,312,500
|
$ |
431
|
$ |
—
|
$ |
(32,801,182
|
)
|
$ |
(32,800,751
|
)
|
|||||||||||||
|
Net income
|
— | — | — | — | — | 5,598,086 | 5,598,086 | |||||||||||||||||||||
|
Balance — December 31, 2021
|
— | $ | — | 4,312,500 | $ | 431 | $ | — | $ | (27,203,096 | ) | $ | (27,202,665 | ) | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
L&F ACQUISITION CORP.
| Year Ended December 31, |
For the Period from August 20, 2020 (Inception) through
December 31,
|
|||||||
| 2021
|
2020
|
|||||||
|
Cash Flows from Operating Activities:
|
||||||||
|
Net income (loss)
|
$ | 5,598,086 |
$
|
(7,798,760
|
)
|
|||
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
||||||||
|
Formation cost paid by Sponsor in exchange for issuance of founder shares
|
— | 5,000 | ||||||
|
Change in fair value of warrant liabilities
|
(9,425,504 | ) |
6,829,174
|
|||||
|
Transaction costs
|
— |
807,424
|
||||||
|
Interest earned on marketable investments held in Trust Account
|
(20,498 | ) |
(2,030
|
)
|
||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Prepaid expenses
|
286,491 |
(295,658
|
)
|
|||||
|
Accrued expenses
|
2,658,236 |
126,944
|
||||||
|
Net cash used in operating activities
|
(903,189 | ) |
(327,906
|
)
|
||||
|
Cash Flows from Investing Activities:
|
||||||||
|
Investment of cash in Trust Account
|
— |
(175,087,501
|
)
|
|||||
|
Net cash used in investing activities
|
— |
(175,087,501
|
)
|
|||||
|
Cash Flows from Financing Activities:
|
||||||||
|
Proceeds from sale of Units, net of underwriting discounts paid
|
— |
169,050,000
|
||||||
|
Proceeds from sale of Private Placement Warrants
|
— |
8,037,500
|
||||||
|
Repayment of promissory note – related party
|
— |
(64,126
|
)
|
|||||
|
Payments of offering costs
|
— |
(129,039
|
)
|
|||||
|
Net cash provided by financing activities
|
— |
176,894,335
|
||||||
|
Net Change in Cash
|
(903,189 | ) |
1,478,928
|
|||||
|
Cash – Beginning
|
1,478,928 |
—
|
||||||
|
Cash – Ending
|
$ | 575,739 |
$
|
1,478,928
|
||||
|
Non-Cash Investing and Financing Activities:
|
||||||||
|
Initial classification of Class A ordinary shares subject to possible redemption
|
$ | — |
$
|
175,087,500
|
||||
|
Deferred underwriting fee payable
|
$ | — |
$
|
6,037,500
|
||||
|
Payment of offering costs through promissory note
|
$ | — |
$
|
64,126
|
||||
|
Offering costs included in accrued offering costs
|
$ | — |
$
|
350,000
|
||||
|
Offering costs paid by Sponsor in exchange for issuance of founder shares
|
$ | — |
$
|
20,000
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
L&F
Acquisition Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on August 20, 2020. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses or entities (a “Business Combination”). On November 23, 2021, L&F Acquisition Holdings, LLC. (“Merger Sub”), a Delaware corporation and a wholly owned subsidiary of
L&F Acquisition Corp., was formed.
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and
emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of
December 31, 2021, the Company had not commenced any operations. All activity from the period August 20, 2020 (inception) through December 31, 2021 relates to the Company’s 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 will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The
Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on November 18, 2020. On November 23, 2020, the Company
consummated the Initial Public Offering of 15,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the
Units sold, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $150,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated private placements of an aggregate of 6,859,505 warrants (the “Private Placement Warrants”) to JAR Sponsor, LLC (the “Sponsor”) and Jefferies LLC at a price of $1.00 per Private Placement Warrant and approximately $1.21 per
Private Placement Warrant, respectively, generating gross proceeds of approximately $7,250,000, which are described in Note 4.
On
November 25, 2020, the underwriter fully exercised its over-allotment option, resulting in an additional 2,250,000 Units issued for an
aggregate amount of $22,500,000. In connection with the underwriter’s full exercise of its over-allotment option, the Company also
consummated the sale of an additional 728,925 Private Placement Warrants to the Sponsor and Jefferies LLC at $1.00 per Private Placement Warrant and approximately $1.21
per Private Placement Warrant, respectively, generating total proceeds of $787,500. A total of approximately $22,837,500 was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to approximately $175,087,500.
Transaction costs amounted to $10,050,665,
consisting of $3,450,000 of underwriting fees, $6,037,500 of deferred underwriting fees and $563,165 of other offering costs.
Following the closing of the Initial Public Offering on November 23, 2020, and the underwriters full exercise of its over-allotment option on November
25, 2020, an amount of approximately $175,087,500 ($10.15 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 of 1940, as amended (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 investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earliest of: (i) the completion of a Business Combination and (ii)
the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be
applied generally toward consummating a Business Combination. The stock exchange listing rules require that the 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 (excluding
the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the issued and 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. There is no assurance that the Company will be able to successfully effect a Business Combination.
The
Company will provide the holders of the public shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the Business Combination, either (i) in connection with a general meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its
discretion. The Public Shareholders will be entitled to redeem their Public Shares, equal to the aggregate amount then on deposit in the Trust Account, calculated as of business days prior to the consummation of the Business Combination (initially $10.15
per Public Share), including interest (which interest shall be net of taxes payable), divided by the number of then issued and outstanding public shares, subject to certain limitations as described in the prospectus. The per-share amount to be
distributed to the Public Shareholders who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note 6). There will be no redemption rights upon the
completion of a Business Combination with respect to the Public Warrants.
The Company will proceed with a Business Combination only if the Company seeks shareholder approval, it receives an ordinary resolution under Cayman
Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company. If a shareholder vote is not required and the Company does not decide to hold
a shareholder vote for business or other legal reasons, the Company will, pursuant to its amended and restated memorandum and articles of association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange
Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in
connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally,
each Public Shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.
Notwithstanding the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions
pursuant to the tender offer rules, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of
the Public Shares without the Company’s prior written consent.
The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the
completion of a Business Combination and (b) not to propose an amendment to the amended and restated memorandum and articles of association (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the
Company’s initial Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination
within the Combination Period (as defined below) or (ii) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, unless the Company provides the Public Shareholders with the opportunity to
redeem their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the Trust account and not previously released to
pay taxes, divided by the number of then issued and outstanding Public Shares.
The Company will have until May 23, 2022 to consummate a Business Combination (the “Combination Period”). However, if the Company has not completed a
Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than business days thereafter, 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 and not previously released to us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish the rights of
the Public Shareholders as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining Public
Shareholders and its Board of Directors, liquidate and dissolve, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares it will receive if
the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust
Account if the Company fails to complete a Business Combination within the Combination Period. The underwriter has agreed to waive their rights to their deferred underwriting commission (see Note 6) 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 other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event
of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than $10.15.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any
claims by a third party (other than the Company’s independent registered public accounting firm) 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 to below the lesser of (1) $10.15 per Public Share and (2) the actual amount per
Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.15 per Public Share, due to
reductions in the value of trust assets, in each case net of the interest that may be withdrawn to pay taxes. This liability will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account
and as to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). 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 vendors, service providers (other than the Company’s independent registered public accounting firm), 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.
Business Combination
On
December 17, 2021, L&F Acquisition Corp., a Cayman Islands exempted company (“LNFA”), entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination
Agreement”), by and among LNFA, L&F Acquisition Holdings, LLC, a Delaware limited liability company (“L&F Holdings”), ZF Merger Sub, Inc., a Delaware corporation (“ZF Merger Sub”), IDX Merger Sub, Inc., a Delaware corporation (“IDX Merger
Sub”), IDX Forward Merger Sub, LLC, a Delaware limited liability company (“IDX Forward Merger Sub”), ZeroFox, Inc., a Delaware corporation (“ZeroFox”), and ID Experts Holdings, Inc., a Delaware corporation (“IDX”). The Business Combination Agreement
and the transactions contemplated thereby were approved by the boards of directors of each of LNFA, ZeroFox and IDX and have been approved by the requisite stockholders of ZeroFox and IDX (See Note 6).
Going Concern
As of December 31, 2021, the Company had $575,739 in its operating bank accounts, $175,110,029 in marketable securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in
connection therewith and working capital deficit of $2,550,274.
The
Company may need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the
Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the
Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction,
and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Additionally,
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a
Going Concern,” the Company has until May 23, 2022 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an
extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation, should a Business Combination not occur and an extension is not
requested by the Sponsor, potential subsequent dissolution, and working capital deficit raises 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 May 23, 2022.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements are presented
in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange
Commission (the “SEC”).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, 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 shareholder 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
statement 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 the Company’s 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
revenues and expenses during the reporting period.
Making estimates requires management to exercise significant
judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change
in the near term due to one or more future confirming events. 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.
Marketable Investments Held in Trust Account
At December 31, 2021 and 2020, substantially all of the assets
held in the Trust Account were held in a money market fund that only holds U.S. Treasury Securities.
Offering Costs
Offering costs consisted of legal, accounting and other
expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair
value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred in the statements of operations. Offering costs associated with the Class A ordinary share issued were initially charged
to temporary equity and then accreted to ordinary shares subject to redemption upon the completion of the Initial Public Offering. Offering costs amounting to $9,243,241 were charged to stockholders’ equity and offering costs amounting to $807,424
were charged to the statement of operations upon the completion of the Initial Public Offering (see Note 1).
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to
possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and
are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares 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) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be
outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2021 and 2020, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’
equity section of the Company’s balance sheets.
The Company recognizes
changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the
Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable Class A ordinary shares resulted in charges against additional paid-in capital and accumulated deficit.
At December 31, 2021, the Class A ordinary shares reflected in
the balance sheets are reconciled in the following table:
|
Gross proceeds
|
$
|
175,087,500
|
||
|
Less:
|
||||
|
Proceeds allocated to Public
Warrants
|
(13,196,250
|
)
|
||
|
Class A ordinary shares issuance
costs
|
(9,243,241
|
)
|
||
|
Excess funds in trust from sale of
Private Warrants
|
(2,587,500
|
)
|
||
|
Plus:
|
||||
|
Accretion of carrying value to
redemption value
|
25,026,991
|
|||
|
Class A ordinary shares subject to
possible redemption
|
$
|
175,087,500
|
Income Taxes
The Company accounts for income taxes under ASC Topic 740,
“Income Taxes,” which 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 Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. As of December 31, 2021 and 2020, there were no unrecognized tax benefits
and no amounts accrued for interest and penalties. 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 is considered to be an exempted Cayman Islands
company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over
the next twelve months.
Net Loss Per Ordinary Share
The Company complies with accounting and
disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. Accretion associated
with the redeemable shares of Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income (loss)
per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are
exercisable to purchase 16,213,430 Class A ordinary shares in the aggregate. As of December 31, 2021 and 2020, the Company did not have
any dilutive securities or other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted net loss per ordinary share is the same as basic net loss per
ordinary share for the periods presented.
The following table reflects the calculation of basic and diluted
net income (loss) per ordinary share (in dollars, except per share amounts):
|
Year Ended
December 31, 2021
|
For the Period from August 20, 2020 (Inception) Through
December 31, 2020
|
|||||||||||||||
| Class A | Class B |
Class A
|
Class B
|
|||||||||||||
|
Basic and diluted net income (loss) per ordinary share
|
||||||||||||||||
|
Numerator:
|
||||||||||||||||
|
Allocation of net income (loss), as adjusted
|
$ | 4,478,469 | $ | 1,119,617 |
$
|
(4,486,647
|
)
|
$
|
(3,312,113
|
)
|
||||||
|
Denominator:
|
||||||||||||||||
|
Basic and diluted weighted average shares outstanding
|
17,250,000 | 4,312,500 |
5,303,571
|
3,915,179
|
||||||||||||
|
Basic and diluted net income (loss) per ordinary share
|
$ | 0.26 | $ | 0.26 |
$
|
(0.85
|
)
|
$
|
(0.85
|
)
|
||||||
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 Coverage of $250,000. The Company has not experienced losses on this account and management believes the
Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s balance sheet, primarily due to their short-term nature, other than warrant liabilities
(see note 8).
Fair Value Measurements
Fair value is defined as the price that would be received for
sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
•
|
Level 1, defined as observable inputs such as quoted prices (unadjusted)
for identical instruments in active markets;
|
|
•
|
Level 2, defined as inputs other than quoted prices in active markets that
are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
|
•
|
Level 3, defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
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.
Warrant Liability
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all
of its 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 FASB ASC Topic 815, “Derivatives and Hedging”
(“ASC 815”). The Company accounts for the Warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary
shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are
outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a
component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company assessed both Public and Private Warrants and determined
both met the criteria for liability treatment. The Company assessed both Public and Private Warrants and determined both met the criteria for liability treatment.
Recent Accounting Standards
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 consolidated 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 consolidated financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 15,000,000 Units at a purchase price of $10.00 per Unit. In connection with the underwriter’s full
exercise of the over-allotment option on November 25, 2020, the Company sold an additional 2,250,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one
Class A ordinary share and of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to
purchase one Class A ordinary share at an exercise price of $11.50 per whole share (see Note 8).
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 5,000,000 Private Placement Warrants at a price of $1.00 per
Private Placement Warrant, for an aggregate purchase price of $5,000,000 and Jefferies LLC purchased an aggregate of 1,859,505 Private Placement Warrants at a price of approximately $1.21 per Private Placement Warrant, for an aggregate purchase price of approximately $2,250,000. In
connection with the underwriter’s full exercise of its over-allotment option, the Company also consummated the sale of an additional 728,925
Private Placement Warrants, 450,000 of which were sold to the Sponsor at $1.00 per Private Placement Warrant and 278,925 of which were sold
to Jefferies LLC at approximately $1.21 per Private Placement Warrant, respectively, generating total proceeds of $787,500. Each Private Placement Warrant is exercisable to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 8). A portion
of the proceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the
sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. In accordance with FINRA Rule 5110(g)(8)(A), the
Private Placement Warrants purchased by Jefferies LLC will not be exercisable for more than five years from the effective date of the
registration statement filed in connection with the Company’s Initial Public Offering for so long as they are held by the Jefferies LLC.
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On August 28, 2020, the Sponsor paid $25,000
to cover certain offering and formation costs of the Company in consideration for 5,750,000 Class B ordinary shares (the “Founder
Shares”). On November 13, 2020, the Sponsor effected a surrender of 1,437,500 Founder Shares to the Company for no consideration, resulting in a decrease in the total number of Class B ordinary shares outstanding to 4,312,500 shares. The Founder Shares included an aggregate of up to 562,500
shares that were subject to forfeiture depending on the extent to which the underwriter’s over-allotment option was exercised, so that the number of Founder Shares would equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. As a result of the underwriter’s election to fully exercise
their over-allotment option on November 25, 2020, no Founder Shares are currently subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price of the Class A ordinary
shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on
which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Administrative Support Agreement
Commencing on November 18, 2020, the Company entered into an agreement to pay the Sponsor up to $10,000 per month for office space, utilities, secretarial and administrative support services. Upon completion of a Business Combination or its liquidation, the Company will
cease paying these monthly fees. For the year ended December 31, 2021 and for period from August 20, 2020 (inception) through December 31, 2020, the Company incurred $120,000 and $10,000 in fees for these services, respectively. As of December 31, 2021 and 2020 $0 and $10,000 were included in accrued
expenses, respectively.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would 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
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. 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 Warrants. As of December 31, 2021 and 2020, the Company had no outstanding borrowings under the Working Capital Loans.
NOTE 6 — COMMITMENTS AND
CONTINGENCIES
Risks and Uncertainties
Management continues to
evaluate the impact of the COVID-19 global pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, its results of operations and/or search for a target company,
the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration and
Shareholders Rights
Pursuant to a registration
and shareholders rights agreement entered into on November 23, 2020, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable
upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans) will have registration rights to require the Company to register a sale of any of securities held by them. The holders
of these securities are entitled to make up to three demands, 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 completion of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash
settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $6,037,500 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Business Combination Agreement
On December 17, 2021,
L&F Acquisition Corp., a Cayman Islands exempted company (“LNFA”), entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among
LNFA, L&F Acquisition Holdings, LLC, a Delaware limited liability company (“L&F Holdings”), ZF Merger Sub, Inc., a Delaware corporation (“ZF Merger Sub”), IDX Merger Sub, Inc., a Delaware corporation (“IDX Merger Sub”), IDX Forward Merger
Sub, LLC, a Delaware limited liability company (“IDX Forward Merger Sub”), ZeroFox, Inc., a Delaware corporation (“ZeroFox”), and ID Experts Holdings, Inc., a Delaware corporation (“IDX”). The Business Combination Agreement and the transactions
contemplated thereby were approved by the boards of directors of each of LNFA, ZeroFox and IDX and have been approved by the requisite stockholders of ZeroFox and IDX.
The Business
Combination Agreement provides for, among other things, the following transactions on the date of Closing: (i) ZF Merger Sub will merge with and into ZeroFox (the “ZF Merger”), with ZeroFox being the surviving company in the ZF Merger and, after
giving effect to such merger, continuing as a wholly-owned subsidiary of L&F Holdings, (ii) IDX Merger Sub will merge with and into IDX (the “IDX Merger”), with IDX being the surviving company in the IDX Merger (“Transitional IDX Entity”)
and, after giving effect to such merger, continuing as a wholly-owned subsidiary of L&F Holdings, and (iii) Transitional IDX Entity will merge with and into IDX Forward Merger Sub (the “IDX Forward Merger”, and collectively with the ZF Merger
and IDX Merger, the “Mergers”), with IDX Forward Merger Sub being the surviving company in the IDX Forward Merger and, after giving effect to such merger, continuing as a wholly-owned subsidiary of L&F Holdings.
The Mergers and the other transactions contemplated
by the Business Combination Agreement are hereinafter referred to as the “Business Combination”. The Business Combination is expected to close in the first half of 2022, following the receipt of the required approval by LNFA’s shareholders and
the fulfillment of other customary closing conditions.
Business Combination Consideration
In accordance with
the terms and subject to the conditions of the Business Combination Agreement, at the effective times of the Mergers, among other things, (i) each outstanding share of common stock (including shares of common stock issued upon the mandatory
conversion of shares of preferred stock) of ZeroFox, other than ZF Dissenting Shares (as defined in the Business Combination Agreement) and ZF Cancelled Shares (as defined in the Business Combination Agreement), will be automatically
cancelled and converted into a right to receive a fraction of a share of LNFA Common Stock determined in accordance with the Business Combination Agreement on the basis of a pre-money enterprise value of ZeroFox of $866,250,000 and a price of $10.00
per share of LNFA Common Stock and (ii) each outstanding share of common stock and preferred stock of IDX, other than IDX Dissenting Shares (as defined in the Business Combination Agreement) and IDX Cancelled Shares (as defined in the
Business Combination Agreement), will be automatically cancelled and converted into a right to receive (x) for common stock and series a-1 and series a-2 preferred stock, a fraction of a share of LNFA Common Stock, (y) for common stock and
series a-1 and series a-2 preferred stock, a portion of $50,000,000 in cash consideration (subject to certain adjustments for cash,
working capital, debt and transaction expenses, and net of liquidation preferences, as provided in the Business Combination Agreement), and (z) for series a-1, series a-2 and series b preferred stock, a liquidation preference amount of $0.361, in each case, in accordance with the Business Combination Agreement and on the basis of a pre-money enterprise value of IDX of $338,750,000 and a price of $10.00
per share of LNFA Common Stock.
Advisory Services
The Company entered into an advisory
agreement with Jefferies LLC (“Jefferies”). Jeffries will act as (i) the Company’s exclusive financial advisor and exclusive capital markets advisor in connection with a possible Business Combination involving one or both of ZeroFOX and/or
IDX (each and collectively, together with its affiliates and subsidiaries, the “Target”) and (ii) sole and exclusive (other than with respect to Stifel Financial Corp. (“Stifel”). If the pending Business Combination with ZeroFox and/or IDX
does not occur, the Company will not be required to pay any contingent fees in connection with this agreement.
Jefferies will provide the Company
with mergers and acquisition and equity capital markets financial advice and assistance in connection with a possible acquisition or other business transaction or series of transactions involving all or a material portion of the Target’s
equity or assets, whether directly or indirectly and through any form of transaction, including, without limitation, merger, reverse merger, liquidation, stock purchase, asset purchase, recapitalization, reorganization, consolidation,
amalgamation, joint venture, strategic partnership, license or other transaction.
The Company entered into an agreement
with Stifel, Nicolaus & Company, Incorporated (“Stifel”). Stifel will endeavor to obtain one or more commitments for the Financing (individually a “Commitment” and collectively the “Commitments”) from one or more financial institutions
or other sources other than any affiliates of the Company, ZeroFOX, Inc. or ID Expert Holdings, Inc.(the “Investors”). If the Business Combination does not occur, the Company will not be required to pay any contingent fees in connection
with this agreement.
There can be no assurances that the
Company will complete the pending Business Combination with ZeroFox and/or IDX.
Common Equity
Investment
Concurrently with the execution of the
Business Combination Agreement, LNFA entered into subscription agreements (the “Common Equity Subscription Agreements”) with certain investors, including, among others, Victory Park Capital, certain existing stockholders of ZeroFox (certain
funds affiliated with New Enterprise Associates, Highland Capital and Alsop Louie Partners (the “ZF Investors”)), and certain existing stockholders of IDX (certain funds affiliated with Blue Venture Fund, Peloton Equity and ForgePoint Capital
(the “IDX Investors”)). Pursuant to the Common Equity Subscription Agreements, the investors agreed to subscribe for and purchase, and LNFA agreed to issue and sell to such investors, on the Closing Date (as defined in the Business
Combination Agreement), an aggregate of 2,000,000 shares of LNFA Common Stock in exchange for an aggregate purchase price of $20,000,000 (the “Common Equity PIPE Financing”).
In addition, on December 16, 2021, the
ZF Investors purchased PIK promissory notes issued by ZeroFox (the “ZF PIK Promissory Notes”) for an aggregate purchase price of $5,000,000.
Such ZF PIK Promissory Notes accrue interest that will be paid-in-kind at a rate of 5.0% per annum. If the Closing occurs, the
repayment of the original principal amount of the ZF PIK Promissory Notes may be offset against amounts owed by the ZF investors under their Common Equity Subscription Agreements. In addition, if the Closing occurs, any portion of closing
cash consideration to which the IDX Investors are entitled in connection with the consummation of the Business Combination may be reduced to fund the subscription amount the IDX Investors would otherwise be required to pay pursuant to the
Common Equity Subscription Agreements.
The closing of the Common Equity PIPE
Financing is contingent upon, among other things, the substantially concurrent consummation of the Business Combination. The Common Equity Subscription Agreements provide that LNFA will grant the investors in the Common Equity PIPE Financing
certain customary registration rights.
Convertible Notes
Investment
In connection with signing the Business
Combination Agreement, LNFA entered into convertible note subscription agreements (the “Convertible Note Subscription Agreements”) with affiliates of Monarch Alternative Capital LP, Victory Park Capital and Corbin Capital (the “Note
Investors”), in respect of $150,000,000 aggregate principal amount of unsecured convertible notes due in 2025 (the “Notes”) to be
issued in connection with the closing of the Business Combination (the “Convertible Notes Financing”). The principal terms of the Notes are set forth in the form of indenture attached as an exhibit to the Convertible Note Subscription
Agreements, which indenture shall be entered into by LNFA, the guarantors party thereto and the indenture trustee (the “Indenture”), and the form of global note attached thereto. The Notes will bear interest at a rate of 7.00% per annum, payable quarterly
in cash; provided, that the issuer may elect to pay interest in kind at 8.75% per annum, and the Notes will be convertible at an
initial conversion price of $11.50, subject to customary anti-dilution adjustments, including with respect to stock-splits and
stock dividends, dividends and other distributions, above-market tender offers, below-market rights offerings and spin-offs (the “Conversion Price”), and shall mature on the date that is three years following the closing of the Convertible
Notes Financing. The post-Business Combination company may, at its election, force conversion of the Notes after the first anniversary of the issuance of the Notes (the “Conversion Trigger Date”), subject to a holder’s prior right to convert,
if the volume-weighted average trading price of the post-Business Combination company’s common stock (x) for the first year after the Conversion Trigger Date, is greater than or equal to 150% of the conversion price for more than 20 trading days
during a period of 30 consecutive trading days and (y) for the second year after the Conversion Trigger Date, is greater than or
equal to 130% of the conversion price for more than 20 trading days during a period of 30 consecutive trading
days.
Each holder of a Note will have the
right to cause the post-Business Combination company to repurchase for cash all or a portion of the Notes held by such holder at any time upon the occurrence of a “fundamental change”, a customary definition provided in the Indenture (a
“Fundamental Change”), at a price equal to par plus accrued and unpaid interest. In the event of a conversion in connection with a Fundamental Change, the Conversion Price will be adjusted by a usual and customary Fundamental Change
“make-whole table” to be agreed in the Indenture. The Indenture will include restrictive covenants that, among other things, will limit the ability of the post-Business Combination company to incur senior debt in excess of $50,000,000, subject to certain qualifications and exceptions set forth in the Indenture. The Indenture also will include customary events of
default.
The closing of the Convertible Notes
Financing is contingent upon, among other things, the substantially concurrent consummation of the Business Combination. LNFA has agreed to execute a registration rights agreement for the benefit of the Note Investors, providing for
customary demand, shelf and piggyback registration rights and otherwise in form and substance acceptable to the Note Investors and LNFA.
NOTE 7 — SHAREHOLDERS’ EQUITY
Preference Shares — The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001
per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s
board of directors. At December 31, 2021 and 2020, there were no preference shares issued or outstanding.
Class A Ordinary Shares — The Company is authorized to issue 500,000,000 Class A ordinary shares, with a par value of $0.0001 per share. Holders of Class A ordinary shares are entitled to one vote for each share. At December 31, 2021 and 2020, there were 17,250,000 and 17,250,000 Class A ordinary shares issued and outstanding subject to possible redemption which are presented as temporary equity, respectively.
Class B Ordinary Shares — The Company is authorized to issue 50,000,000 Class B ordinary shares, with a par value of $0.0001 per share. Holders of the Class B ordinary shares are entitled to one vote for each share. At December 31, 2021 and 2020, there were 4,312,500 Class B ordinary shares issued and outstanding.
Only holders of the Class B ordinary shares will have the right to vote on the appointment of directors prior to the Business Combination. Holders of
Class A ordinary shares and Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of shareholders, except as required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of a
Business Combination on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares or equity-linked
securities are issued or deemed issued in connection with a Business Combination, the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, 20% of the total number of Class A ordinary shares outstanding after completion of this offering, plus the total number of Class A ordinary shares issued, or deemed issued or
issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding any Class A ordinary shares or
equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of
Working Capital Loans; provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
NOTE 8 —WARRANTS
At December 31, 2021 and 2020, there were 8,625,000
Public Warrants and 7,588,430 Private Placement Warrants, respectively outstanding. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) one year from the closing of the Initial Public Offering. The Public Warrants will expire five years from the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle
such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its
obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class A ordinary share issuable upon such warrant exercise has been
registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 20 business days, after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement for the registration, under the
Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement and a current
prospectus relating thereto until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by
the sixtieth (60th) business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective
registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Notwithstanding the above, if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities
Act, the Company may, at its 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 the Company so elects, the Company will not
be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not
available.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00.
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described with respect to the Private Placement Warrants):
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon a minimum of 30 days’ prior written notice of redemption; and
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if, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading
day period ending three business days before the Company sends the notice of redemption to the warrant holders.
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If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify
the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00.
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described with respect to the Private Placement Warrants):
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in whole and not in part;
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at a price of $0.10 per warrant;
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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 determined based on the redemption date and the fair market value of the Class A ordinary shares;
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if, and only if, the closing price of the Class A ordinary shares equal or exceeds $10.00 per public share (as adjusted) for any
20 trading days within the 30-trading
day period ending three trading days before the Company send the notice of redemption of the warrant holders; and
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if the closing price of the Class A ordinary shares 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 is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding
Public Warrants.
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If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to
exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in
the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its
exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. 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 Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public
Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with
the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such
affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60%
of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A
ordinary shares during the 10 trading day period starting on the trading day prior to the day on which the Company consummates a Business
Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest
cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption
trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private
Placement Warrants and the Class A ordinary shares issuable upon the 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. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be
non-redeemable, except as described above, so long as they are held by the initial purchasers, Jefferies LLC or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers, Jefferies LLC or
their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. Further, in accordance with FINRA Rule 5110(g)(8)(A), the Private Placement
Warrants purchased by Jefferies LLC will not be exercisable for more than five years from the effective date of the registration statement
filed in connection with the Company’s Initial Public Offering for so long as they are held by the Jefferies LLC.
NOTE 9 — FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in
connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and
liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
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Level 1: |
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing
information on an ongoing basis.
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Level 2: |
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
Level 3: |
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
At December 31, 2021 and 2020, assets held in the Trust Account were comprised of $175,110,029 and $175,089,531, respectively in a money market fund
which is invested in U.S. Treasury Securities. During the year ended December 31, 2021, the Company did not withdraw any interest
income from the Trust Account.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December
31, 2021 and 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
|
Description
|
Level as of December 31, 2021
|
December 31,
2021
|
December 31,
2020
|
|||||||||
|
Assets:
|
||||||||||||
|
Marketable investments held in Trust Account – U.S. Treasury Securities Money Market Fund
|
1
|
$
|
175,110,029
|
$ |
175,089,531 | |||||||
|
Liabilities:
|
||||||||||||
| Warrant liability – Public Warrants | 1 |
6,028,013 | — | |||||||||
|
Warrant liability – Public Warrants
|
3
|
—
|
14,403,750 | |||||||||
|
Warrant liability – Private Placement Warrants
|
3
|
12,609,407
|
13,659,174 | |||||||||
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period
in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the year ended December 31, 2021 was $6,028,013.
The following table presents the changes in the fair value of Level 3 warrant liabilities:
|
Fair value as of January 1, 2021
|
$ |
28,062,924
|
||
|
Change in fair value
|
(10,825,645
|
)
|
||
|
Transfer of Public warrants to level 1
|
(5,778,750
|
)
|
||
|
Fair value as of March 31, 2021
|
11,458,529
|
|||
|
Change in fair value
|
1,081,281
|
|||
|
Fair value as of June 30, 2021
|
12,539,810
|
|||
|
Change in fair value
|
(443,828
|
)
|
||
|
Fair value as of September 30, 2021
|
$ |
12,095,982
|
||
|
Change in fair value
|
513,425
|
|||
|
Fair value as of December 31, 2021
|
$ |
12,609,407
|
The Private Warrants were valued as of November 23, 2020 and subsequent periods using a Modified Black Scholes Option Pricing Model, which is
considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the ordinary shares. The expected volatility
as of the Initial Public Offering date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own
public warrant pricing. A Monte Carlo simulation methodology was used in estimating the fair value of the Public Warrants as of November 23, 2020 and December 31, 2020, 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 Warrants. For periods subsequent to the detachment of the Public
Warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date.
The key inputs into the Black-Scholes-Merton model for the Private Placement Warrants were as follows:
|
Input
|
December 31, 2021 |
December 31,
2020
|
||||||
|
Risk-free interest rate
|
1.26
|
%
|
0.56 | % | ||||
|
Trading days per year
|
252
|
252 | ||||||
|
Volatility
|
22.0
|
%
|
28.0 | % | ||||
|
Exercise price
|
$
|
11.50
|
$ | 11.50 | ||||
|
Stock Price
|
$
|
10.03
|
$ | 9.54 | ||||
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial
statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
F-27