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
AUTHENTIC EQUITY ACQUISITION
CORP.
(Exact name of registrant as specified in its charter)
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Cayman Islands
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001-39903
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98-1562072
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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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32 Elm Place, 2nd Floor
Rye, NY
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10580
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| (Address
of principal executive offices) |
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(Zip
Code) |
Registrant’s telephone number, including area code: (646)
374-0919
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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Class A ordinary shares included as part of the units |
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AEAC |
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The
Nasdaq Stock Market LLC |
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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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AEACW |
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The
Nasdaq Stock Market LLC |
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Units, each consisting of one Class A ordinary share, $0.0001 par
value, and half of one redeemable warrant |
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AEACU |
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The
Nasdaq Stock Market LLC |
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.
| Large
accelerated filer |
☐ |
Accelerated filer |
☐ |
| Non-accelerated
filer |
☒ |
Smaller reporting
company |
☒ |
| 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 25, 2022, 23,000,000 Class A ordinary shares, par value
$0.0001 per share, and 7,000,000 Class B ordinary shares, par value
$0.0001 per share, were issued and outstanding.
Documents Incorporated by Reference: None.
TABLE OF CONTENTS
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 January 14, 2021. |
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“Companies Law” are to the
Companies Act (as amended) of the Cayman Islands as the same may be
amended from time to time; |
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“Forward Purchase Agreement” are to
the agreement between the company and GEPT, pursuant to which, in
exchange for the payment by GEPT to us of $824,500, (i) GEPT may
purchase, in its discretion, an amount designated by the Company,
which amount will not exceed the lesser of (A) $50,000,000 of units
and (B) a number of units equal to 19.99% of the pro forma equity
outstanding at the time of the closing of the initial business
combination, including but not limited to, any Ordinary Shares
issued in connection with our initial public offering, the Forward
Purchase Agreement or any private placement or other offering or to
any seller in the initial business combination, with each unit
consisting of one Class A ordinary share and 0.425 of one
redeemable warrant, for a purchase price of $10.00 per unit, in a
private placement transaction to occur concurrently with the
closing of our initial business combination, and (ii) if GEPT makes
the purchase described in clause (i) above, we will issue to GEPT,
at the closing of our initial business combination and prior to the
conversion of the Class B Shares into Class A Shares in accordance
with the terms thereof: a number of Class B ordinary shares (the
“GEPT Class B ordinary shares”) that is equal to 12.5% of the
aggregate number of Class B ordinary shares outstanding at the time
of our initial business combination prior to the conversion of such
Class B ordinary shares into Class A ordinary shares pursuant to
the terms thereof and after giving effect to the issuance of the
GEPT Class B ordinary shares and any other Class B ordinary shares
as a result of anti-dilution rights or other adjustments and the
number of Class B ordinary shares transferred, assigned, sold or
forfeited in connection with our initial business combination but
excluding 115,000 Class B ordinary shares from such calculation
(provided, however, that if the Founder Shares are converted into
Class A ordinary shares prior to the date of our initial business
combination, GEPT will receive a number of Class A ordinary shares
equal to the number of Class A ordinary shares that it would have
been entitled to pursuant to the GEPT Issuance); and a number of
Private Placement Warrants equal to 12.5% of the aggregate number
of Private Placement Warrants at the time of our initial business
combination prior to the conversion of such Class B ordinary shares
into Class A ordinary shares pursuant to the terms thereof and
after giving effect to any Private Placement Warrants transferred,
assigned, sold or forfeited in connection with our initial business
combination; |
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“Forward Purchase Securities” are
to the Forward Purchase Shares and Forward Purchase Warrants; |
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“Forward Purchase Shares” are to
Class A ordinary shares to be issued pursuant to the Forward
Purchase Agreement; |
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“Forward Purchase Warrants” are to
warrants to purchase Class A ordinary shares to be issued pursuant
to the Forward Purchase Agreement; |
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“Founder Shares” are to our Class B
ordinary shares initially issued to our Sponsor in a private
placement prior to our initial public offering, the Class B
ordinary shares to be issued to GEPT under the Forward Purchase
Agreement, if any, 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 or earlier at the
option of the holders thereof (for the avoidance of doubt, such
Class A ordinary shares will not be “Public Shares”); |
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“GEPT” are to General Electric
Pension Trust; |
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“Initial Shareholders” are to the
holders of our Founder Shares prior to our initial public
offering; |
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“Management” or our “Management
Team” are to our executive officers and directors; |
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“Ordinary Resolution” are to a
resolution adopted by the affirmative vote of at least a majority
of the votes cast by the holders of the issued shares present in
person or represented by proxy at a general meeting of the company
and entitled to vote on such matter or a resolution approved in
writing by all of the holders of the issued shares entitled to vote
on such matter; |
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● |
“Ordinary Shares” are to our Class
A ordinary shares and our Class B ordinary shares; |
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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 and
to be issued upon conversion of working capital loans, if any, and
the warrants to be issued to GEPT under the Forward Purchase
Agreement (other than the Forward Purchase Warrants), if any; |
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“Public Shares” are to our 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 Sponsor and Management
Team to the extent our Sponsor and/or members of our Management
Team purchase Public Shares, provided that our Sponsor’s and each
member of our Management Team’s status as a “Public Shareholder”
will only exist with respect to such Public Shares; |
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“Special Resolution” are to a
resolution adopted by the affirmative vote of at least a two-thirds
(2/3) majority (or such higher threshold as specified in the
company’s amended and restated articles of association) of the
votes cast by the holders of the issued shares present in person or
represented by proxy at a general meeting of the company and
entitled to vote on such matter or a resolution approved in writing
by all of the holders of the issued shares entitled to vote on such
matter; |
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“Sponsor” are to Authentic Equity
Sponsor LLC, a Delaware limited liability company; and |
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● |
“we,” “us,” “our,” “company” or
“our company” are to Authentic Equity Acquisition Corp., a Cayman
Islands exempted company. |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report, including, without limitation, statements under the
heading “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 “believes,”
“estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,”
“will,” “potential,” “projects,” “predicts,” “continue,” or
“should,” or, in each case, their negative or other variations or
comparable terminology. There can be no assurance that actual
results will not materially differ from expectations. Such
statements include, but are not limited to, any statements relating
to our ability to consummate any acquisition or other business
combination and any other statements that are not statements of
current or historical facts. These statements are based on
management’s current expectations, but actual results may differ
materially due to various factors, including, but not limited
to:
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our ability to complete our initial
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; |
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the ability of our officers and
directors to generate a number of potential investment
opportunities; |
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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. |
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. Future developments
affecting us may not be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties
(some of which are beyond our control) and other assumptions that
may cause actual results or performance to be materially different
from those expressed or implied by these forward-looking
statements. These risks and uncertainties include, but are not
limited to, those factors described under the heading “Risk
Factors.” Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect,
actual results may vary in material respects from those projected
in these forward-looking statements. We undertake no obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
may be required under applicable securities laws. These risks and
others described under “Risk Factors” may not be exhaustive.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. We caution
you that forward-looking statements are not guarantees of future
performance and that our actual results of operations, financial
condition and liquidity, and developments in the industry in which
we operate may differ materially from those made in or suggested by
the forward-looking statements contained in this Report. In
addition, even if our results or operations, financial condition
and liquidity, and developments in the industry in which we operate
are consistent with the forward-looking statements contained in
this Report, those results or developments may not be indicative of
results or developments in subsequent periods.
SUMMARY OF RISK FACTORS
The following is a summary of the principal risks described
below in Part I, Item 1A “Risk Factors” in this Annual Report on
Form 10-K. We believe that the risks described in the “Risk
Factors” section are material to investors, but other factors not
presently known to us or that we currently believe are immaterial
may also adversely affect us. The following summary should not be
considered an exhaustive summary of the material risks facing us,
and it should be read in conjunction with the “Risk Factors”
section and the other information contained in this Annual Report
on Form 10-K.
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We are a recently incorporated
company with no operating history and no revenues, and you have no
basis on which to evaluate our ability to achieve our business
objective. |
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Past performance by our Management
Team or their respective affiliates may not be indicative of future
performance of an investment in us. |
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Our shareholders may not be
afforded an opportunity to vote on our proposed initial business
combination, which means we may complete our initial business
combination even though a majority of our shareholders do not
support such a combination. |
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Your only opportunity to affect the
investment decision regarding a potential business combination may
be limited to the exercise of your right to redeem your shares from
us for cash. |
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If we seek shareholder approval of
our initial business combination, our Sponsor and members of our
Management Team have agreed to vote in favor of such initial
business combination, regardless of how our Public Shareholders
vote. |
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The ability of our Public
Shareholders to redeem their shares for cash may make our financial
condition unattractive to potential business combination targets,
which may make it difficult for us to enter into a business
combination with a target. |
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The ability of our Public
Shareholders to exercise redemption rights with respect to a large
number of our shares could increase the probability that our
initial business combination would be unsuccessful and that you
would have to wait for liquidation in order to redeem your
shares. |
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Our search for a business
combination, and any target business with which we ultimately
consummate a business combination, may be materially adversely
affected by the recent coronavirus (COVID-19) outbreak and the
status of debt and equity markets. |
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We may not be able to consummate an
initial business combination within 24 months after the closing of
our initial public offering, in which case we would cease all
operations except for the purpose of winding up and we would redeem
our Public Shares and liquidate. |
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If we seek shareholder approval of
our initial business combination, our Sponsor, directors, executive
officers, advisors and their affiliates may elect to purchase
Public Shares or warrants, which may influence a vote on a proposed
business combination and reduce the public “float” of our Class A
ordinary shares or public warrants. |
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If a shareholder fails to receive
notice of our offer to redeem our Public Shares in connection with
our initial business combination, or fails to comply with the
procedures for tendering its shares, such shares may not be
redeemed. |
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You will not have any rights or
interests in funds from the trust account, except under certain
limited circumstances. Therefore, to liquidate your investment, you
may be forced to sell your Public Shares or warrants, potentially
at a loss. |
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Our securities could be delisted
from trading on Nasdaq, which could limit investors’ ability to
make transactions in our securities and subject us to additional
trading restrictions. |
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If we seek shareholder approval of
our initial business combination and we do not conduct redemptions
pursuant to the tender offer rules, and if you or a “group” of
shareholders are deemed to hold in excess of 15% of our
Class A ordinary shares, you will lose the ability to redeem
all such shares in excess of 15% of our Class A ordinary
shares. |
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Because of our limited resources
and the significant competition for business combination
opportunities, it may be more difficult for us to complete our
initial business combination. If we have not consummated our
initial business combination within the required time period, our
Public Shareholders may receive only approximately $10.00 per
Public Share, or less in certain circumstances, on the liquidation
of our trust account and our warrants will expire worthless. |
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If the net proceeds of our initial
public offering and the sale of the Private Placement Warrants not
being held in the trust account are insufficient to allow us to
operate for the 24 months following the closing of our initial
public offering, it could limit the amount available to fund our
search for a target business or businesses and our ability to
complete our initial business combination, and we will depend on
loans from our Sponsor, its affiliates or members of our Management
Team to fund our search and to complete our initial business
combination. |
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Subsequent to our completion of our
initial business combination, we may be required to take
write-downs or write-offs, restructuring and impairment or other
charges that could have a significant negative effect on our
financial condition, results of operations and the price of our
securities, which could cause you to lose some or all of your
investment. |
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If third parties bring claims
against us, the proceeds held in the trust account could be reduced
and the per-share redemption amount received by shareholders may be
less than $10.00 per Public Share. |
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Our directors may decide not to
enforce the indemnification obligations of our Sponsor, resulting
in a reduction in the amount of funds in the trust account
available for distribution to our Public Shareholders. |
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We may not have sufficient funds to
satisfy indemnification claims of our directors and executive
officers. |
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If, after we distribute the
proceeds in the trust account to our Public Shareholders, we file a
bankruptcy petition or an involuntary bankruptcy petition is filed
against us that is not dismissed, a bankruptcy court may seek to
recover such proceeds, and the members of our board of directors
may be viewed as having breached their fiduciary duties to our
creditors, thereby exposing the members of our board of directors
and us to claims of punitive damages. |
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We have identified a material weakness
in our internal control over financial reporting regarding
interpretation of and accounting for certain complex financial
instruments. This material weakness could continue to adversely
affect our ability to report our results of operations and
financial condition accurately and in a timely manner. |
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Our management has determined that
our working capital deficit, as well as the mandatory liquidation
and subsequent dissolution if we do not complete a business
combination within 24 months from our initial public offering,
raise substantial doubt about the company’s ability to continue as
a “going concern.” |
PART I
Item 1. Business
Overview
We are a blank check company incorporated as a Cayman Islands
exempted company for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses, which
we refer to throughout this Report as our initial business
combination.
While we may pursue an initial business combination in any
industry, sector or geographic region, we intend to focus our
search initially on North American businesses in the consumer
sector, which complements the expertise of our Management Team. We
will seek strong fundamental businesses in a broad range of
consumer products and services sectors, with emphasis on one or
more of the following attributes:
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Market leadership or a path to
market leadership in the short to medium-term; |
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Established, authentic and
profitable brands; |
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History of organic growth and
attractive margins with opportunities to further enhance revenue
growth and profitability through innovation, marketing investments
(including digital) and productivity improvements; |
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Recession resistant, everyday use
products offering a compelling price/value proposition; |
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Beneficiary of increased
outsourcing of critical, value-added services within the consumer
sector; |
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Extendable platforms via adjacent
category launches and M&A; |
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Omnichannel presence and/or
opportunities; |
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Strong, visionary management teams;
and |
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Orphan segments or brands deemed
non-core or off-strategy by their corporate owners that could
benefit greatly from increased focus and investment. |
The U.S. consumer goods and services sector is a large addressable
market, which at $14.5 trillion in 2019 represented approximately
68% of U.S. GDP and grew at a 4.4% CAGR over the 2016-2019 period.
Within this substantial market, we will focus our efforts on
subcategories where we can enhance value by leveraging our
experience and relationships across the value chain including, but
not limited to, packaged and frozen foods, beverages, beer, wine
and spirits, snacks, household products, pet products, consumer and
marketing services and personal care products, including health and
beauty and over-the-counter products.
Our Management Team has the necessary corporate, financial and
investment experience to successfully pursue acquisitions with a
myriad of transaction structures. We envision a transaction may be
derived from many different business inflection points, which
include, but are not limited to: (i) corporate carve outs; (ii)
privately owned, on-trend, fast-growing businesses and brands
seeking an efficient path to becoming public; (iii) private equity
owned businesses whose growth can be further accelerated; and (iv)
businesses that would similarly benefit from a partnership with our
Management Team. Whether a carve-out or whole company acquisition,
we are proficient in identifying attractive opportunities and
continuously adding value post deal execution.
Our Sponsor is an affiliate of Authentic Equity, LLC (“Authentic
Equity”) a premier New York based consumer focused private equity
investment firm led by David Hooper, our Chairman and CEO, Thomas
Flocco, our President,COO and Director, and Todd Khoury, our CFO
and Director. Authentic Equity is focused on investing in
high-quality North American middle market consumer companies with
quality management teams and attractive strategic, operational and
financial growth opportunities that can benefit from access to
Authentic Equity’s network of operating talent. During their
collective careers, our management team and board have made private
equity investments in, or served in senior executive operating
roles at, more than 20 consumer companies, including in such
companies as Advantage Solutions, A&W Brands Inc., Big Heart
Pet Brands, Birds Eye Foods, Del Monte Foods, Fortune Brands (Beam,
Inc.), Gillette, LoJack Corporation, Ole Smoky Distillery,
Richelieu Foods, The Nielsen Company, Triarc Beverage Group and Utz
Quality Foods. In aggregate, our Management and board have
participated in transactions totaling in excess of $20 billion of
initial enterprise value.
One of Authentic Equity’s Co-Founders, David Hooper, has over
twenty-five years of consumer private equity experience, including
highly successful tenures at Centerview Capital and Vestar Capital
Partners. At both Centerview Capital and Vestar Capital Partners,
Mr. Hooper played a leading role in sourcing, acquiring, building
and exiting high quality, on-trend portfolios of consumer and
consumer services companies, such as: (i) Birds Eye Foods, which
was sold to Pinnacle Foods/Conagra Brands (NYSE: CAG); (ii) The
Nielsen Company, which completed an initial public offering (NYSE:
NLSN); (iii) Richelieu Foods, which was sold to
Freiberger/Sudzucker (ETR: SZU); (iv) Del Monte Foods, which was
sold to Del Monte Pacific Limited; (v) Big Heart Pet Brands, which
was sold to J.M. Smucker (NYSE: SJM); (vi) Ole Smoky Distillery;
and (vii) Advantage Solutions (Nasdaq CM: ADV), which merged with
Conyers Park II Acquisition Corp.
Business Strategy
Leveraging the over 60 years collective expertise of Mr. Hooper,
Mr. Flocco and Mr. Khoury in the consumer products and consumer
products services industries, we intend to target acquisitions in
these sectors where we see a clear path to value creation by
transforming businesses to improve top-line growth, drive
productivity and enhance scale. Our Management Team has extensive
relationships throughout the consumer products value chain and
proven expertise in sourcing, structuring and completing
transactions across multiple consumer categories. Moreover, we
believe ongoing M&A could be a critical component of our
stakeholder value creation framework following consummation of our
initial business combination.
We intend to invest behind key themes and trends that we believe
will continue to affect the rapidly evolving consumer industry, and
to identify opportunities that are capitalizing on the following
dynamics or have the potential to do so:
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Increased importance of authentic,
mission driven brands that stand for something; |
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Growing demand for
multicultural/ethnic offerings; |
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Ongoing channel shift from
store-based retail to Amazon, retailer.com and direct to consumer,
highlighting the importance of true omnichannel exposure; |
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Rapidly shifting demographics with
different needs and aggregate spending power; |
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Rising consumer brand engagement
driving growth in clean label, natural and organic and sustainably
sourced and packaged products; |
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Growing adoption rates and
humanization of companion pets and resulting premiumization across
the pet food and pet products categories; |
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Acceleration of barbell consumption
as premium and value priced offerings grow at the expense of
mid-priced products and services; |
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Ongoing importance of the right
consumer value equation, relationship of price to perceived
value; |
|
● |
Ongoing outsourcing of critical
consumer packaged goods (“CPG”) operations and functions; |
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● |
Productivity as a growth enabler —
reducing indirect costs to reinvest in innovation and marketing to
accelerate growth; |
|
● |
Consumer desire to customize and
communicate through their brand choices, driving rapidly growing
niche pockets within large categories; and |
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Increased importance of clean
environments, inside and outside the home. |
In addition to leveraging our Management Team’s strong, existing
consumer industry relationships, we intend to communicate broadly
our desire to seek a transaction to private equity and venture
capital investors, consumer company founders, investment banks,
accounting firms, industry associations and consulting firms
serving the CPG industry.
Acquisition Strategy
Our business combination targeting will focus on opportunities
where we believe our expertise will enable us to accelerate growth
by expanding distribution and improving velocity, improving margins
by driving productivity and shifting business mix and increasing
cash flow generation by improving working capital and making
disciplined capital investments. With our business strategy as our
guiding principles, we have identified certain criteria and
guidelines that we believe to be important in evaluating
acquisitions. While we will apply these criteria in evaluating the
merits of potential combinations, we may complete our initial
combination with a business that does not meet these criteria and
guidelines.
We are targeting candidates with $500 million to in excess of $1
billion of enterprise value with the majority of their business in
North America, which we believe best utilizes our expertise. Many
of the acquisition candidates will possess one or more of the
following characteristics:
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Market leaders with a strong
competitive moat: Companies with a #1 or #2 market share in
their respective categories, or a path to market share leadership,
and a clear, defensible and difficult to replicate strategic
position; |
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● |
Strong platform for growth:
Companies that possess strong growth potential through compelling
category exposure, greater innovation, improved marketing, brand
extendibility and inorganic growth opportunities through
M&A; |
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● |
Margin improvement
opportunities: Using competitive benchmarking and bottoms-up
cost analysis, we will seek targets where our expertise and that of
our board of directors and advisors can be applied to drive
sustainable gross and operating margin improvements; |
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Strategic and proven management
team: Companies with strong management teams that have proven
industry experience and a track record of delivering strong
top-line growth and margin improvements with agility to adapt to
changing business conditions, both structural and cyclical; |
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Compelling public company
attributes: Companies that will resonate with public market
investors including category and brand tailwinds, latent growth
opportunities and predictable earnings trajectories; and |
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Compelling valuation:
Companies valued at appropriate valuation multiples relative to
public peers with opportunities to expand valuation with
performance above expectations. |
These criteria are not intended to be exhaustive. Any evaluation
relating to the merits of a particular initial business combination
may be based, to the extent relevant, on these general guidelines
as well as other considerations, factors and criteria that our
Sponsor and management team may deem relevant. In the event that we
decide to enter into a business combination with a target business
that does not meet the above criteria and guidelines, we will
disclose that the target business does not meet the above criteria
in our shareholder communications related to our initial business
combination, which would be in the form of proxy solicitation or
tender offer materials, as applicable, that we would file with the
SEC. Although we intend to focus on identifying business
combination candidates in the consumer products, services, retail
and related industries, we will consider a business combination
candidate outside of these industries if we determine that such
candidate offers an attractive opportunity for our company.
Our Management Team
Our leadership team, including our board members, consists of
seasoned investors and operators with deep experience driving
growth by improving brand equity and resonance, optimizing
operations and implementing digital and technology solutions to
accelerate growth and improve productivity. Our team has a long
history of enhancing value by aligning with management partners and
other stakeholders. Collectively, they possess a wide-ranging set
of complementary competencies across the consumer products value
chain with extensive public market experience and financial
acumen.
We believe that our Management Team is well positioned to identify
attractive opportunities while mitigating risk through a methodical
acquisition identification and diligence process, leveraging their
extensive network of relationships across the industry and years of
consumer private equity experience.
Our founders’ objectives are to generate attractive returns by
enhancing value through revenue growth acceleration and improved
operational performance of the acquired company. Further, we
believe our Management Team will make us an attractive partner to
potential target businesses, increasing our probability of
completing a successful business combination and enhancing value
for all stakeholders.
David Hooper, Chairman and Chief Executive Officer
Mr. Hooper serves as our Chief Executive Officer and also chairs
our board of directors. Mr. Hooper co-founded Authentic Equity in
2018. Prior to Authentic Equity, in 2006, he co-founded Centerview
Capital. At Centerview Capital, Mr. Hooper was a Partner, managed
the firm’s consumer fund and co-chaired its investment committee.
He played a leading role in each of Centerview Capital’s consumer
investments since inception, including The Nielsen Company,
Richelieu Foods, Big Heart Pet Brands/Del Monte Foods, Ole Smoky
Distillery and Advantage Solutions.
Prior to Centerview Capital, Mr. Hooper was a Managing Director,
Head of the Consumer Group and Chairman of the U.S. Investment
Committee at Vestar Capital Partners. Prior to joining Vestar in
1994, Mr. Hooper served as a financial consultant to GPA Group plc
and was a member of The Blackstone Group’s Principal Investment
Group and Drexel Burnham Lambert’s M&A department.
Over his career, Mr. Hooper has served as a board member or board
observer of numerous consumer-oriented companies, including
Nielsen, J.M. Smucker, Big Heart Pet Brands, Advantage Solutions,
Birds Eye Foods, Richelieu Foods, Del Monte Foods, Ole Smoky
Distillery and Anvil Knitwear.
Mr. Hooper holds a BSBA from Georgetown University and an MBA from
the Stanford Graduate School of Business. Mr. Hooper serves on the
Board of Advisors for Georgetown University’s McDonough School of
Business.
Thomas Flocco, President, Chief Operating Officer and
Director
Mr. Flocco is an established consumer products operating executive
with a more than 30-year track record of experience in building and
managing businesses and brands, driving operational improvements
and providing strategic leadership.
Mr. Flocco joined Authentic Equity in 2020 as an Operating Partner.
Prior to Authentic Equity, he served as President and Chief
Operating Officer of Utz Quality Foods (NYSE: UTZ), a snack foods
company with approximately $900 million of revenue, from 2017 to
2019, where he was responsible for day-to-day commercial, financial
and operational activity. He previously served as President and
Chief Executive Officer of Beam Inc. (now Beam Suntory) (“Beam”), a
global distilled spirits business with over $2.5 billion of revenue
and 4,000 employees, from 2003 to 2008. At Beam, he held full
general management responsibility for a global spirits business
that includes brands such as Jim Beam, Knob Creek, Maker’s Mark,
Courvoisier, Sauza, Canadian Club, Laphroaig and others. He has
also served as Chairman and CEO of Everglades Boats, where he
currently holds the title of Chairman.
Earlier in his career, Mr. Flocco was a Senior Vice President -
Strategy and M&A for Fortune Brands, Inc. and a Partner at
McKinsey & Company, where he co-led the Consumer and
Supply Chain practices in North America. He began his career in
Sales and then in Brand Management for Procter & Gamble.
Over his career, Mr. Flocco has served on multiple boards of
directors of consumer companies, including BevMo!, and currently
sits on the board of directors of Everglades Boats.
Mr. Flocco holds a BA in Chemistry from Boston University and an
MBA from Harvard Business School.
Todd Khoury, Chief Financial Officer and Director
Mr. Khoury co-founded Authentic Equity in 2018. During his career,
Mr. Khoury was a Managing Director, Head of the Media and
Communications Group and a member of the U.S. Investment Committee
at Vestar Capital Partners from 1993 to 2005. He was also a
Managing Director at BlackRock, Inc. from 2005 to 2007, where he
co-led the firm’s initial effort in private equity. He has also
worked closely with a number of small businesses on strategic and
operational initiatives and started his career at Salomon Brothers
Inc.
Mr. Khoury holds a BA in History from Yale University and an MBA
from Harvard Business School.
Robert Ernst, Independent Director
Mr. Ernst is an experienced deal advisory professional with over 30
years of public accounting experience. He has focused in the area
of mergers and acquisitions, including business and financial due
diligence, synergy analysis, integration planning, market
assessment and transaction structuring. He has advised on buy-side
and sell-side due diligence transactions for numerous financial and
strategic buyers in domestic and international transactions,
ranging in enterprise value from $5 million to in excess of $25
billion.
Mr. Ernst was the Transaction Services Service Line leader for
KPMG’s U.S. Deal Advisory practice for approximately eleven years
before his retirement in September 2020. Prior to joining KPMG, Mr.
Ernst was a Transaction Services Partner focusing on private equity
and consumer markets transactions at Andersen and, prior to that,
at PricewaterhouseCoopers. His industry experience includes
consumer products, manufacturing, retail and distribution,
restaurant and technology.
Mr. Ernst holds a BS in Accounting and Finance from Boston College
and an MBA from Columbia University School of Business.
Tim O’Connor, Independent Director
Mr. O’Connor is a highly experienced consumer products executive
with over 30 years of leadership of food and consumer products
companies, including as Chief Executive Officer and Chief Financial
Officer.
Mr. O’Connor is currently the CEO of Teasdale Foods, Inc., a
producer of branded and private label Latino and Hispanic foods.
Prior to Teasdale, Mr. O’Connor served as the CEO of Richelieu
Foods, Inc. (“Richelieu”), the leading manufacturer of retail
private label frozen and deli pizza in the U.S. and a leading
provider of retail salad dressings and premium sauces, until the
company’s sale to Freiberger/Sudzucker (ETR: SZU) in 2017. As CEO
of Richelieu, Mr. O’Connor delivered highly relevant product
innovation, operational improvements and strategic development that
led to significant growth in market share, revenue, profits and
cash flow. Prior to becoming CEO of Richelieu in 2013, Mr. O’Connor
served as Richelieu’s CFO from 2011 to 2013.
Earlier in his career, Mr. O’Connor served as Executive Vice
President and CFO of LoJack Corporation, a leading manufacturer of
stolen vehicle recovery systems for cars, trucks and SUVs. Mr.
O’Connor also served in senior finance roles for American Tower
Corp. (NYSE: AMT), a leading wireless and broadcast communications
infrastructure company, Procter & Gamble (NYSE: PG), and The
Gillette Company.
Mr. O’Connor holds a BS in Finance and Accounting from Northeastern
University.
Kathleen Griffin Stack, Independent Director
Ms. Stack has over three decades of experience as an investor and
research analyst in the consumer products sector.
Ms. Stack served most recently as Managing Director at J.P Morgan
Asset Management until 2015, where she was responsible for equity
investments within the U.S. consumer products sector across
institutional and retail funds. Her career at J.P Morgan Chase
& Co. spanned 34 years, 32 years of which she was the U.S.
Consumer Products Research Analyst. In addition, she served as
Global Team Leader for consumer products equity investments in the
Global Analyst Portfolio, as Portfolio Manager for the U.S. Analyst
Fund, and as U.S. Equity Research Analyst for the web hosting,
internet infrastructure, regional banking and brokerage
sectors.
Prior to joining Morgan Guaranty Trust Company of New York (the
predecessor to J.P Morgan Chase & Co.), Ms. Stack was an
Associate at Donaldson, Lufkin & Jenrette, Incorporated, and an
Assistant Vice President at Lehman Brothers Kuhn Loeb,
Incorporated. She began her career at Lehman Brothers Incorporated,
where she was the first Research Assistant in the U.S. Equity
Research Department. Ms. Stack was recognized over multiple years
by Institutional Investor Magazine as “Best of the Buy Side”.
Ms. Stack holds an A.B. in Mathematical Economics from Colgate
University and an M.B.A. in Finance from The Wharton School,
University of Pennsylvania.
Michael Weinstein, Independent Director
Mr. Weinstein is a consumer marketing professional with a long and
successful track record focused on the beverage industry.
Mr. Weinstein most recently was Chairman of INOV8 Beverage
Consulting Group and its predecessor, INOV8 Beverages, which he
co-founded in 2004. His career spans nearly 50 years, starting with
positions of increasing responsibility at the Pepsi-Cola Company
and Kenyon & Eckhardt Advertising. Later in his career, he
served as President and COO of A&W Brands Inc., CEO of Triarc
Beverage Group (which included the Snapple, Royal Crown, Mistic and
Stewart’s brands) until its sale to Cadbury Schweppes, and
President of Global Innovation and Business Development at Cadbury
Schweppes.
Mr. Weinstein currently serves as a board member of privately held
King Juice (Calypso Lemonade) and Eska Water. Previously, he served
on the boards of the H. J. Heinz Company, Dr. Pepper Snapple, Bob
Evans Farms, A&W Brands Inc. and Tampico Beverages. Accolades
include Beverage Industry Executive of the Year and induction into
the Beverage World Hall of Fame.
Mr. Weinstein holds a BA from Lafayette College and an MBA from
Harvard Business School.
Initial Business Combination
So long as our securities are then listed on Nasdaq, our initial
business combination must occur with one or more target businesses
that together have an aggregate fair market value of at least 80%
of the net 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 signing a definitive agreement
in connection with our initial business combination. If our board
of directors is not able to independently determine the fair market
value of the target business or businesses, we will obtain an
opinion from an independent investment banking firm or an
independent valuation or appraisal firm with respect to the
satisfaction of such criteria. While we consider it unlikely that
our board will not be able to make an independent determination of
the fair market value of a target business or businesses, it may be
unable to do so if the board is less familiar or experienced with
the target company’s business, there is a significant amount of
uncertainty as to the value of the company’s assets or prospects,
including if such company is at an early stage of development,
operations or growth, or if the anticipated transaction involves a
complex financial analysis or other specialized skills and the
board determines that outside expertise would be helpful or
necessary in conducting such analysis. Since any opinion, if
obtained, would merely state that the fair market value of the
target business meets the 80% of net assets threshold, unless such
opinion includes material information regarding the valuation of a
target business or the consideration to be provided, it is not
anticipated that copies of such opinion would be distributed to our
shareholders. However, if required under applicable law, any proxy
statement that we deliver to shareholders and file with the SEC in
connection with a proposed transaction will include such
opinion.
We anticipate structuring our initial business combination so that
the post-business combination 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. We may,
however, structure our initial business combination such that the
post-business combination 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-business combination company owns or
acquires 50% or more of the outstanding voting securities of the
target or otherwise acquires a controlling interest in the target
sufficient for it not to be required to register as an investment
company under the Investment Company Act of 1940, as amended (the
“Investment Company Act”). Even if the post-business combination
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-business
combination company, depending on valuations ascribed to the target
and us in the business combination. For example, we could pursue a
transaction in which we issue a substantial number of new shares in
exchange for all of the outstanding capital stock of a target. In
this case, we would acquire a 100% controlling interest in the
target. However, as a result of the issuance of a substantial
number of new shares, our shareholders immediately prior to our
initial business combination could own less than a majority of our
outstanding shares subsequent to our initial business combination.
If less than 100% of the equity interests or assets of a target
business or businesses are owned or acquired by the post-business
combination company, the portion of such business or businesses
that is owned or acquired is what will be valued for purposes of
the 80% of net assets test. If the business combination involves
more than one target business, the 80% of net assets test will be
based on the aggregate value of all of the target businesses. In
addition, we have agreed not to enter into a definitive agreement
regarding an initial business combination without the prior consent
of our Sponsor. If our securities are not then listed on Nasdaq for
whatever reason, we would no longer be required to meet the
foregoing 80% of net asset test.
To the extent we effect our initial business combination with a
company or business that may be financially unstable or in its
early stages of development or growth, we may be affected by
numerous risks inherent in such company or business. Although our
Management will endeavor to evaluate the risks inherent in a
particular target business, we cannot assure you that we will
properly ascertain or assess all significant risk factors.
The time required to select and evaluate a target business and to
structure and complete our initial business combination, and the
costs associated with this process, are not currently ascertainable
with any degree of certainty. Any costs incurred with respect to
the identification and evaluation of a prospective target business
with which our initial business combination is not ultimately
completed will result in our incurring losses and will reduce the
funds we can use to complete another business combination.
Our Forward Purchase Agreement
We believe our ability to complete our initial business combination
will be enhanced by the additional capital made available to us
pursuant to the Forward Purchase Agreement. Under the Forward
Purchase Agreement, in exchange for $824,500 paid to us, GEPT has
the right, in its discretion, to purchase a number of units
designated by the Company, up to the lesser of (i) $50,000,000 of
units and (ii) a number of units equal to 19.99% of the pro forma
equity outstanding at the time of the closing of our initial
business combination, including but not limited to, any Ordinary
Shares issued in connection with our initial public offering, the
Forward Purchase Agreement or any private placement or other
offering or to any seller in the initial business combination, with
each unit consisting of one Class A ordinary share and 0.425 of one
warrant to purchase one Class A ordinary share at $11.50 per share,
subject to adjustment, for a purchase price of $10.00 per unit, in
a private placement to occur concurrently with the closing of our
initial business combination, and the right to acquire a specified
number of Class B ordinary shares and Private Placement Warrants as
described below.
If GEPT purchases the maximum number of forward purchase units
available to it under the Forward Purchase Agreement, we will issue
to GEPT, at the closing of our initial business combination and
prior to the conversion of the Class B ordinary shares into Class A
ordinary shares in accordance with the terms thereof (the “GEPT
Issuance”):
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● |
a number of Class B ordinary shares
(the “GEPT Class B ordinary shares”) that is equal to 12.5% of the
aggregate number of Class B ordinary shares outstanding at the time
of our initial business combination prior to the conversion of such
Class B ordinary shares into Class A ordinary shares pursuant to
the terms thereof and after giving effect to the issuance of the
GEPT Class B ordinary shares and any other Class B ordinary shares
as a result of anti-dilution rights or other adjustments and the
number of Class B ordinary shares transferred, assigned, sold or
forfeited in connection with our initial business combination but
excluding 115,000 Class B ordinary shares from such calculation
(the “Post-Business Combination Class B ordinary shares”)
(provided, however, that if the Founder Shares are converted into
Class A ordinary shares prior to the date of our initial business
combination, GEPT will receive a number of Class A ordinary shares
equal to the number of Class A ordinary shares that it would have
been entitled to pursuant to the GEPT Issuance); and |
|
● |
a number of Private Placement
Warrants equal to 12.5% of the aggregate number of Private
Placement Warrants outstanding at the time of our initial business
combination prior to the conversion of such Class B ordinary shares
into Class A ordinary shares pursuant to the terms thereof and
after giving effect to any Private Placement Warrants transferred,
assigned, sold or forfeited in connection with our initial business
combination (the “Post-Business Combination Private Placement
Warrants”). |
Additionally, if GEPT purchases the maximum number of forward
purchase units available to it under the Forward Purchase
Agreement, in order to help facilitate a business combination, our
Sponsor has agreed to forfeit to us for no consideration a number
of Class B ordinary shares and Private Placement Warrants (the
“Sponsor Forfeiture”) such that after the Sponsor Forfeiture and
the GEPT Issuance, our Sponsor will own (i) a number of Class B
ordinary shares equal to 87.5% of the number of Post-Business
Combination Class B ordinary shares plus 15,000 Class B ordinary
shares, and (ii) a number of Private Placement Warrants equal to
87.5% of the number of Post-Business Combination Private Placement
Warrants.
We will determine the number of forward purchase units to be sold
under the Forward Purchase Agreement and GEPT’s obligation to
purchase such units will be subject to the satisfaction of certain
conditions, including, among others, the delivery by GEPT of a
notice to us that it will purchase the Forward Purchase Securities
in whole or in part. The rights of GEPT under the Forward Purchase
Agreement do not depend on whether any Class A ordinary shares are
redeemed by our Public Shareholders. If GEPT does not purchase the
maximum number of forward purchase units available to it under the
Forward Purchase Agreement, GEPT will not be entitled to receive
any of the Founder Shares or Private Placement Warrants described
above, and we will be entitled to retain the $824,500 paid to us by
GEPT.
The terms of the Forward Purchase Shares and Forward Purchase
Warrants, respectively, will generally be identical to the terms of
the Class A ordinary shares and the redeemable warrants included in
the units issued in our initial public offering, except that the
Forward Purchase Shares will not be entitled to redemption rights
or to vote on our initial business combination, and the Forward
Purchase Securities will have certain registration rights, as
described in the final prospectus relating to our initial public
offering. In the event that GEPT purchases less than 5,000,000
units pursuant to the Forward Purchase Agreement, our Sponsor will
forfeit to us, for no consideration, up to 1,250,000 Class B
ordinary shares depending on the number of units purchased.
Other Considerations
We are not prohibited from pursuing an initial business combination
with a company that is affiliated with our Sponsor, officers or
directors. In the event we seek to complete our initial business
combination with a company that is affiliated with our Sponsor or
any of our officers or directors, we, or a committee of independent
directors, will obtain an opinion from an independent investment
banking firm or another independent entity that commonly renders
valuation opinions 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.
In addition, certain of our officers and directors presently have,
and any of them in the future may have additional, fiduciary and
contractual duties to other entities. As a result, if any of our
officers or directors becomes aware of a business combination
opportunity which is suitable for an entity to which he or she has
then-current fiduciary or contractual obligations, then, he or she
may be required to honor such fiduciary or contractual obligations
to present such business combination opportunity to such entity,
before we can pursue such opportunity. If these other entities
decide to pursue any such opportunity, we may be precluded from
pursuing the same. However, we do not expect these duties to
materially affect our ability to complete our initial business
combination. To address the matters set out above our Amended and
Restated Memorandum and Articles of Association provide that, to
the maximum extent permitted by law, we renounce any interest or
expectancy in, or in being offered an opportunity to participate in
any business combination opportunity which may be a corporate
opportunity for both us and our Sponsor and another entity,
including any entities managed by our Sponsor or its affiliates and
any companies in which our Sponsor or such entities have invested
about which any of our officers or directors acquires knowledge and
we will waive any claim or cause of action we may have in respect
thereof. In addition, our Amended and Restated Memorandum and
Articles of Association contain provisions to exculpate and
indemnify, to the maximum extent permitted by law, such persons in
respect of any liability, obligation or duty to the company that
may arise as a consequence of such persons becoming aware of any
business opportunity or failing to present such business
opportunity.
Our Sponsor, officers and directors may Sponsor, form or
participate in other blank check companies similar to ours during
the period in which we are seeking an initial business combination.
Any such companies may present additional conflicts of interest in
pursuing an acquisition target, particularly in the event there is
overlap among investment mandates. However, we do not currently
expect that any such other blank check company would materially
affect our ability to complete our initial business combination. In
addition, our Sponsor, officers and directors are not required to
commit any specified amount of time to our affairs, and,
accordingly, will have conflicts of interest in allocating
management time among various business activities, including
identifying potential business combinations and monitoring the
related due diligence.
Status as a Public Company
We believe our structure will make us an attractive business
combination partner to target businesses. As an existing public
company, we offer a target business an alternative to the
traditional initial public offering through a merger or other
business combination with us. In a business combination transaction
with us, the owners of the target business may, for example,
exchange their shares of stock in the target business for our Class
A ordinary shares (or shares of a new holding company) or for a
combination of our Class A ordinary shares and cash, allowing us to
tailor the consideration to the specific needs of the sellers. We
believe target businesses will find this method a more expeditious
and cost effective method to becoming a public company than the
typical initial public offering. The typical initial public
offering process takes a significantly longer period of time than
the typical business combination transaction process, and there are
significant expenses in the initial public offering process,
including underwriting discounts and commissions, that may not be
present to the same extent in connection with a business
combination with us.
Furthermore, once a proposed business combination is completed, the
target business will have effectively become public, whereas an
initial public offering is always subject to the underwriters’
ability to complete the offering, as well as general market
conditions, which could delay or prevent the offering from
occurring or have negative valuation consequences. Once public, we
believe the target business would then have greater access to
capital, an additional means of providing management incentives
consistent with shareholders’ interests and the ability to use its
shares as currency for acquisitions. Being a public company can
offer further benefits by augmenting a company’s profile among
potential new customers and vendors and aid in attracting talented
employees.
While we believe that our structure and our Management Team’s
backgrounds will make us an attractive business partner, some
potential target businesses may view our status as a blank check
company, such as our lack of an operating history and our ability
to seek shareholder approval of any proposed initial business
combination, negatively.
We are an “emerging growth company,” as defined in Section 2(a) of
the Securities Act, as modified by the JOBS Act. As such, we are
eligible to take advantage of certain exemptions from various
reporting requirements that are applicable to other public
companies that are not “emerging growth companies” including, but
not limited to, not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements, and exemptions from the
requirements of holding a non-binding advisory vote on executive
compensation and 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 million as of the prior June
30th, and (2) the date on which we have issued more than
$1.0 billion in non-convertible debt during the prior three-year
period.
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 million
as of the prior June 30, or (2) our annual revenues exceeded $100
million during such completed fiscal year and the market value of
our Ordinary Shares held by non-affiliates exceeds $700 million as
of the prior June 30.
Financial Position
With funds available for a business combination initially in the
amount of approximately $221.9 million (such amount representing
the amount of proceeds held in the trust account less approximately
$8.1 million 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.
Effecting Our Initial Business Combination
General
We are not presently engaged in, and we will not engage in, any
operations for an indefinite period of time following our initial
public offering. We intend to effectuate our initial business
combination using cash from the proceeds of our initial public
offering and the private placement of the Private Placement
Warrants, the proceeds of the sale of our shares in connection with
our initial business combination (pursuant to any forward purchase
agreement or other forward purchase agreements or backstop
agreements we may enter into following the consummation of our
initial public offering or otherwise), shares issued to the owners
of the target, debt issued to bank or other lenders or the owners
of the target, or a combination of the foregoing or other sources.
We may seek to complete our initial business combination with a
company or business that may be financially unstable or in its
early stages of development or growth, which would subject us to
the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or
debt, or not all of the funds released from the trust account are
used for payment of the consideration in connection with our
initial business combination or used for redemptions of our Class A
ordinary shares, we may apply the balance of the cash released to
us from the trust account for general corporate purposes, including
for maintenance or expansion of operations of the post-business
combination company, the payment of principal or interest due on
indebtedness incurred in completing our initial business
combination, to fund the purchase of other companies or for working
capital.
We have not selected any business combination target. Although our
Management will assess the risks inherent in a particular target
business with which we may combine, we cannot assure you that this
assessment will result in our identifying all risks that a target
business may encounter. Furthermore, some of those risks may be
outside of our control, meaning that we can do nothing to control
or reduce the chances that those risks will adversely affect a
target business.
We may need to obtain additional financing to complete our initial
business combination, either because the transaction requires more
cash than is available from the proceeds held in our trust account,
or because we become obligated to redeem a significant number of
our Public Shares upon completion of the business combination, in
which case we may issue additional securities or incur debt in
connection with such business combination. There are no
prohibitions on our ability to issue securities or incur debt in
connection with our initial business combination. We are not
currently a party to any arrangement or understanding with any
third party with respect to raising any additional funds through
the sale of securities, the incurrence of debt or otherwise.
Sources of Target Businesses
We anticipate that target business candidates will continue to be
brought to our attention from various unaffiliated sources,
including investment market participants, private equity groups,
investment banking firms, consultants, accounting firms and large
business enterprises. 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 some 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 that
they become aware of through their business contacts as a result of
formal or informal inquiries or discussions they may have, as well
as attending trade shows or conventions. In addition, we expect to
receive a number of proprietary deal flow opportunities that would
not otherwise necessarily be available to us as a result of the
business relationships of our officers and directors. While we do
not presently anticipate engaging the services of professional
firms or other individuals that specialize in business acquisitions
on any formal basis, we may engage these firms or other individuals
in the future, in which event we may pay a finder’s fee, consulting
fee or other compensation to be determined in an arm’s length
negotiation based on the terms of the transaction. We will engage a
finder only to the extent our Management determines that the use of
a finder may bring opportunities to us that may not otherwise be
available to us or if finders approach us on an unsolicited basis
with a potential transaction that our Management determines is in
our best interest to pursue. Payment of finder’s fees is
customarily tied to completion of a transaction, in which case any
such fee will be paid out of the funds held in the trust account.
In no event, however, will our Sponsor or any of our existing
officers or directors, or their respective affiliates be paid by us
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 (regardless of the type of
transaction that it is). We have agreed to pay an affiliate of our
Sponsor a total of $10,000 per month for office space, secretarial
and administrative support and to reimburse our Sponsor for any
out-of-pocket expenses related to identifying, investigating and
completing an initial business combination. Some of our officers
and directors may enter into employment or consulting agreements
with the post-business combination company following our initial
business combination. The presence or absence of any such fees or
arrangements will not be used as a criterion in our selection
process of an acquisition candidate.
We are not prohibited from pursuing an initial business combination
with a company that is affiliated with our Sponsor, officers or
directors. In the event we seek to complete our initial business
combination with a company that is affiliated with our Sponsor or
any of our officers or directors, we, or a committee of independent
directors, will obtain an opinion from an independent investment
banking firm or another independent entity that commonly renders
valuation opinions 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.
Each of our officers and directors presently has, and any of them
in the future may have, additional, fiduciary or contractual
obligations to other entities, including entities that are
affiliates of our Sponsor, pursuant to which such officer or
director is or will be required to present a business combination
opportunity to such entity. Accordingly, if any of our officers or
directors becomes aware of a business combination opportunity which
is suitable for an entity to which he or she has then-current
fiduciary or contractual obligations, he or she may be required to
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. See “Management —
Conflicts of Interest.”
Evaluation of a Target Business and Structuring of Our Initial
Business Combination
In evaluating a prospective target business, we expect to conduct
an extensive due diligence review which may encompass, as
applicable and among other things, meetings with incumbent
management and employees, document reviews, interviews of customers
and suppliers, inspection of facilities and a review of financial
and other information about the target and its industry. We will
also utilize our Management Team’s operational and capital planning
experience. If we determine to move forward with a particular
target, we will proceed to structure and negotiate the terms of the
business combination transaction.
The time required to select and evaluate a target business and to
structure and complete our initial business combination, and the
costs associated with this process, are not currently ascertainable
with any degree of certainty. Any costs incurred with respect to
the identification and evaluation of, and negotiation with, a
prospective target business with which our initial business
combination is not ultimately completed will result in our
incurring losses and will reduce the funds we can use to complete
another business combination. The company will not pay any
consulting fees to members of our Management Team, or 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
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. |
Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a
prospective target business when evaluating the desirability of
effecting our initial business combination with that business, our
assessment of the target business’s management may not prove to be
correct. In addition, the future management may not have the
necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of members of our Management
Team, if any, in the target business cannot presently be stated
with any certainty. The determination as to whether any of the
members of our Management Team will remain with the combined
company will be made at the time of our initial business
combination. While it is possible that one or more of our directors
will remain associated in some capacity with us following our
initial business combination, it is unlikely that any of them will
devote their full efforts to our affairs subsequent to our initial
business combination. Moreover, we cannot assure you that members
of our Management Team will have significant experience or
knowledge relating to the operations of the particular target
business.
We cannot assure you that any of our key personnel will remain in
senior management or advisory positions with the combined company.
The determination as to whether any of our key personnel will
remain with the combined company will be made at the time of our
initial business combination.
Following a business combination, we may seek to recruit additional
managers to supplement the incumbent management of the target
business. We cannot assure you that we will have the ability to
recruit additional managers, or that additional managers will have
the requisite skills, knowledge or experience necessary to enhance
the incumbent management.
Shareholders May Not Have the Ability to Approve Our Initial
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 listing rules of Nasdaq, shareholder approval would
typically be required for our initial business combination if, for
example:
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We issue Ordinary Shares that will
be equal to or in excess of 20% of the number of our Ordinary
Shares then-outstanding (other than in a public offering); |
|
● |
Any of our directors, officers or
shareholders has a certain ownership 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 issued and outstanding Ordinary
Shares or voting power of a specified percentage; or |
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● |
The issuance or potential issuance
of Ordinary Shares will result in our undergoing a change of
control. |
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 law will be made by us,
solely in our discretion, and will be based on business and
reasons, which include a variety of factors, including, but not
limited to:
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the timing of the transaction,
including in the event we determine 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; |
|
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the expected cost of holding a
shareholder vote; |
|
● |
the risk that the shareholders
would fail to approve the proposed business combination; |
|
● |
other time and budget constraints
of the company; and |
|
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additional legal complexities of a
proposed business combination that would be time-consuming and
burdensome to present to shareholders. |
Permitted Purchases of Our Securities
If we seek shareholder approval of our initial business combination
and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our
Sponsor, directors, executive officers, advisors or their
affiliates may purchase Public Shares or warrants in privately
negotiated transactions or in the open market either prior to or
following the completion of our initial business combination.
Additionally, at any time at or prior to our initial business
combination, subject to applicable securities laws (including with
respect to material nonpublic information), our Sponsor, directors,
executive officers, advisors or their affiliates may enter into
transactions with investors and others to provide them with
incentives to acquire Public Shares, vote their Public Shares in
favor of our initial business combination or not redeem their
Public Shares. 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 Public Shares
or warrants in such transactions. If they engage in such
transactions, they will be restricted from making any such
purchases when they are in possession of any material non-public
information not disclosed to the seller or if such purchases are
prohibited by Regulation M under the Exchange Act.
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 or submitted a proxy to vote
against our initial business combination, such selling shareholders
would be required to revoke their prior elections to redeem their
shares and any proxy to vote against our initial business
combination. 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 be
required to comply with such rules.
The purpose of any such transaction could be to (i) vote in favor
of the business combination and thereby increase the likelihood of
obtaining shareholder approval of the business combination, (ii)
reduce the number of public warrants outstanding or vote such
warrants on any matters submitted to the warrant holders for
approval in connection with our initial business combination or
(iii) 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. 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 anticipate
that they may identify the shareholders with whom our Sponsor,
officers, directors or their affiliates may pursue privately
negotiated transactions 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 tender offer or proxy materials in connection with our
initial business combination. To the extent that our Sponsor,
officers, directors, advisors or their affiliates enter into a
private transaction, they would identify and contact only potential
selling or redeeming 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 shareholder meeting related to our
initial business combination. Our Sponsor, executive officers,
directors, advisors or their affiliates will select which
shareholders to purchase shares from based on the negotiated price
and number of shares and any other factors that they may deem
relevant, and will be restricted from purchasing shares if such
purchases do not comply with Regulation M under the Exchange Act
and the other federal securities laws.
Our Sponsor, officers, directors and/or their affiliates will be
restricted from making purchases of shares if the purchases would
violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. We
expect any such purchases would be reported by such person 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 income taxes, if any,
divided by the number of then-outstanding Public Shares, subject to
the limitations described herein. The amount in the trust account
is initially anticipated to be $10.00 per Public Share. The
per-share amount we will distribute to investors who properly
redeem their shares will not be reduced by the deferred
underwriting commissions we will pay to the underwriters. The
redemption rights will include the requirement that a beneficial
holder must identify itself in order to validly redeem its shares.
There will be no redemption rights upon the completion of our
initial business combination with respect to our warrants. Further,
we will not proceed with redeeming our Public Shares, even if a
Public Shareholder has properly elected to redeem its shares, if a
business combination does not close. Our Sponsor and each member of
our Management Team have entered into an agreement with us,
pursuant to which they have agreed to waive their redemption rights
with respect to any Founder Shares and Public Shares held by them
in connection with (i) the completion of our initial business
combination and (ii) a shareholder vote to approve an amendment to
our Amended and Restated Memorandum and Articles of Association (A)
that would modify the substance or timing of our obligation to
provide holders of our Class A ordinary shares the right to have
their shares redeemed in connection with our initial business
combination or to redeem 100% of our Public Shares if we do not
complete our initial business combination within 24 months from the
closing of our initial public offering or (B) with respect to any
other provision relating to the rights of holders of our Class A
ordinary shares.
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 (so that we do not then become subject to the SEC’s
“penny stock” rules). However, the proposed business combination
may require: (i) cash consideration to be paid to the target or its
owners, (ii) cash to be transferred to the target for working
capital or other general corporate purposes or (iii) the retention
of cash to satisfy other conditions in accordance with the terms of
the proposed business combination. In the event the aggregate cash
consideration we would be required to pay for all Class A ordinary
shares that are validly submitted for redemption plus any amount
required to satisfy cash conditions pursuant to the terms of the
proposed business combination exceed the aggregate amount of cash
available to us, we will not complete the business combination or
redeem any shares, and all Class A ordinary shares submitted for
redemption will be returned to the holders thereof.
Manner of Conducting Redemptions
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 either (i) in
connection with a shareholder meeting called to approve the
business combination or (ii) 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 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 typically require shareholder approval. We
currently intend to conduct redemptions in connection with a
shareholder vote unless shareholder approval is not required by
applicable law or stock exchange listing requirement or we choose
to conduct redemptions pursuant to the tender offer rules of the
SEC for business or other reasons. So long as we obtain and
maintain a listing for our securities on Nasdaq, we will be
required to comply with the rules of Nasdaq.
If we held a shareholder vote to approve our initial business
combination, 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. |
In the event that we seek shareholder approval of our 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.
If we seek shareholder approval, we will complete our initial
business combination only if a majority of the Ordinary Shares,
represented in person or by proxy and entitled to vote thereon,
voted at a shareholder meeting are voted in favor of the business
combination. In such case, our Sponsor and each member of our
Management Team have agreed to vote their Founder Shares and Public
Shares in favor of our initial business combination. As a result,
in addition to our initial purchaser’s Founder Shares, we would
need 8,000,001, or 34.8% (assuming all issued and outstanding
shares are voted), of the 23,000,000 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. Each Public Shareholder may elect to redeem their Public
Shares irrespective of whether they vote for or against the
proposed transaction or vote at all. In addition, our Sponsor and
each member of our Management Team have entered into an agreement
with us, pursuant to which they have agreed to waive their
redemption rights with respect to any Founder Shares and Public
Shares held by them in connection with (i) the completion of a
business combination and (ii) a shareholder vote to approve an
amendment to our Amended and Restated Memorandum and Articles of
Association (A) that would modify the substance or timing of our
obligation to provide holders of our Class A ordinary shares the
right to have their shares redeemed in connection with our initial
business combination or to redeem 100% of our Public Shares if we
do not complete our initial business combination within 24 months
from the closing of our initial public offering or (B) with respect
to any other provision relating to the rights of holders of our
Class A ordinary shares.
If we conduct redemptions pursuant to the tender offer rules of the
SEC, we will, pursuant to our Amended and Restated Memorandum and
Articles of Association:
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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. |
Upon the public announcement of our initial business combination,
if we elect to conduct redemptions pursuant to the tender offer
rules, we and our Sponsor will terminate any plan established in
accordance with Rule 10b5-1 to purchase Class A ordinary shares in
the open market, in order to comply with Rule 14e-5 under the
Exchange Act.
In the event we conduct redemptions pursuant to the tender offer
rules, our offer to redeem will remain open for at least 20
business days, in accordance with Rule 14e-1(a) under the Exchange
Act, and we will not be permitted to complete our initial business
combination until the expiration of the tender offer period. In
addition, the tender offer will be conditioned on Public
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 such initial business combination.
Limitation on Redemption upon Completion of Our Initial Business
Combination If We Seek Shareholder Approval
If we seek shareholder approval of our initial business combination
and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our
Amended and Restated Memorandum and Articles of Association will
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 redeeming its shares
with respect to more than an aggregate of 15% of the shares sold in
our initial public offering, which we refer to as “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 without our prior
consent, 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.
Tendering Share Certificates in Connection with a Tender Offer or
Redemption Rights
Public Shareholders seeking to exercise their redemption rights,
whether they are record holders or hold their shares in “street
name,” will be required to either tender their certificates (if
any) to our transfer agent prior to the date set forth in the proxy
solicitation or tender offer materials, as applicable, mailed to
such holders, or to deliver their shares to the transfer agent
electronically using The Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System, at the holder’s option,
in each case up to two business days prior to the initially
scheduled vote to approve the business combination. The proxy
solicitation or tender offer materials, as applicable, that we will
furnish to holders of our Public Shares in connection with our
initial business combination will indicate the applicable delivery
requirements, which will include the requirement that a beneficial
holder must identify itself in order to validly redeem its shares.
Accordingly, a Public Shareholder would have from the time we send
out our tender offer materials until the close of the tender offer
period, or up to two business days prior to the initially scheduled
vote on the proposal to approve the business combination if we
distribute proxy materials, as applicable, to tender its shares if
it wishes to seek to exercise its redemption rights. Given the
relatively short period in which to exercise redemption rights, it
is advisable for shareholders to use electronic delivery of their
Public Shares.
There is a nominal cost associated with the above-referenced
tendering process and the act of certificating the shares or
delivering them through the DWAC System. The transfer agent will
typically charge the tendering broker a fee of approximately $80.00
and it would be up to the broker whether or not to pass this cost
on to the redeeming holder. However, this fee would be incurred
regardless of whether or not we require holders seeking to exercise
redemption rights to tender their shares. The need to deliver
shares is a requirement of exercising redemption rights regardless
of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures used by many blank
check companies. In order to perfect redemption rights in
connection with their business combinations, many blank check
companies would distribute proxy materials for the shareholders’
vote on an initial business combination, and a holder could simply
vote against a proposed business combination and check a box on the
proxy card indicating such holder was seeking to exercise his or
her redemption rights. After the business combination was approved,
the company would contact such shareholder to arrange for him or
her to deliver his or her certificate to verify ownership. As a
result, the shareholder then had an “option window” after the
completion of the business combination during which he or she could
monitor the price of the company’s shares in the market. If the
price rose above the redemption price, he or she could sell his or
her shares in the open market before actually delivering his or her
shares to the company for cancellation. As a result, the redemption
rights, to which shareholders were aware they needed to commit
before the shareholder meeting, would become “option” rights
surviving past the completion of the business combination until the
redeeming holder delivered its certificate. The requirement for
physical or electronic delivery prior to the meeting ensures that a
redeeming shareholder’s election to redeem is irrevocable once the
business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at
any time up to two business days prior to the initially scheduled
vote on the proposal to approve the business combination, unless
otherwise agreed to by us. Furthermore, if a holder of a public
share delivered its certificate in connection with an election of
redemption rights and subsequently decides prior to the applicable
date not to elect to exercise such rights, such holder may simply
request that the transfer agent return the certificate (physically
or electronically). It is anticipated that the funds to be
distributed to holders of our Public Shares electing to redeem
their shares will be distributed promptly after the completion of
our initial business combination.
If our initial business combination is not approved or completed
for any reason, then our Public 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 our initial proposed business combination is not completed, we
may continue to try to complete a business combination with a
different target until 24 months from the closing of our initial
public offering.
Redemption of Public Shares and Liquidation If No Initial Business
Combination
Our Amended and Restated Memorandum and Articles of Association
provide that we will have only 24 months from the closing of our
initial public offering to consummate an initial business
combination. If we have not consummated an initial business
combination within 24 months from the closing of our initial public
offering, we will: (i) cease all operations except for the purpose
of winding up; (ii) as promptly as reasonably possible but not more
than ten business days thereafter, redeem the Public Shares, at a
per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account, including interest earned on
the funds held in the trust account and not previously released to
us to pay our income taxes, if any (less up to $100,000 of interest
to pay dissolution expenses) divided by the number of the
then-outstanding Public Shares, which redemption will completely
extinguish Public Shareholders’ rights as shareholders (including
the right to receive further liquidation distributions, if any);
and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of 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 the requirements
of other applicable law. There will be no redemption rights or
liquidating distributions with respect to our warrants, which will
expire worthless if we fail to consummate an initial business
combination within 24 months from the closing of our initial public
offering. Our Amended and Restated Memorandum and Articles of
Association will provide that, if a resolution of the company’s
shareholders is passed pursuant to the Companies Law of the Cayman
Islands to commence the voluntary liquidation of the company, we
will follow the foregoing procedures with respect to the
liquidation of the trust account as promptly as reasonably possible
but not more than ten business days thereafter, subject to
applicable Cayman Islands law.
Our Sponsor and each member of our Management Team have entered
into an agreement with us, pursuant to which they have agreed to
waive their rights to liquidating distributions from the trust
account with respect to any Founder Shares they hold if we fail to
consummate an initial business combination within 24 months from
the closing of our initial public offering (although they will be
entitled to liquidating distributions from the trust account with
respect to any Public Shares they hold if we fail to complete our
initial business combination within the prescribed time frame).
Our Sponsor, executive 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) that would modify the substance or timing of our
obligation to provide holders of our Class A ordinary shares the
right to have their shares redeemed in connection with our initial
business combination or to redeem 100% of our Public Shares if we
do not complete our initial business combination within 24 months
from the closing of our initial public offering or (B) with respect
to any other provision relating to the rights of holders of our
Class A ordinary shares, in each case, 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 income taxes,
if any, divided by the number of the then-outstanding Public
Shares. However, we may not redeem our Public Shares in an amount
that would cause our net tangible assets to be less than $5,000,001
(so that we do not then become subject to the SEC’s “penny stock”
rules). If this optional redemption right is exercised with respect
to an excessive number of Public Shares such that we cannot satisfy
the net tangible asset requirement, we would not proceed with the
amendment or the related redemption of our Public Shares at such
time. This redemption right shall apply in the event of the
approval of any such amendment, whether proposed by our Sponsor,
any executive officer or director, or any other person.
We expect that all costs and expenses associated with implementing
our plan of dissolution, as well as payments to any creditors, will
be funded from amounts remaining out of the $1,000,000 held outside
the trust account plus up to $100,000 of funds from the trust
account available to us to pay dissolution expenses, although we
cannot assure you that there will be sufficient funds for such
purpose.
If we were to expend all of the net proceeds of 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 $10.00. The proceeds deposited in the trust
account could, however, become subject to the claims of our
creditors which would have higher priority than the claims of our
Public Shareholders. We cannot assure you that the actual per-share
redemption amount received by shareholders will not be less than
$10.00. While we intend to pay such amounts, if any, we cannot
assure you that we will have funds sufficient to pay or provide for
all creditors’ claims.
Although we will seek to have all vendors, service providers (other
than our independent registered public accounting firm),
prospective target businesses and other entities with which we do
business execute agreements with us waiving any right, title,
interest or claim of any kind in or to any monies held in the trust
account for the benefit of our Public 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 perform an analysis of the alternatives available
to it and will only enter into an agreement with a third-party that
has not executed a waiver if management believes that such
third-party’s engagement would be significantly more beneficial to
us than any alternative. Examples of possible instances where we
may engage a third-party that refuses to execute a waiver include
the engagement of a third-party consultant whose particular
expertise or skills are believed by management to be significantly
superior to those of other consultants that would agree to execute
a waiver or in cases where management is unable to find a service
provider willing to execute a waiver. Jefferies LLC and BMO Capital
Markets Corp. will not execute an agreement with us waiving such
claims to the monies held in the trust account. In addition, there
is no guarantee that such entities will agree to waive any claims
they may have in the future as a result of, or arising out of, any
negotiations, contracts or agreements with us and will not seek
recourse against the trust account for any reason. In order to
protect the amounts held in the trust account, our Sponsor has
agreed that it will be liable to us if and to the extent any claims
by a third-party for services rendered or products sold to us
(other than our independent registered public accounting firm), or
a prospective target business with which we have discussed entering
into a transaction agreement, reduce the amounts in the trust
account to below the lesser of (i) $10.00 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
$10.00 per Public Share due to reductions in the value of the trust
assets, in each case net of the interest that may be withdrawn to
pay our tax obligations, provided that such liability will
not apply to any claims by a third-party or prospective target
business that executed a waiver of any and all rights to seek
access to the trust account nor will it apply to any claims under
our indemnity of the underwriters of our initial public offering
against certain liabilities, including liabilities under the
Securities Act. In the event that an executed waiver is deemed to
be unenforceable against a third-party, our Sponsor will not be
responsible to the extent of any liability for such third-party
claims. However, we have not asked our Sponsor to reserve for such
indemnification obligations, nor have we independently verified
whether our Sponsor has sufficient funds to satisfy 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. 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) $10.00 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 $10.00 per Public
Share due to reductions in the value of the trust assets, in each
case net of the amount of interest which may be withdrawn to pay
our income tax obligations, and our Sponsor asserts that it is
unable to satisfy its indemnification obligations or that it has no
indemnification obligations related to a particular claim, our
independent directors would determine whether to take legal action
against our Sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take
legal action on our behalf against our Sponsor to enforce its
indemnification obligations to us, it is possible that our
independent directors in exercising their business judgment may
choose not to do so in any particular instance. Accordingly, we
cannot assure you that due to claims of creditors the actual value
of the per-share redemption price will not be less than $10.00 per
Public Share.
We will seek to reduce the possibility that our Sponsor will have
to indemnify the trust account due to claims of creditors by
endeavoring to have all vendors, service providers (other than our
independent registered public accounting firm), prospective target
businesses or other entities with which we do business execute
agreements with us waiving any right, title, interest or claim of
any kind in or to monies held in the trust account. Our Sponsor
will also not be liable as to any claims under our indemnity of the
underwriters of our initial public offering against certain
liabilities, including liabilities under the Securities Act. We
will have access to up to $1,000,000 following our initial public
offering and the sale of the Private Placement Warrants with which
to pay any such potential claims (including costs and expenses
incurred in connection with our liquidation, currently estimated to
be no more than approximately $100,000). In the event that we
liquidate and it is subsequently determined that the reserve for
claims and liabilities is insufficient, shareholders who received
funds from our trust account could be liable for claims made by
creditors, however such liability will not be greater than the
amount of funds from our trust account received by any such
shareholder. 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
petition or an involuntary bankruptcy petition is filed against us
that is not dismissed, the proceeds held in the trust account could
be subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and subject to the claims of third parties with
priority over the claims of our shareholders. To the extent any
bankruptcy claims deplete the trust account, we cannot assure you
we will be able to return $10.00 per Public Share to our Public
Shareholders. Additionally, if we file a bankruptcy petition or an
involuntary bankruptcy 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 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 will be entitled to receive funds from the
trust account only (i) in the event of the redemption of our Public
Shares if we do not complete our initial business combination
within 24 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 provide holders of our
Class A ordinary shares the right to have their shares redeemed in
connection with our initial business combination or to redeem 100%
of our Public Shares if we do not complete our initial business
combination within 24 months from the closing of our initial public
offering or (B) with respect to any other provision relating to the
rights of holders of our Class A ordinary shares, or (iii) if they
redeem their respective shares for cash upon the completion of the
initial business combination. Public shareholders who redeem their
Class A ordinary shares in connection with a shareholder vote
described in clause (ii) in the preceding sentence shall not be
entitled to funds from the trust account upon the subsequent
completion of an initial business combination or liquidation if we
have not consummated an initial business combination within 24
months from the closing of our initial public offering, with
respect to such Class A ordinary shares so redeemed. 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 identifying, evaluating and selecting a target business for our
initial business combination, we may encounter intense competition
from other entities having a business objective similar to ours,
including other blank check 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 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
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 maintain our executive offices at 32 Elm Place, 2nd
Floor, Rye, NY 10580. The cost for our use of this space is
included in the $10,000 per month fee we will pay to an affiliate
of our Sponsor for office space, administrative and support
services. We consider our current office space adequate for our
current operations.
Employees
We currently have three executive officers. These individuals are
not obligated to devote any specific number of hours to our matters
but they intend to devote as much of their time as they deem
necessary to our affairs until we have completed our initial
business combination. The amount of time they will devote in any
time period will vary based on whether a target business has been
selected for our initial business combination and the stage of the
business combination process we are in. We do not intend to have
any full time employees prior to the completion of our initial
business combination.
Periodic Reporting and Financial Information
We have registered our units, Class A ordinary shares and warrants
under the Exchange Act and have reporting obligations, including
the requirement that we file annual, quarterly and current reports
with the SEC. In accordance with the requirements of the Exchange
Act, our annual reports will contain financial statements audited
and reported on by our independent registered public
accountants.
We will provide shareholders with audited financial statements of
the prospective target business as part of the proxy solicitation
or tender offer materials, as applicable, sent to shareholders.
These financial statements may be required to be prepared in
accordance with, or reconciled to, GAAP, or IFRS, depending on the
circumstances, and the historical financial statements may be
required to be audited in accordance with the standards of the
PCAOB. These financial statement requirements may limit the pool of
potential target businesses we may acquire because some targets may
be unable to provide such statements in time for us to disclose
such statements in accordance with federal proxy rules and complete
our initial business combination within the prescribed time frame.
We cannot assure you that any particular target business identified
by us as a potential acquisition candidate will have financial
statements prepared in accordance with the requirements outlined
above, or that the potential target business will be able to
prepare its financial statements in accordance with the
requirements outlined above. To the extent that these requirements
cannot be met, we may not be able to acquire the proposed target
business. While this may limit the pool of potential acquisition
candidates, we do not believe that this limitation will be
material.
We are required to evaluate our internal control procedures as of
the fiscal year ending December 31, 2021 as required by the
Sarbanes-Oxley Act. Our management has determined that our working
capital deficit, as well as the mandatory liquidation and
subsequent dissolution if we do not complete a business combination
within 24 months from our initial public offering, raise
substantial doubt about the company’s ability to continue as a
“going concern.” Only in the event we are deemed to be a large
accelerated filer or an accelerated filer and no longer qualify as
an emerging growth company, will we be required to comply with the
independent registered public accounting firm attestation
requirement on our internal control over financial reporting. A
target business may not be in compliance with the provisions of the
Sarbanes-Oxley Act regarding adequacy of their internal controls.
The development of the internal controls of any such entity to
achieve compliance with the Sarbanes-Oxley Act may increase the
time and costs necessary to complete any such acquisition.
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
have applied for and received a tax exemption undertaking from the
Cayman Islands government that, in accordance with Section 6 of the
Tax Concessions Act (as amended) of the Cayman Islands, for a
period of 30 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 million as of the prior June 30th, and
(2) the date on which we have issued more than $1.0 billion in
non-convertible debt during the prior three-year period.
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 million
as of the prior June 30, or (2) our annual revenues exceeded $100
million during such completed fiscal year and the market value of
our Ordinary Shares held by non-affiliates exceeds $700 million 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 capacity as such.
Item 1A. Risk Factors
An investment in our securities involves a high degree of risk.
You should consider carefully all of the risks described below,
together with the other information contained in this Report,
before making a decision to invest in our securities. If any of the
following events occur, our business, financial condition and
operating results may be materially adversely affected. In that
event, the trading price of our securities could decline, and you
could lose all or part of your investment.
We have no operating history and no revenues, and you have no basis
on which to evaluate our ability to achieve our business
objective.
We were formed in September 29, 2020 under the laws of the Cayman
Islands and have no operating results. Because we lack an operating
history, you have no basis upon which to evaluate our ability to
achieve our business objective of completing our initial business
combination with one or more target businesses. If we fail to
complete our initial business combination, we will never generate
any operating revenues.
Past performance by our Management Team or their respective
affiliates may not be indicative of future performance of an
investment in us.
Information regarding performance is presented for informational
purposes only. Any past experience or performance of our Management
Team and their respective affiliates is not a guarantee of either
(i) our ability to successfully identify and execute a transaction
or (ii) success with respect to any business combination that we
may consummate. You should not rely on the historical record of our
Management Team or their respective affiliates as indicative of the
future performance of an investment in us or the returns we will,
or are likely to, generate going forward. Our management has no
experience in operating special purpose acquisition companies.
Our shareholders may not be afforded an opportunity to vote on our
proposed initial business combination, which means we may complete
our initial business combination even though a majority of our
shareholders do not support such a combination.
We may choose not to hold a shareholder vote before we complete our
initial business combination if the business combination would not
require shareholder approval under applicable law or stock exchange
listing requirements. For instance, if we were seeking to acquire a
target business where the consideration we were paying in the
transaction was all cash, we would typically not be required to
seek shareholder approval to complete such a transaction. Except
for as required by applicable law or stock exchange listing
requirements, the decision as to whether we will seek shareholder
approval of a proposed business combination or will allow
shareholders to sell their shares to us in a tender offer will be
made by us, solely in our discretion, and will be based on a
variety of factors, such as the timing of the transaction and
whether the terms of the transaction would otherwise require us to
seek shareholder approval. Accordingly, we may complete our initial
business combination even if holders of a majority of our issued
and outstanding Ordinary Shares do not approve of the business
combination we complete.
Please see the section entitled “Proposed Business — Shareholders
May Not Have the Ability to Approve Our Initial Business
Combination” for additional information.
Your only opportunity to affect the investment decision regarding a
potential business combination may be limited to the exercise of
your right to redeem your shares from us for cash.
At the time of your investment in us, you will not be provided with
an opportunity to evaluate the specific merits or risks of any
target businesses. Since our board of directors may complete a
business combination without seeking shareholder approval, Public
Shareholders may not have the right or opportunity to vote on the
business combination, unless we seek such shareholder approval.
Accordingly, your only opportunity to affect the investment
decision regarding a potential business combination may be limited
to exercising your redemption rights within the period of time
(which will be at least 20 business days) set forth in our tender
offer documents mailed to our Public Shareholders in which we
describe our initial business combination.
If we seek shareholder approval of our initial business
combination, our Sponsor and members of our Management Team have
agreed to vote in favor of such initial business combination,
regardless of how our Public Shareholders vote.
Our Initial Shareholders own, on an as-converted basis, 20% of our
outstanding Ordinary Shares immediately following the completion of
our initial public offering plus the number of Class A ordinary
shares that may be sold pursuant to the Forward Purchase Agreement.
Our Sponsor and members of our Management Team also may from time
to time purchase Class A ordinary shares prior to our initial
business combination. Our Amended and Restated Memorandum and
Articles of Association provide that, if we seek shareholder
approval, we will complete our initial business combination only if
a simple majority of the Ordinary Shares, represented in person or
by proxy and entitled to vote thereon, voted at a shareholder
meeting are voted in favor of the business combination. As a
result, in addition to our Initial Shareholders’ Founder Shares, we
would need 8,000,001, or 34.8% (assuming all issued and outstanding
shares are voted), or of the 23,000,000 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. Accordingly, if we seek shareholder approval of our
initial business combination, the agreement by our Sponsor and each
member of our Management Team to vote in favor of our initial
business combination will increase the likelihood that we will
receive the requisite shareholder approval for such initial
business combination.
In evaluating a prospective target business for our initial
business combination, our Management may rely on the availability
of all of the funds from the sale of the Forward Purchase
Securities to be used as part of the consideration to the sellers
in the initial business combination. If the sale of the Forward
Purchase Securities does not close, we may lack sufficient funds to
consummate our initial business combination.
In connection with our initial public offering, we entered into a
Forward Purchase Agreement, which provides, among other things, for
the purchase by GEPT of a number of units designated by the
Company, up to the lesser of (i) $50,000,000 of units and (ii) a
number of units equal to 19.99% of the pro forma equity outstanding
at the time of the Business Combination Closing, including but not
limited to, any Ordinary Shares issued in connection with our
initial public offering, the Forward Purchase Agreement or any
private placement or other offering or to any seller in the initial
business combination, with each unit consisting of one Class A
ordinary share and 0.425 of one warrant to purchase one Class A
ordinary share at $11.50 per share, for a purchase price of $10.00
per unit. However, if the sale of the Forward Purchase Securities
does not close, we may lack sufficient funds to consummate our
initial business combination. GEPT’s obligation to purchase the
Forward Purchase Securities will be subject to the satisfaction of
certain conditions, including, among others, the delivery by GEPT
of a notice to us that it will purchase the Forward Purchase
Securities in whole or in part and that our initial business
combination is consummated substantially concurrently with, and
immediately following, the purchase of Forward Purchase
Securities.
The ability of our Public Shareholders to redeem their shares for
cash may make our financial condition unattractive to potential
business combination targets, which may make it difficult for us to
enter into a business combination with a target.
We may seek to enter into a business combination transaction
agreement with a prospective target that requires as a closing
condition that we have a minimum net worth or a certain amount of
cash. If too many Public Shareholders exercise their redemption
rights, we would not be able to meet such closing condition and, as
a result, would not be able to proceed with the business
combination. Furthermore, in no event will we redeem our Public
Shares in an amount that would cause our net tangible assets to be
less than $5,000,001 (so that we do not then become subject to the
SEC’s “penny stock” rules). Consequently, if accepting all properly
submitted redemption requests would cause our net tangible assets
to be less than $5,000,001 or such greater amount necessary to
satisfy a closing condition as described above, we would not
proceed with such redemption and the related business combination
and may instead search for an alternate business combination.
Prospective targets will be aware of these risks and, thus, may be
reluctant to enter into a business combination transaction with
us.
The ability of our Public Shareholders to exercise redemption
rights with respect to a large number of our shares may not allow
us to complete the most desirable business combination or optimize
our capital structure.
At the time we enter into an agreement for our initial business
combination, we will not know how many shareholders may exercise
their redemption rights, and therefore will need to structure the
transaction based on our expectations as to the number of shares
that will be submitted for redemption. If a large number of shares
are submitted for redemption, we may need to restructure the
transaction to reserve a greater portion of the cash in the trust
account or arrange for additional third-party financing. Raising
additional third-party financing may involve dilutive equity
issuances or the incurrence of indebtedness at higher than
desirable levels. The above considerations may limit our ability to
complete the most desirable business combination available to us or
optimize our capital structure. The amount of the deferred
underwriting commissions payable to the underwriters will not be
adjusted for any shares that are redeemed in connection with an
initial business combination. The per-share amount we will
distribute to shareholders who properly exercise their redemption
rights will not be reduced by the deferred underwriting commission
and after such redemptions, the amount held in trust will continue
to reflect our obligation to pay the entire deferred underwriting
commissions.
The ability of our Public Shareholders to exercise redemption
rights with respect to a large number of our shares could increase
the probability that our initial business combination would be
unsuccessful and that you would have to wait for liquidation in
order to redeem your shares.
If our initial business combination agreement requires us to use a
portion of the cash in the trust account to pay the purchase price,
or requires us to have a minimum amount of cash at closing, the
probability that our initial business combination would be
unsuccessful is increased. If our initial business combination is
unsuccessful, you would not receive your pro rata portion of the
funds in the trust account until we liquidate the trust account. If
you are in need of immediate liquidity, you could attempt to sell
your shares in the open market; however, at such time our shares
may trade at a discount to the pro rata amount per share in the
trust account. In either situation, you may suffer a material loss
on your investment or lose the benefit of funds expected in
connection with our redemption until we liquidate or you are able
to sell your shares in the open market.
The requirement that we consummate an initial business combination
within 24 months after the closing of our initial public offering
may give potential target businesses leverage over us in
negotiating a business combination and may limit the time we have
in which to conduct due diligence on potential business combination
targets, in particular as we approach our business combination
deadline, which could undermine our ability to complete our initial
business combination on terms that would produce value for our
shareholders.
Any potential target business with which we enter into negotiations
concerning a business combination will be aware that we must
consummate an initial business combination within 24 months from
the closing of our initial public offering. Consequently, such
target business may obtain leverage over us in negotiating a
business combination, knowing that if we do not complete our
initial business combination with that particular target business,
we may be unable to complete our initial business combination with
any target business. This risk will increase as we get closer to
the time frame described above. In addition, we may have limited
time to conduct due diligence and may enter into our initial
business combination on terms that we would have rejected upon a
more comprehensive investigation.
Our search for a business combination, and any target business with
which we ultimately consummate a business combination, may be
materially adversely affected by the recent coronavirus (COVID-19)
outbreak and the status of debt and equity markets.
Since it was first reported to have emerged in December 2019, a
novel strain of coronavirus, which causes COVID-19, has spread
across the world, including the United States. On January 30, 2020,
the World Health Organization declared the outbreak of COVID-19 a
“Public Health Emergency of International Concern.” On January 31,
2020, U.S. Health and Human Services Secretary Alex M. Azar II
declared a public health emergency for the United States to aid the
U.S. healthcare community in responding to COVID-19, and on March
11, 2020 the World Health Organization characterized the outbreak
as a “pandemic.” The COVID-19 outbreak has adversely affected, and
other events (such as terrorist attacks, natural disasters or a
significant outbreak of other infectious diseases) could adversely
affect, the economies and financial markets worldwide, potentially
including the business of any potential target business with which
we intend to consummate a business combination. Furthermore, we may
be unable to complete a business combination in a timely manner or
at all if concerns relating to COVID-19 continue to restrict
travel, limit the ability to have meetings with potential investors
or make it impossible or impractical to negotiate and consummate a
transaction with the target company’s personnel, vendors and
services providers. The extent to which COVID-19 impacts our search
for a business combination will depend on future developments,
which are highly uncertain and cannot be predicted, including new
information which may emerge concerning the severity of COVID-19
and the actions to contain COVID-19 or treat its impact, among
others. If the disruptions posed by COVID-19 or other events (such
as terrorist attacks, natural disasters or a significant outbreak
of other infectious diseases) continue for an extensive period of
time, our ability to consummate a business combination, or the
operations of a target business with which we ultimately consummate
a business combination, may be materially adversely affected.
In addition, our ability to consummate a transaction may be
dependent on the ability to raise equity and debt financing which
may be impacted by COVID-19 and other events (such as terrorist
attacks, natural disasters or a significant outbreak of other
infectious diseases), including as a result of increased market
volatility, decreased market liquidity in third-party financing
being unavailable on terms acceptable to us or at all. Finally, the
outbreak of COVID-19 may also have the effect of heightening many
of the other risks described in this “Risk Factors” section, such
as those related to the market for our securities and cross-border
transactions.
We may not be able to consummate an initial business combination
within 24 months after the closing of our initial public offering,
in which case we would cease all operations except for the purpose
of winding up and we would redeem our Public Shares and
liquidate.
We may not be able to find a suitable target business and
consummate an initial business combination within 24 months after
the closing of our initial public offering. Our ability to complete
our initial business combination may be negatively impacted by
general market conditions, volatility in the capital and debt
markets and the other risks described herein. For example, the
outbreak of COVID-19 continues to grow both in the U.S. and
globally and, while the extent of the impact of the outbreak on us
will depend on future developments, it could limit our ability to
complete our initial business combination, including as a result of
increased market volatility, decreased market liquidity and
third-party financing being unavailable on terms acceptable to us
or at all. Additionally, the outbreak of COVID-19 may negatively
impact businesses we may seek to acquire. If we have not
consummated an initial business combination within such applicable
time period, we will: (i) cease all operations except for the
purpose of winding up; (ii) as promptly as reasonably possible but
not more than ten business days thereafter, redeem the Public
Shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account, including
interest earned on the funds held in the trust account and not
previously released to us to pay our income taxes, if any (less up
to $100,000 of interest to pay dissolution expenses), divided by
the number of the then-outstanding Public Shares, which redemption
will completely extinguish Public Shareholders’ rights as
shareholders (including the right to receive further liquidation
distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of 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 the requirements of other applicable law. Our Amended
and Restated Memorandum and Articles of Association provide that,
if a resolution of the company’s shareholders is passed pursuant to
the Companies Law of the Cayman Islands to commence the voluntary
liquidation of the company, we will follow the foregoing procedures
with respect to the liquidation of the trust account as promptly as
reasonably possible but not more than ten business days thereafter,
subject to applicable Cayman Islands law. In either such case, our
Public Shareholders may receive only $10.00 per Public Share, or
less than $10.00 per Public Share, on the redemption of their
shares, and our warrants will expire worthless. See “— If third
parties bring claims against us, the proceeds held in the trust
account could be reduced and the per-share redemption amount
received by shareholders may be less than $10.00 per Public Share”
and other risk factors herein.
If we seek shareholder approval of our initial business
combination, our Sponsor, directors, executive officers, advisors
and their affiliates may elect to purchase Public Shares or
warrants, which may influence a vote on a proposed business
combination and reduce the public “float” of our Class A ordinary
shares or public warrants.
If we seek shareholder approval of our initial business combination
and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our
Sponsor, directors, executive officers, advisors or their
affiliates may purchase Public Shares or warrants in privately
negotiated transactions or in the open market either prior to or
following the completion of our initial business combination,
although they are under no obligation to do so. 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 Public Shares or warrants in such
transactions.
In the event that our Sponsor, directors, executive 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. The purpose of any such transaction could be
to (1) vote in favor of the business combination and thereby
increase the likelihood of obtaining shareholder approval of the
business combination, (2) reduce the number of public warrants
outstanding or vote such warrants on any matters submitted to the
warrant holders for approval in connection with our initial
business combination or (3) 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. 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. 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. See “Proposed Business — Permitted
Purchases and Other Transactions with Respect to Our Securities”
for a description of how our Sponsor, directors, executive
officers, advisors or their affiliates will select which
shareholders to purchase securities from in any private
transaction.
If a shareholder fails to receive notice of our offer to redeem our
Public Shares in connection with our initial business combination,
or fails to comply with the procedures for tendering its shares,
such shares may not be redeemed.
We will comply with the proxy rules or tender offer rules, as
applicable, when conducting redemptions in connection with our
initial business combination. Despite our compliance with these
rules, if a shareholder fails to receive our proxy solicitation or
tender offer materials, as applicable, such shareholder may not
become aware of the opportunity to redeem its shares. In addition,
the proxy solicitation or tender offer materials, as applicable,
that we will furnish to holders of our Public Shares in connection
with our initial business combination will describe the various
procedures that must be complied with in order to validly redeem or
tender Public Shares. In the event that a shareholder fails to
comply with these procedures, its shares may not be redeemed. See
“Proposed Business — Business Strategy — Effecting Our Initial
Business Combination — Tendering Share Certificates in Connection
with a Tender Offer or Redemption Rights.”
The securities in which we invest the funds held in the trust
account could bear a negative rate of interest, which could reduce
the value of the assets held in trust such that the per-share
redemption amount received by public shareholders may be less than
$10.00 per share.
The proceeds held in the trust account will be invested only in
U.S. government treasury obligations with a maturity of 185 days or
less or in money market funds meeting certain conditions under Rule
2a-7 under the Investment Company Act, which invest only in direct
U.S. government treasury obligations. While short-term U.S.
government treasury obligations currently yield a positive rate of
interest, they have briefly yielded negative interest rates in
recent years. Central banks in Europe and Japan pursued interest
rates below zero in recent years, and the Open Market Committee of
the Federal Reserve has not ruled out the possibility that it may
in the future adopt similar policies in the United States. In the
event that we are unable to complete our initial business
combination or make certain amendments to our Amended and Restated
Memorandum and Articles of Association, our public shareholders are
entitled to receive their pro-rata share of the proceeds held in
the trust account, plus any interest income, net of income taxes
paid or payable (less, in the case we are unable to complete our
initial business combination, $100,000 of interest to pay
dissolution expenses). Negative interest rates could reduce the
value of the assets held in trust such that the per-share
redemption amount received by public shareholders may be less than
$10.00 per share.
You will not have any rights or interests in funds from the trust
account, except under certain limited circumstances. Therefore, to
liquidate your investment, you may be forced to sell your Public
Shares or warrants, potentially at a loss.
Our Public Shareholders will be entitled to receive funds from the
trust account only upon the earliest to occur of: (i) our
completion of an initial business combination, and then only in
connection with those Class A ordinary shares that such shareholder
properly elected to redeem, subject to the limitations described
herein, (ii) the redemption of any Public Shares properly tendered
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 provide holders of our
Class A ordinary shares the right to have their shares redeemed in
connection with our initial business combination or to redeem 100%
of our Public Shares if we do not complete our initial business
combination within 24 months from the closing of our initial public
offering or (B) with respect to any other provision relating to the
rights of holders of our Class A ordinary shares, and (iii) the
redemption of our Public Shares if we have not consummated an
initial business within 24 months from the closing of our initial
public offering, subject to applicable law and as further described
herein. Public shareholders who redeem their Class A ordinary
shares in connection with a shareholder vote described in clause
(ii) in the preceding sentence shall not be entitled to funds from
the trust account upon the subsequent completion of an initial
business combination or liquidation if we have not consummated an
initial business combination within 24 months from the closing of
our initial public offering, with respect to such Class A ordinary
shares so redeemed. In no other circumstances will a Public
Shareholder have any right or interest of any kind in the trust
account. Holders of warrants will not have any right to the
proceeds held in the trust account with respect to the warrants.
Accordingly, to liquidate your investment, you may be forced to
sell your Public Shares or warrants, potentially at a loss.
Our securities could be delisted from trading on Nasdaq, which
could limit investors’ ability to make transactions in our
securities and subject us to additional trading restrictions.
Our units, Class A ordinary shares and warrants are each traded on
the Nasdaq. Our units commenced public trading on January 15, 2021
under the symbol “AEACU.” Our Class A ordinary shares and warrants
began separate trading on March 8, 2021, under the symbols “AEAC”
and “AEACW,” respectively.
Although, after giving effect to our initial public offering, we
expect to meet, on a pro forma basis, the minimum initial listing
standards set forth in the listing standards of Nasdaq, we cannot
assure you that our securities will be, or will continue to be,
listed on Nasdaq in the future or prior to our initial business
combination.
In order to continue listing our securities on Nasdaq prior to our
initial business combination, we must maintain certain financial,
distribution and share price levels. Generally, we must maintain a
minimum market capitalization (generally $2,500,000) and a minimum
number of holders of our securities (generally 300 public
holders).
Additionally, our units will not be traded after completion of our
initial business combination and, in connection with our initial
business combination, we will be required to demonstrate compliance
with the initial listing requirements of Nasdaq, which are more
rigorous than the continued listing requirements of Nasdaq, in
order to continue to maintain the listing of our securities on
Nasdaq.
For instance, in order for our shares to be listed upon the
consummation of our business combination, among other things, at
such time our share price would generally be required to be at
least $4.00 per share and we would be required to have at least 300
round lot shareholders. We cannot assure you that we will be able
to meet those listing requirements at that time.
If Nasdaq delists any of our securities from trading on its
exchange and we are not able to list our securities on another
national securities exchange, we expect such securities could be
quoted on an over-the-counter market. If this were to occur, we
could face significant material adverse consequences,
including:
|
● |
a limited availability of market
quotations for our securities; |
|
● |
reduced liquidity for our
securities; |
|
● |
a determination that our Class A
ordinary shares are a “penny stock” which will require brokers
trading in our Class A ordinary shares to adhere to more stringent
rules and possibly result in a reduced level of trading activity in
the secondary trading market for our securities; |
|
● |
a limited amount of news and
analyst coverage; and |
|
● |
a decreased ability to issue
additional securities or obtain additional financing in the
future. |
The National Securities Markets Improvement Act of 1996, which is a
federal statute, prevents or preempts the states from regulating
the sale of certain securities, which are referred to as “covered
securities.” Because our units, Class A ordinary shares and
warrants are listed on Nasdaq, our units, Class A ordinary shares
and warrants qualify as covered securities under the statute.
Although the states are preempted from regulating the sale of
covered securities, the federal statute does allow the states to
investigate companies if there is a suspicion of fraud, and, if
there is a finding of fraudulent activity, then the states can
regulate or bar the sale of covered securities in a particular
case. While we are not aware of a state having used these powers to
prohibit or restrict the sale of securities issued by blank check
companies, other than the State of Idaho, certain state securities
regulators view blank check companies unfavorably and might use
these powers, or threaten to use these powers, to hinder the sale
of securities of blank check companies in their states. Further, if
we were no longer listed on Nasdaq, our securities would not
qualify as covered securities under the statute and we would be
subject to regulation in each state in which we offer our
securities.
You will not be entitled to protections normally afforded to
investors of many other blank check companies.
Since the net proceeds of our initial public offering and the sale
of the Private Placement Warrants are intended to be used to
complete an initial business combination with a target business
that has not been selected, we may be deemed to be a “blank check”
company under the United States securities laws. However, because
we have net tangible assets in excess of $5,000,000 and filed a
Current Report on Form 8-K, including an audited balance sheet
demonstrating this fact, we are exempt from rules promulgated by
the SEC to protect investors in blank check companies, such as Rule
419. Accordingly, investors will not be afforded the benefits or
protections of those rules. Among other things, this means our
units will be immediately tradable and we will have a longer period
of time to complete our initial business combination than do
companies subject to Rule 419. Moreover, if our initial public
offering were subject to Rule 419, that rule would prohibit the
release of any interest earned on funds held in the trust account
to us unless and until the funds in the trust account were released
to us in connection with our completion of an initial business
combination.
If we seek shareholder approval of our initial business combination
and we do not conduct redemptions pursuant to the tender offer
rules, and if you or a “group” of shareholders are deemed to hold
in excess of 15% of our Class A ordinary shares, you will lose the
ability to redeem all such shares in excess of 15% of our Class A
ordinary shares.
If we seek shareholder approval of our initial business combination
and we do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, our
Amended and Restated 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 redeeming its shares
with respect to more than an aggregate of 15% of the shares sold in
our initial public offering, which we refer to as the “Excess
Shares,” without our prior consent. 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. Your inability to redeem the Excess Shares will reduce
your influence over our ability to complete our initial business
combination and you could suffer a material loss on your investment
in us if you sell Excess Shares in open market transactions.
Additionally, you will not receive redemption distributions with
respect to the Excess Shares if we complete our initial business
combination. And as a result, you will continue to hold that number
of shares exceeding 15% and, in order to dispose of such shares,
would be required to sell your shares in open market transactions,
potentially at a loss.
Because of our limited resources and the significant competition
for business combination opportunities, it may be more difficult
for us to complete our initial business combination. If we have not
consummated our initial business combination within the required
time period, our Public Shareholders may receive only approximately
$10.00 per Public Share, or less in certain circumstances, on the
liquidation of our trust account and our warrants will expire
worthless.
We expect to encounter intense competition from other entities
having a business objective similar to ours, including private
investors (which may be individuals or investment partnerships),
other blank check companies and other entities, domestic and
international, competing for the types of businesses we intend to
acquire. Many of these individuals and entities are well
established and have extensive experience in identifying and
effecting, directly or indirectly, acquisitions of companies
operating in or providing services to various industries. Many of
these competitors possess greater technical, human and other
resources or more local industry knowledge than we do and our
financial resources will be relatively limited when contrasted with
those of many of these competitors. While we believe there are
numerous target businesses we could potentially acquire with the
net proceeds of our initial public offering and the sale of the
Private Placement Warrants, our ability to compete with respect to
the acquisition of certain target businesses that are sizable will
be limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing the
acquisition of certain target businesses. Furthermore, we are
obligated to offer holders of our Public Shares the right to redeem
their shares for cash at the time of our initial business
combination in conjunction with a shareholder vote or via a tender
offer. Target companies will be aware that this may reduce the
resources available to us for our initial business combination. Any
of these obligations may place us at a competitive disadvantage in
successfully negotiating a business combination. If we have not
consummated our initial business combination within the required
time period, our Public Shareholders may receive only approximately
$10.00 per Public Share, or less in certain circumstances, on the
liquidation of our trust account and our warrants will expire
worthless. See “— If third parties bring claims against us, the
proceeds held in the trust account could be reduced and the
per-share redemption amount received by shareholders may be less
than $10.00 per Public Share” and other risk factors herein.
If the net proceeds of our initial public offering and the sale of
the Private Placement Warrants not being held in the trust account
are insufficient to allow us to operate for the 24 months following
the closing of our initial public offering, it could limit the
amount available to fund our search for a target business or
businesses and our ability to complete our initial business
combination, and we will depend on loans from our Sponsor, its
affiliates or members of our Management Team to fund our search and
to complete our initial business combination.
Of the net proceeds of our initial public offering and the sale of
the Private Placement Warrants, only approximately $1,000,000 will
be available to us initially outside the trust account to fund our
working capital requirements. We believe that the funds available
to us outside of the trust account, together with funds available
from loans from our Sponsor, its affiliates or members of our
Management Team will be sufficient to allow us to operate for at
least the 24 months following the closing of our initial public
offering; however, we cannot assure you that our estimate is
accurate, and our Sponsor, its affiliates or members of our
Management Team are under no obligation to advance funds to us in
such circumstances. Of the funds available to us, we expect to use
a portion of the funds available to us to pay fees to consultants
to assist us with our search for a target business. We could also
use a portion of the funds as a down payment or to fund a “no-shop”
provision (a provision in letters of intent designed to keep target
businesses from “shopping” around for transactions with other
companies or investors on terms more favorable to such target
businesses) with respect to a particular proposed business
combination, although we do not have any current intention to do
so. If we entered into a letter of intent where we paid for the
right to receive exclusivity from a target business and were
subsequently required to forfeit such funds (whether as a result of
our breach or otherwise), we might not have sufficient funds to
continue searching for, or conduct due diligence with respect to, a
target business.
In the event that our offering expenses exceed our estimate of
$1,000,000, we may fund such excess with funds not to be held in
the trust account. In such case, unless funded by the proceeds of
loans available from our Sponsor, its affiliates or members of our
Management Team 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. The amount held in the trust account will not be impacted
as a result of such increase or decrease. If we are required to
seek additional capital, we would need to borrow funds from our
Sponsor, its affiliates, members of our Management Team or other
third parties to operate or may be forced to liquidate. Neither our
Sponsor, members of our Management Team nor their affiliates is
under any obligation to us in such circumstances. Any such advances
may be repaid only from funds held outside the trust account or
from funds released to us upon completion of our initial business
combination. Up to $1,500,000 of such loans may be convertible into
warrants of the post-business combination entity at a price of
$1.00 per warrant at the option of the lender. The warrants would
be identical to the Private Placement Warrants. Prior to the
completion of our initial business combination, we do not expect to
seek loans from parties other than our Sponsor, its affiliates or
members of our Management Team as we do not believe third parties
will be willing to loan such funds and provide a waiver against any
and all rights to seek access to funds in our trust account. If we
have not consummated our initial business combination within the
required time period because we do not have sufficient funds
available to us, we will be forced to cease operations and
liquidate the trust account. Consequently, our Public Shareholders
may only receive an estimated $10.00 per Public Share, or possibly
less, on our redemption of our Public Shares, and our warrants will
expire worthless. See “— If third parties bring claims against us,
the proceeds held in the trust account could be reduced and the
per-share redemption amount received by shareholders may be less
than $10.00 per Public Share” and other risk factors herein.
Subsequent to our completion of our initial business combination,
we may be required to take write-downs or write-offs, restructuring
and impairment or other charges that could have a significant
negative effect on our financial condition, results of operations
and the price of our securities, which could cause you to lose some
or all of your investment.
Even if we conduct extensive due diligence on a target business
with which we combine, we cannot assure you that this diligence
will identify all material issues with a particular target
business, that it would be possible to uncover all material issues
through a customary amount of due diligence, or that factors
outside of the target business and outside of our control will not
later arise. As a result of these factors, we may be forced to
later write-down or write-off assets, restructure our operations,
or incur impairment or other charges that could result in our
reporting losses. Even if our due diligence successfully identifies
certain risks, unexpected risks may arise and previously known
risks may materialize in a manner not consistent with our
preliminary risk analysis. Even though these charges may be
non-cash items and not have an immediate impact on our liquidity,
the fact that we report charges of this nature could contribute to
negative market perceptions about us or our securities. In
addition, charges of this nature may cause us to violate net worth
or other covenants to which we may be subject as a result of
assuming pre-existing debt held by a target business or by virtue
of our obtaining post-combination debt financing. Accordingly, any
holders who choose to retain their securities following the
business combination could suffer a reduction in the value of their
securities. Such holders are unlikely to have a remedy for such
reduction in value.
If third parties bring claims against us, the proceeds held in the
trust account could be reduced and the per-share redemption amount
received by shareholders may be less than $10.00 per share.
Our placing of funds in the trust account may not protect those
funds from third-party claims against us. Although we will seek to
have all vendors, service providers (other than our independent
registered public accounting firm), prospective target businesses
and other entities with which we do business execute agreements
with us waiving any right, title, interest or claim of any kind in
or to any monies held in the trust account for the benefit of our
Public Shareholders, such parties may not execute such agreements,
or even if they execute such agreements, they may not be prevented
from bringing claims against the trust account, including, but not
limited to, fraudulent inducement, breach of fiduciary
responsibility or other similar claims, as well as claims
challenging the enforceability of the waiver, in each case in order
to gain advantage with respect to a claim against our assets,
including the funds held in the trust account. If any third-party
refuses to execute an agreement waiving such claims to the monies
held in the trust account, our Management will perform an analysis
of the alternatives available to it and will only enter into an
agreement with a third-party that has not executed a waiver if
management believes that such third-party’s engagement would be
significantly more beneficial to us than any alternative.
Examples of possible instances where we may engage a third-party
that refuses to execute a waiver include the engagement of a
third-party consultant whose particular expertise or skills are
believed by management to be significantly superior to those of
other consultants that would agree to execute a waiver or in cases
where management is unable to find a service provider willing to
execute a waiver. In addition, there is no guarantee that such
entities will agree to waive any claims they may have in the future
as a result of, or arising out of, any negotiations, contracts or
agreements with us and will not seek recourse against the trust
account for any reason. Upon redemption of our Public Shares, if we
have not consummated an initial business combination within 24
months from the closing of our initial public offering, or upon the
exercise of a redemption right in connection with our initial
business combination, we will be required to provide for payment of
claims of creditors that were not waived that may be brought
against us within the ten years following redemption. Accordingly,
the per-share redemption amount received by Public Shareholders
could be less than the $10.00 per Public Share initially held in
the trust account, due to claims of such creditors. Pursuant to a
letter agreement, our Sponsor has agreed that it will be liable to
us if and to the extent any claims by a third-party (other than our
independent registered public accounting firm) for services
rendered or products sold to us, or a prospective target business
with which we have discussed entering into a transaction agreement,
reduce the amounts in the trust account to below the lesser of (i)
$10.00 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 $10.00 per Public Share due to
reductions in the value of the trust assets, in each case net of
the interest that may be withdrawn to pay our tax obligations,
provided that such liability will not apply to any claims by
a third-party or prospective target business that executed a waiver
of any and all rights to seek access to the trust account nor will
it apply to any claims under our indemnity of the underwriters of
our initial public offering against certain liabilities, including
liabilities under the Securities Act. Moreover, in the event that
an executed waiver is deemed to be unenforceable against a
third-party, our Sponsor will not be responsible to the extent of
any liability for such third-party claims.
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 $10.00 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.
Our directors may decide not to enforce the indemnification
obligations of our sponsor, resulting in a reduction in the amount
of funds in the trust account available for distribution to our
Public Shareholders.
In the event that the proceeds in the trust account are reduced
below the lesser of (i) $10.00 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 $10.00 per Public
Share due to reductions in the value of the trust assets, in each
case net of the interest that may be withdrawn to pay our tax
obligations, and our Sponsor asserts that it is unable to satisfy
its obligations or that it has no indemnification obligations
related to a particular claim, our independent directors would
determine whether to take legal action against our Sponsor to
enforce its indemnification obligations. While we currently expect
that our independent directors would take legal action on our
behalf against our Sponsor to enforce its indemnification
obligations to us, it is possible that our independent directors in
exercising their business judgment and subject to their fiduciary
duties may choose not to do so in any particular instance. If our
independent directors choose not to enforce these indemnification
obligations, the amount of funds in the trust account available for
distribution to our Public Shareholders may be reduced below $10.00
per Public Share.
We may not have sufficient funds to satisfy indemnification claims
of our directors and executive officers.
We have agreed to indemnify our officers and directors to the
fullest extent permitted by law. However, our officers and
directors have agreed to waive any right, title, interest or claim
of any kind in or to any monies in the trust account and to not
seek recourse against the trust account for any reason whatsoever
(except to the extent they are entitled to funds from the trust
account due to their ownership of Public Shares). Accordingly, any
indemnification provided will be able to be satisfied by us only if
(i) we have sufficient funds outside of the trust account or (ii)
we consummate an initial business combination. Our obligation to
indemnify our officers and directors may discourage 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.
If, after we distribute the proceeds in the trust account to our
Public Shareholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, a bankruptcy court may seek to recover such proceeds,
and the members of our board of directors may be viewed as having
breached their fiduciary duties to our creditors, thereby exposing
the members of our board of directors and us to claims of punitive
damages.
If, after we distribute the proceeds in the trust account to our
Public Shareholders, we file a bankruptcy petition or an
involuntary bankruptcy 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 court could seek to recover some or all
amounts received by our shareholders. In addition, our board of
directors may be viewed as having breached its fiduciary duty to
our creditors and/or having acted in bad faith, thereby exposing
itself and us to claims of punitive damages, by paying Public
Shareholders from the trust account prior to addressing the claims
of creditors.
If, before distributing the proceeds in the trust account to our
Public Shareholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, the claims of creditors in such proceeding may have
priority over the claims of our shareholders and the per-share
amount that would otherwise be received by our shareholders in
connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust account to our
Public Shareholders, we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not
dismissed, the proceeds held in the trust account could be subject
to applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to the claims of third parties with priority
over the claims of our shareholders. To the extent any bankruptcy
claims deplete the trust account, the per-share amount that would
otherwise be received by our shareholders in connection with our
liquidation may be reduced.
If we are deemed to be an investment company under the Investment
Company Act, we may be required to institute burdensome compliance
requirements and our activities may be restricted, which may make
it difficult for us to complete our initial business
combination.
If we are deemed to be an investment company under the Investment
Company Act, our activities may be restricted, including:
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restrictions on the nature of our
investments; and |
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restrictions on the issuance of
securities, |
each of which may make it difficult for us to complete our initial
business combination. In addition, we may have imposed upon us
burdensome requirements, including:
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registration as an investment
company with the SEC; |
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adoption of a specific form of
corporate structure; and |
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reporting, record keeping, voting,
proxy and disclosure requirements and other rules and
regulations. |
In order not to be regulated as an investment company under the
Investment Company Act, unless we can qualify for an exclusion, we
must ensure that we are engaged primarily in a business other than
investing, reinvesting or trading of securities and that our
activities do not include investing, reinvesting, owning, holding
or trading “investment securities” constituting more than 40% of
our assets (exclusive of U.S. government securities and cash items)
on an unconsolidated basis. Our business will be to identify and
complete a business combination and thereafter to operate the
post-business combination business or assets for the long term. We
do not plan to buy businesses or assets with a view to resale or
profit from their resale. We do not plan to buy unrelated
businesses or assets or to be a passive investor.
We do not believe that our anticipated principal activities will
subject us to the Investment Company Act. To this end, the proceeds
held in the trust account may only be invested in United States
“government securities” within the meaning of Section 2(a)(16) of
the Investment Company Act having a maturity of 185 days or less or
in money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act which invest only in
direct U.S. government treasury obligations. Pursuant to the trust
agreement, the trustee is not permitted to invest in other
securities or assets. By restricting the investment of the proceeds
to these instruments, and by having a business plan targeted at
acquiring and growing businesses for the long term (rather than on
buying and selling businesses in the manner of a merchant bank or
private equity fund), we intend to avoid being deemed an
“investment company” within the meaning of the Investment Company
Act. Our initial public offering is not intended for persons who
are seeking a return on investments in government securities or
investment securities. The trust account is intended as a holding
place for funds pending the earliest to occur of either: (i) the
completion of our initial business combination; (ii) the redemption
of any Public Shares properly tendered 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 provide holders of our Class A ordinary shares
the right to have their shares redeemed in connection with our
initial business combination or to redeem 100% of our Public Shares
if we do not complete our initial business combination within 24
months from the closing of our initial public offering or (B) with
respect to any other provision relating to the rights of holders of
our Class A ordinary shares; or (iii) absent our completing an
initial business combination within 24 months from the closing of
our initial public offering, our return of the funds held in the
trust account to our Public Shareholders as part of our redemption
of the Public Shares. If we do not invest the proceeds as discussed
above, we may be deemed to be subject to the Investment Company
Act. If we were deemed to be subject to the Investment Company Act,
compliance with these additional regulatory burdens would require
additional expenses for which we have not allotted funds and may
hinder our ability to complete a business combination. If we have
not consummated our initial business combination within the
required time period, our Public Shareholders may receive only
approximately $10.00 per Public Share, or less in certain
circumstances, on the liquidation of our trust account and our
warrants will expire worthless.
Changes in laws or regulations, or a failure to comply with any
laws and regulations, may adversely affect our business, including
our ability to negotiate and complete our initial business
combination, and results of operations.
We are subject to laws and regulations enacted by national,
regional and local governments. In particular, we will be required
to comply with certain SEC and other legal requirements. Compliance
with, and monitoring of, applicable laws and regulations may be
difficult, time consuming and costly. Those laws and regulations
and their interpretation and application may also change from time
to time and those changes could have a material adverse effect on
our business, investments and results of operations. In addition, a
failure to comply with applicable laws or regulations, as
interpreted and applied, could have a material adverse effect on
our business, including our ability to negotiate and complete our
initial business combination, and results of operations.
If we are unable to consummate an initial business combination
within 24 months from the closing of our initial public offering,
our Public Shareholders may be forced to wait beyond such 24 months
before redemption from our trust account.
If we have not consummated an initial business combination within
24 months from the closing of our initial public offering, the
proceeds then on deposit in the trust account, including interest
earned on the funds held in the trust account and not previously
released to us to pay our income taxes, if any (less up to $100,000
of interest to pay dissolution expenses), will be used to fund the
redemption of our Public Shares, as further described herein. Any
redemption of Public Shareholders from the trust account will be
effected automatically by function of our Amended and Restated
Memorandum and Articles of Association prior to any voluntary
winding up. If we are required to wind up, liquidate the trust
account and distribute such amount therein, pro rata, to our Public
Shareholders, as part of any liquidation process, such winding up,
liquidation and distribution must comply with the applicable
provisions of the Companies Law. In that case, investors may be
forced to wait beyond 24 months from the closing of our initial
public offering before the redemption proceeds of our trust account
become available to them, and they receive the return of their pro
rata portion of the proceeds from our trust account. We have no
obligation to return funds to investors prior to the date of their
redemption or any liquidation unless, prior thereto, we consummate
our initial business combination or amend certain provisions of our
Amended and Restated Memorandum and Articles of Association, and
only then in cases where investors have sought to redeem their
Class A ordinary shares. Only upon their redemption or any
liquidation will Public Shareholders be entitled to distributions
if we do not complete our initial business combination and do not
amend certain provisions of our Amended and Restated Memorandum and
Articles of Association. Our Amended and Restated Memorandum and
Articles of Association provide that, if a resolution of the
company’s shareholders is passed pursuant to the Companies Law of
the Cayman Islands to commence the voluntary liquidation of the
company, we will follow the foregoing procedures with respect to
the liquidation of the trust account as promptly as reasonably
possible but not more than ten business days thereafter, subject to
applicable Cayman Islands law.
Our shareholders may be held liable for claims by third parties
against us to the extent of distributions received by them upon
redemption of their shares.
If we are forced to enter into an insolvent liquidation, any
distributions received by shareholders could be viewed as an
unlawful payment if it was proved that immediately following the
date on which the distribution was made, we were unable to pay our
debts as they fall due in the ordinary course of business. As a
result, a liquidator could seek to recover some or all amounts
received by our shareholders. Furthermore, our directors may be
viewed as having breached their fiduciary duties to us or our
creditors and/or may have acted in bad faith, thereby exposing
themselves and our company to claims, 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. We and our directors and officers who knowingly and
willfully authorized or permitted any distribution to be paid out
of our share premium account while we were unable to pay our debts
as they fall due in the ordinary course of business would be guilty
of an offence and may be liable for a fine of approximately
$18,000.00 and imprisonment for five years in the Cayman
Islands.
We may not hold an annual meeting of shareholders until after the
consummation of our initial business combination.
In accordance with the corporate governance requirements of Nasdaq,
we are not required to hold an annual meeting until one year after
our first fiscal year end following our listing on Nasdaq. There is
no requirement under the Companies Law for us to hold annual or
general meetings to elect directors. Until we hold an annual
meeting of shareholders, Public Shareholders may not be afforded
the opportunity to elect directors and to discuss company affairs
with management. Our board of directors is divided into three
classes with only one class of directors being elected in each year
and each class (except for those directors appointed prior to our
first annual meeting of shareholders) serving a three-year
term.
Holders of Class A ordinary shares will not be entitled to vote on
any election of directors we hold prior to our initial business
combination.
Prior to our initial business combination, only holders of our
Founder Shares will have the right to vote on the election of
directors. Holders of our Public Shares will not be entitled to
vote on the election of directors during such time; provided,
however, that if all of the Founder Shares are converted prior to
the date of our initial business combination, the holders of our
Class A ordinary shares will have the right to vote on the election
of directors. In addition, prior to our initial business
combination, holders of a majority of our Founder Shares may remove
a member of the board of directors for any reason. Accordingly, you
may not have any say in the management of our company prior to the
consummation of an initial business combination.
We are not registering the Class A ordinary shares issuable upon
exercise of the warrants under the Securities Act or any state
securities laws at this time, and such registration may not be in
place when an investor desires to exercise warrants, thus
precluding such investor from being able to exercise its warrants
except on a cashless basis and potentially causing such warrants to
expire worthless.
We are not registering the Class A ordinary shares issuable upon
exercise of the warrants under the Securities Act or any state
securities laws at this time. However, under the terms of the
warrant agreement, we have agreed that, as soon as practicable, but
in no event later than 20 business days after the closing of our
initial business combination, we will use our commercially
reasonable efforts to file with the SEC a registration statement
covering the issuance of such shares, and we will use our
commercially reasonable efforts to cause the same to become
effective within 60 business days after the closing of our initial
business combination and to maintain the effectiveness of such
registration statement and a current prospectus relating to those
Class A ordinary shares until the warrants expire or are redeemed.
We cannot assure you that we will be able to do so if, for example,
any facts or events arise which represent a fundamental change in
the information set forth in the registration statement or
prospectus, the financial statements contained or incorporated by
reference therein are not current, complete or correct or the SEC
issues a stop order. If the shares issuable upon exercise of the
warrants are not registered under the Securities Act in accordance
with the above requirements, we will be required to permit holders
to exercise their warrants on a cashless basis, in which case, the
number of Class A ordinary shares that you will receive upon
cashless exercise will be based on a formula subject to a maximum
amount of shares equal to 0.365 Class A ordinary shares per warrant
(subject to adjustment). However, no warrant will be exercisable
for cash or on a cashless basis, and we will not be obligated to
issue any shares to holders seeking to exercise their warrants,
unless the issuance of the shares upon such exercise is registered
or qualified under the securities laws of the state of the
exercising holder, or an exemption from registration is available.
Notwithstanding the above, if our Class A 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, we
may, at our option, require holders of public warrants who exercise
their warrants to do so on a “cashless basis” in accordance with
Section 3(a)(9) of the Securities Act and, in the event we so
elect, we will not be required to file or maintain in effect a
registration statement, but we will use our commercially reasonable
efforts to register or qualify the shares under applicable blue sky
laws to the extent an exemption is not available. Exercising the
warrants on a cashless basis could have the effect of reducing the
potential “upside” of the holder’s investment in our company
because the warrant holder will hold a smaller number of Class A
ordinary shares upon a cashless exercise of the warrants they hold.
In no event will we be required to net cash settle any warrant, or
issue securities or other compensation in exchange for the warrants
in the event that we are unable to register or qualify the shares
underlying the warrants under applicable state securities laws and
no exemption is available. If the issuance of the shares upon
exercise of the warrants is not so registered or qualified or
exempt from registration or qualification, the holder of such
warrant shall not be entitled to exercise such warrant and such
warrant may have no value and expire worthless. In such event,
holders who acquired their warrants as part of a purchase of units
will have paid the full unit purchase price solely for the Class A
ordinary shares included in the units. There may be a circumstance
where an exemption from registration exists for holders of our
Private Placement Warrants to exercise their warrants while a
corresponding exemption does not exist for holders of the public
warrants included as part of units sold in our initial public
offering. In such an instance, our Sponsor and its permitted
transferees (which may include our directors and executive
officers) would be able to exercise their warrants and sell the
Ordinary Shares underlying their warrants while holders of our
public warrants would not be able to exercise their warrants and
sell the underlying ordinary shares. If and when the warrants
become redeemable by us, we may exercise our redemption right even
if we are unable to register or qualify the underlying Class A
ordinary shares for sale under all applicable state securities
laws. As a result, we may redeem the warrants as set forth above
even if the holders are otherwise unable to exercise their
warrants.
The warrants may become exercisable and redeemable for a security
other than the Class A ordinary shares, and you will not have any
information regarding such other security at this time.
In certain situations, including if we are not the surviving entity
in our initial business combination, the warrants may become
exercisable for a security other than the Class A ordinary shares.
As a result, if the surviving company redeems your warrants for
securities pursuant to the warrant agreement, you may receive a
security in a company of which you do not have information at this
time. Pursuant to the warrant agreement, the surviving company will
be required to use commercially reasonable efforts to register the
issuance of the security underlying the warrants within twenty
business days of the closing of an initial business
combination.
Our warrants and units committed to be issued in connection with
the forward purchase agreement are accounted for as a derivative
liability and are recorded at fair value upon issuance with changes
in fair value each period reported in earnings, which may have an
adverse effect on the market price of our Class A ordinary shares
or may make it more difficult for us to consummate an initial
Business Combination.
We account for our warrants and the units committed to be issued in
connection with the forward purchase agreement as a derivative
liability and will record them at fair value upon issuance with any
changes in fair value each period reported in earnings as
determined by us based upon a valuation report obtained from an
independent third party valuation firm. The impact of changes in
fair value on earnings may have an adverse effect on the market
price of our Class A ordinary shares. In addition, potential
targets may seek a SPAC that does not have warrants or units that
are accounted for as a derivative liability, which may make it more
difficult for us to consummate an initial Business Combination with
a target business.
Our warrants are accounted for as a derivative liability and are
recorded at fair value upon issuance with changes in fair value
each period reported in earnings, which may have an adverse effect
on the market price of our Class A ordinary shares or may make it
more difficult for us to consummate an initial Business
Combination.
We account for our warrants as a derivative liability and will
record them at fair value upon issuance with any changes in fair
value each period reported in earnings as determined by us based
upon a valuation report obtained from an independent third party
valuation firm. The impact of changes in fair value on earnings may
have an adverse effect on the market price of our Class A ordinary
shares. In addition, potential targets may seek a SPAC that does
not have warrants that are accounted for as a derivative liability,
which may make it more difficult for us to consummate an initial
Business Combination with a target business.
The grant of registration rights to our Sponsor may make it more
difficult to complete our initial business combination, and the
future exercise of such rights may adversely affect the market
price of our Class A ordinary shares.
Our Sponsor and its permitted transferees can demand that we
register the resale of the Class A ordinary shares into which
Founder Shares are convertible, the Private Placement Warrants and
the Class A ordinary shares issuable upon exercise of the Private
Placement Warrants, and warrants that may be issued upon conversion
of working capital loans and the Class A ordinary shares issuable
upon conversion of such warrants. The registration rights will be
exercisable with respect to the Founder Shares and the Private
Placement Warrants and the Class A ordinary shares issuable upon
exercise of such Private Placement Warrants. Pursuant to the
Forward Purchase Agreement, we have agreed to use reasonable best
efforts (i) to file within 30 days after the closing of the initial
business combination a registration statement with the SEC for a
secondary offering of the Forward Purchase Shares and the Forward
Purchase Warrants (and underlying Class A ordinary shares), (ii) to
cause such registration statement to be declared effective promptly
thereafter but in no event later than sixty (60) days after the
initial filing, (iii) to maintain the effectiveness of such
registration statement until the earliest of (A) the date on which
our Sponsor or its assignees cease to hold the securities covered
thereby, and (B) the date all of the securities covered thereby can
be sold publicly without restriction or limitation under Rule 144
under the Securities Act and (iv) after such registration statement
is declared effective, cause us to conduct firm commitment
underwritten offerings, subject to certain limitations. In
addition, the Forward Purchase Agreement provides for certain
“piggy-back” registration rights to the holders of Forward Purchase
Securities to include their securities in other registration
statements filed by us. We will bear the cost of registering these
securities. The registration and availability of such a significant
number of securities for trading in the public market may have an
adverse effect on the market price of our Class A ordinary shares.
In addition, the existence of the registration rights may make our
initial business combination more costly or difficult to conclude.
This is because the shareholders of the target business may
increase the equity stake they seek in the combined entity or ask
for more cash consideration to offset the negative impact on the
market price of our securities that is expected when the securities
owned by our Sponsor or its permitted transferees are registered
for resale.
Because we are neither limited to evaluating a target business in a
particular industry sector nor have we selected any specific target
businesses with which to pursue our initial business combination,
you will be unable to ascertain the merits or risks of any
particular target business’s operations.
We may pursue business combination opportunities in any sector,
except that we will not, under our Amended and Restated Memorandum
and Articles of Association, be permitted to effectuate our initial
business combination solely with another blank check company or
similar company with nominal operations. Because we have not yet
selected or approached any specific target business with respect to
a business combination, there is no basis to evaluate the possible
merits or risks of any particular target business’s operations,
results of operations, cash flows, liquidity, financial condition
or prospects. To the extent we complete our initial business
combination, we may be affected by numerous risks inherent in the
business operations with which we combine. For example, if we
combine with a financially unstable business or an entity lacking
an established record of sales or earnings, we may be affected by
the risks inherent in the business and operations of a financially
unstable or a development stage entity. Although our officers and
directors will endeavor to evaluate the risks inherent in a
particular target business, we cannot assure you that we will
properly ascertain or assess all of the significant risk factors or
that we will have adequate time to complete due diligence.
Furthermore, some of these risks may be outside of our control and
leave us with no ability to control or reduce the chances that
those risks will adversely impact a target business. We also cannot
assure you that an investment in our units will ultimately prove to
be more favorable to investors than a direct investment, if such
opportunity were available, in a business combination target.
Accordingly, any holders who choose to retain their securities
following the business combination could suffer a reduction in the
value of their securities. Such holders are unlikely to have a
remedy for such reduction in value.
We may seek acquisition opportunities in industries or sectors
which may or may not be outside of our management’s area of
expertise.
We will consider a business combination outside of our management’s
area of expertise if a business combination target is presented to
us and we determine that such candidate offers an attractive
acquisition opportunity for our company. Although our Management
will endeavor to evaluate the risks inherent in any particular
business combination target, we cannot assure you that we will
adequately ascertain or assess all of the significant risk factors.
We also cannot assure you that an investment in our units will not
ultimately prove to be less favorable to investors in our initial
public offering than a direct investment, if an opportunity were
available, in a business combination target. In the event we elect
to pursue an acquisition outside of the areas of our management’s
expertise, our management’s expertise may not be directly
applicable to its evaluation or operation, and the information
contained in this Report regarding the areas of our management’s
expertise would not be relevant to an understanding of the business
that we elect to acquire. As a result, our Management may not be
able to adequately ascertain or assess all of the significant risk
factors. Accordingly, any holders who choose to retain their
securities following the business combination could suffer a
reduction in the value of their securities. Such holders are
unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that we
believe are important in evaluating prospective target businesses,
we may enter into our initial business combination with a target
that does not meet such criteria and guidelines, and as a result,
the target business with which we enter into our initial business
combination may not have attributes entirely consistent with our
general criteria and guidelines.
Although we have identified general criteria and guidelines for
evaluating prospective target businesses, it is possible that a
target business with which we enter into our initial business
combination will not have all of these positive attributes. If we
complete our initial business combination with a target that does
not meet some or all of these guidelines, such combination may not
be as successful as a combination with a business that does meet
all of our general criteria and guidelines. In addition, if we
announce a prospective business combination with a target that does
not meet our general criteria and guidelines, a greater number of
shareholders may exercise their redemption rights, which may make
it difficult for us to meet any closing condition with a target
business that requires us to have a minimum net worth or a certain
amount of cash. In addition, if shareholder approval of the
transaction is required by applicable law or stock exchange listing
requirements, or we decide to obtain shareholder approval for
business or other reasons, it may be more difficult for us to
attain shareholder approval of our initial business combination if
the target business does not meet our general criteria and
guidelines. If we have not consummated our initial business
combination within the required time period, our Public
Shareholders may receive only approximately $10.00 per Public
Share, or less in certain circumstances, on the liquidation of our
trust account and our warrants will expire worthless.
We are not required to obtain an opinion from an independent
accounting or investment banking firm, and consequently, you may
have no assurance from an independent source that the price we are
paying for the business is fair to our shareholders from a
financial point of view.
Unless we complete our initial business combination with an
affiliated entity, we are not required to obtain an opinion from an
independent investment banking firm or another independent entity
that commonly renders valuation opinions that the price we are
paying is fair to our shareholders from a financial point of view.
If no opinion is obtained, our shareholders will be relying on the
judgment of our board of directors, who will determine fair market
value based on standards generally accepted by the financial
community. Such standards used will be disclosed in our proxy
solicitation or tender offer materials, as applicable, related to
our initial business combination.
We may issue additional Class A ordinary shares or preference
shares to complete our initial business combination or under an
employee incentive plan after completion of our initial business
combination. We may also issue Class A ordinary shares upon the
conversion of the Founder Shares at a ratio greater than one-to-one
at the time of our initial business combination as a result of the
anti-dilution provisions contained in our Amended and Restated
Memorandum and Articles of Association. Any such issuances would
dilute the interest of our shareholders and likely present other
risks.
Our Amended and Restated Memorandum and Articles of Association
authorizes the issuance of up to 300,000,000 Class A ordinary
shares, par value $0.0001 per share, 30,000,000 Class B ordinary
shares, par value $0.0001 per share, and 1,000,000 preference
shares, par value $0.0001 per share. Immediately after our initial
public offering, there were 277,000,000 and 23,000,000 authorized
but unissued Class A ordinary shares and Class B ordinary shares,
respectively, available for issuance which amount does not take
into account shares reserved for issuance upon exercise of
outstanding warrants or shares issuable upon conversion of the
Class B ordinary shares, if any. The Class B ordinary shares will
automatically convert into Class A ordinary shares (which such
Class A ordinary shares delivered upon conversion will not have any
redemption rights or be entitled to liquidating distributions from
the trust account if we fail to consummate an initial business
combination) at the time of our initial business combination or
earlier at the option of the holders thereof as described herein
and in our Amended and Restated Memorandum and Articles of
Association. Immediately after our initial public offering, there
will be no preference shares issued and outstanding.
We may issue a substantial number of additional Class A ordinary
shares or preference shares to complete our initial business
combination or under an employee incentive plan after completion of
our initial business combination. We may also issue Class A
ordinary shares in connection with our redeeming the warrants as
described in “Description of Securities — Warrants — Public
Shareholders’ and Forward Purchase Warrants” or upon conversion of
the Class B ordinary shares at a ratio greater than one-to-one at
the time of our initial business combination as a result of the
anti-dilution provisions as set forth herein. However, our Amended
and Restated Memorandum and Articles of Association provide, among
other things, that prior to or in connection with our initial
business combination, we may not issue additional shares that would
entitle the holders thereof to (i) receive funds from the trust
account or (ii) vote on any initial business combination or on any
other proposal presented to shareholders prior to or in connection
with the completion of an initial business combination. 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. The issuance of additional ordinary or preference
shares • may significantly dilute the equity interest of investors
in our initial public offering, which dilution would increase if
the anti-dilution provisions in the Class B ordinary shares
resulted in the issuance of Class A ordinary shares on a greater
than one-to-one basis upon conversion of the Class B ordinary
shares;
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may subordinate the rights of
holders of Class A ordinary shares if preference shares are issued
with rights senior to those afforded our Class A ordinary
shares; |
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could cause a change in control if
a substantial number of Class A ordinary shares are issued, which
may affect, among other things, our ability to use our net
operating loss carry forwards, if any, and could result in the
resignation or removal of our present officers and directors; |
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may have the effect of delaying or
preventing a change of control of us by diluting the share
ownership or voting rights of a person seeking to obtain control of
us; |
|
● |
may adversely affect prevailing
market prices for our units, Class A ordinary shares and/or
warrants; and |
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● |
may not result in adjustment to the
exercise price of our warrants. |
Unlike some other similarly structured blank check companies, our
Sponsor will receive additional Class A ordinary shares if we issue
shares to consummate an initial business combination.
The Founder Shares will automatically convert into Class A ordinary
shares (which such Class A ordinary shares delivered upon
conversion will not have any redemption rights or be entitled to
liquidating distributions from the trust account if we fail to
consummate an initial business combination) at the time of our
initial business combination or earlier at the option of the
holders thereof at a ratio such that the number of Class A ordinary
shares issuable upon conversion of all Founder Shares will equal,
in the aggregate, on an as-converted basis, 20% of the sum of (i)
the total number of Ordinary Shares issued and outstanding upon
completion of our initial public offering (less the total number of
Class B ordinary shares forfeited (if any) by the Sponsor to the
extent less than 5,000,000 units are purchased under the Forward
Purchase Agreement) and the number of Class A ordinary shares that
may be sold pursuant to the Forward Purchase Agreement, if any,
plus (ii) 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
the initial business combination, excluding any Class A ordinary
shares or equity-linked securities exercisable for or convertible
into Class A ordinary shares issued, deemed issued, or to be
issued, to any seller in the initial business combination, any
Private Placement Warrants issued to our Sponsor, any of its
affiliates or any members of our Management Team upon conversion of
working capital loans and any Forward Purchase Warrants. In no
event will the Class B ordinary shares convert into Class A
ordinary shares at a rate of less than one-to-one. This is
different than some other similarly structured blank check
companies in which the Initial Shareholders will only be issued an
aggregate of 20% of the total number of shares to be outstanding
prior to the initial business combination.
Resources could be wasted in researching acquisitions that are not
completed, which could materially adversely affect subsequent
attempts to locate and acquire or merge with another business. If
we have not consummated our initial business combination within the
required time period, our Public Shareholders may receive only
approximately $10.00 per Public Share, or less in certain
circumstances, on the liquidation of our trust account and our
warrants will expire worthless.
We anticipate that the investigation of each specific target
business and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If we decide not to complete a
specific initial business combination, the costs incurred up to
that point for the proposed transaction likely would not be
recoverable. Furthermore, if we reach an agreement relating to a
specific target business, we may fail to complete our initial
business combination for any number of reasons including those
beyond our control. Any such event will result in a loss to us of
the related costs incurred which could materially adversely affect
subsequent attempts to locate and acquire or merge with another
business. If we have not consummated our initial business
combination within the required time period, our Public
Shareholders may receive only approximately $10.00 per Public
Share, or less in certain circumstances, on the liquidation of our
trust account and our warrants will expire worthless.
We may be a passive foreign investment company, or “PFIC,” which
could result in adverse U.S. federal income tax consequences to
U.S. investors.
If we are a PFIC for any taxable year (or portion thereof) that is
included in the holding period of a U.S. Holder of our Class A
ordinary shares or warrants, the U.S. Holder may be subject to
adverse U.S. federal income tax consequences and may be subject to
additional reporting requirements. Our PFIC status for our current
and subsequent taxable years may depend on whether we qualify for
the PFIC start-up exception. Depending on the particular
circumstances the application of the start-up exception may be
subject to uncertainty, and there cannot be any assurance that we
will qualify for the start-up exception. Accordingly, there can be
no assurances with respect to our status as a PFIC for our current
taxable year or any subsequent taxable year. Our actual PFIC status
for any taxable year, however, will not be determinable until after
the end of such taxable year. Moreover, if we determine we are a
PFIC for any taxable year, upon written request, we will endeavor
to provide to a U.S. Holder such information as the Internal
Revenue Service (“IRS”) may require, including a PFIC Annual
Information Statement, in order to enable the U.S. Holder to make
and maintain a “qualified electing fund” election, but there can be
no assurance that we will timely provide such required information,
and such election would be unavailable with respect to our warrants
in all cases. We urge U.S. investors to consult their tax advisors
regarding the possible application of the PFIC rules.
We may reincorporate in another jurisdiction in connection with our
initial business combination and such reincorporation may result in
taxes imposed on shareholders.
We may, in connection with our initial business combination and
subject to requisite shareholder approval under the Companies Law,
reincorporate in the jurisdiction in which the target company or
business is located or in another jurisdiction. The transaction may
require a shareholder or warrant holder to recognize taxable income
in the jurisdiction in which the shareholder or warrant holder is a
tax resident or in which its members are resident if it is a tax
transparent entity. We do not intend to make any cash distributions
to shareholders or warrant holders to pay such taxes. Shareholders
or warrant holders may be subject to withholding taxes or other
taxes with respect to their ownership of us after the
reincorporation.
After our initial business combination, it is possible that a
majority of our directors and officers will live outside the United
States and all of our assets will be located outside the United
States; therefore investors may not be able to enforce federal
securities laws or their other legal rights.
It is possible that after our initial business combination, a
majority of our directors and officers will reside outside of the
United States and all of our assets will be located outside of the
United States. As a result, it may be difficult, or in some cases
not possible, for investors in the United States to enforce their
legal rights, to effect service of process upon all of our
directors or officers or to enforce judgments of United States
courts predicated upon civil liabilities and criminal penalties on
our directors and officers under United States laws. In particular,
there is uncertainty as to whether the courts of the Cayman Islands
or any other applicable jurisdictions would recognize and enforce
judgments of U.S. courts obtained against us or our directors or
officers predicated upon the civil liability provisions of the
securities laws of the United States or any state in the United
States or entertain original actions brought in the Cayman Islands
or any other applicable jurisdiction’s courts against us or our
directors or officers predicated upon the securities laws of the
United States or any state in the United States.
We are dependent upon our executive officers and directors and
their loss could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of
individuals and, in particular, our executive officers and
directors. Our operations are dependent upon a relatively small
group of individuals and, in particular, our executive officers and
directors. We believe that our success depends on the continued
service of our officers and directors, at least until we have
completed our initial business combination. In addition, our
executive officers and directors are not required to commit any
specified amount of time to our affairs and, accordingly, will have
conflicts of interest in allocating their time among various
business activities, including identifying potential business
combinations and monitoring the related due diligence. We do not
have an employment agreement with, or key-man insurance on the life
of, any of our directors or executive officers.
The unexpected loss of the services of one or more of our directors
or executive officers could have a detrimental effect on us.
Our ability to successfully effect our initial business combination
and to be successful thereafter will be totally dependent upon the
efforts of our key personnel, some of whom may join us following
our initial business combination. The loss of key personnel could
negatively impact the operations and profitability of our
post-combination business.
Our ability to successfully effect our initial business combination
is dependent upon the efforts of our key personnel. The role of our
key personnel in the target business, however, cannot presently be
ascertained. Although some of our key personnel may remain with the
target business in senior management, director or advisory
positions following our initial business combination, it is likely
that some or all of the management of the target business will
remain in place. While we closely scrutinize any individuals we
engage after our initial business combination, we cannot assure you
that our assessment of these individuals will prove to be correct.
These individuals may be unfamiliar with the requirements of
operating a company regulated by the SEC, which could cause us to
have to expend time and resources helping them become familiar with
such requirements.
Our key personnel may negotiate employment or consulting agreements
with a target business in connection with a particular business
combination, and a particular business combination may be
conditioned on the retention or resignation of such key personnel.
These agreements may provide for them to receive compensation
following our initial business combination and as a result, may
cause them to have conflicts of interest in determining whether a
particular business combination is the most advantageous.
Our key personnel may be able to remain with our company after the
completion of our initial business combination only if they are
able to negotiate employment or consulting agreements in connection
with the business combination. Such negotiations would take place
simultaneously with the negotiation of the business combination and
could provide for such individuals to receive compensation in the
form of cash payments and/or our securities for services they would
render to us after the completion of the business combination. Such
negotiations also could make such key personnel’s retention or
resignation a condition to any such agreement. The personal and
financial interests of such individuals may influence their
motivation in identifying and selecting a target business. In
addition, our Sponsor, upon and following 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.
We may have a limited ability to assess the management of a
prospective target business and, as a result, may affect our
initial business combination with a target business whose
management may not have the skills, qualifications or abilities to
manage a public company.
When evaluating the desirability of effecting our initial business
combination with a prospective target business, our ability to
assess the target business’s management may be limited due to a
lack of time, resources or information. Our assessment of the
capabilities of the target business’s management, therefore, may
prove to be incorrect and such management may lack the skills,
qualifications or abilities we suspected. Should the target
business’s management not possess the skills, qualifications or
abilities necessary to manage a public company, the operations and
profitability of the post-combination business may be negatively
impacted. Accordingly, any holders who choose to retain their
securities following the business combination could suffer a
reduction in the value of their securities. Such holders are
unlikely to have a remedy for such reduction in value.
The officers and directors of an acquisition candidate may resign
upon completion of our initial business combination. The loss of a
business combination target’s key personnel could negatively impact
the operations and profitability of our post-combination
business.
The role of an acquisition candidate’s key personnel upon the
completion of our initial business combination cannot be
ascertained at this time. Although we contemplate that certain
members of an acquisition candidate’s management team will remain
associated with the acquisition candidate following our initial
business combination, it is possible that members of the management
of an acquisition candidate will not wish to remain in place.
Our executive officers and directors will allocate their time to
other businesses thereby causing conflicts of interest in their
determination as to how much time to devote to our affairs. This
conflict of interest could have a negative impact on our ability to
complete our initial business combination.
Our executive 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 executive officers is engaged in several other business
endeavors for which he may be entitled to substantial compensation,
and our executive officers are not obligated to contribute any
specific number of hours per week to our affairs. Our independent
directors also serve as officers and board members for other
entities. If our executive officers’ and directors’ other business
affairs require them to devote substantial amounts of time to such
affairs in excess of their current commitment levels, it could
limit their ability to devote time to our affairs which may have a
negative impact on our ability to complete our initial business
combination. For a complete discussion of our executive officers’
and directors’ other business affairs, please see “Management —
Officers and Directors.”
Our officers and directors presently have, and any of them in the
future may have, additional, fiduciary or contractual obligations
to other entities, including another blank check company, and,
accordingly, may have conflicts of interest in determining to which
entity a particular business opportunity should be presented.
Until we consummate our initial business combination, we intend to
engage in the business of identifying and combining with one or
more businesses or entities. Each of our officers and directors
presently has, and any of them in the future may have, additional
fiduciary or contractual obligations to other entities pursuant to
which such officer or director is or will be required to present a
business combination opportunity to such entity. Accordingly, they
may have conflicts of interest in determining to which entity a
particular business opportunity should be presented. These
conflicts may not be resolved in our favor and a potential target
business may be presented to another entity prior to its
presentation to us.
In addition, our Sponsor, officers and directors may in the future
become affiliated with other blank check companies that may have
acquisition objectives that are similar to ours. Accordingly, they
may have conflicts of interest in determining to which entity a
particular business opportunity should be presented. These
conflicts may not be resolved in our favor and a potential target
business may be presented to such other blank check companies prior
to its presentation to us. Our Amended and Restated Memorandum and
Articles of Association provide that, to the maximum extent
permitted by law, we renounce any interest or expectancy in, or in
being offered an opportunity to participate in any business
combination opportunity which may be a corporate opportunity for
both us and our Sponsor and another entity, including any entities
managed by our Sponsor or its affiliates and any companies in which
our Sponsor or such entities have invested about which any of our
officers or directors acquires knowledge and we will waive any
claim or cause of action we may have in respect thereof. In
addition, our amended and restated articles of association contain
provisions to exculpate and indemnify, to the maximum extent
permitted by law, such persons in respect of any liability,
obligation or duty to the company that may arise as a consequence
of such persons becoming aware of any business opportunity or
failing to present such business opportunity.
For a complete discussion of our executive officers’ and directors’
business affiliations and the potential conflicts of interest that
you should be aware of, please see “Management — Officers and
Directors,” “Management — Conflicts of Interest” and “Certain
Relationships and Related Party Transactions.”
Our executive officers, directors, security holders and their
respective affiliates may have competitive pecuniary interests that
conflict with our interests.
We have not adopted a policy that expressly prohibits our
directors, executive officers, security holders or affiliates from
having a direct or indirect pecuniary or financial interest in any
investment to be acquired or disposed of by us or in any
transaction to which we are a party or have an interest. In fact,
we may enter into a business combination with a target business
that is affiliated with our Sponsor, our directors or executive
officers, although we do not intend to do so. Nor do we have a
policy that expressly prohibits any such persons from engaging for
their own account in business activities of the types conducted by
us. Accordingly, such persons or entities may have a conflict
between their interests and ours.
The personal and financial interests of our directors and officers
may influence their motivation in timely identifying and selecting
a target business and completing a business combination.
Consequently, our directors’ and officers’ discretion in
identifying and selecting a suitable target business may result in
a conflict of interest when determining whether the terms,
conditions and timing of a particular business combination are
appropriate and in the company’s best interests. If this were the
case and the directors fail to act in accordance with their
fiduciary duties to us as a matter of Cayman Islands law, we may
have a claim against such individuals. See the section titled
“Description of Securities — Certain Differences in Corporate Law —
Shareholders’ Suits” for further information on the ability to
bring such claims. However, we might not ultimately be successful
in any claim we may make against them for such reason.
We may engage in a business combination with one or more target
businesses that have relationships with entities that may be
affiliated with our sponsor, executive officers, directors or
existing holders which may raise potential conflicts of
interest.
In light of the involvement of our Sponsor, executive officers and
directors with other entities, we may decide to acquire one or more
businesses affiliated with our Initial Shareholders. Our directors
also serve as officers and board members for other entities,
including, without limitation, those described under “Management —
Conflicts of Interest.” Our Sponsor, officers and directors may
Sponsor, form or participate in other blank check companies similar
to ours during the period in which we are seeking an initial
business combination. Such entities may compete with us for
business combination opportunities. Our Sponsor, officers and
directors are not currently aware of any specific opportunities for
us to complete our initial business combination with any entities
with which they are affiliated, and there have been no substantive
discussions concerning a business combination with any such entity
or entities. Although we will not be specifically focusing on, or
targeting, any transaction with any affiliated entities, we would
pursue such a transaction if we determined that such affiliated
entity met our criteria and guidelines for a business combination
as set forth in “Proposed Business — Effecting Our Initial Business
Combination — Evaluation of a Target Business and Structuring of
Our Initial Business Combination” and such transaction was approved
by a majority of our independent and disinterested directors.
Despite our agreement to obtain an opinion from an independent
investment banking firm or another independent entity that commonly
renders valuation opinions regarding the fairness to our company
from a financial point of view of a business combination with one
or more domestic or international businesses affiliated with our
Initial Shareholders, potential conflicts of interest still may
exist and, as a result, the terms of the business combination may
not be as advantageous to our Public Shareholders as they would be
absent any conflicts of interest.
Since our sponsor, executive officers and directors will lose their
entire investment in us if our initial business combination is not
completed (other than with respect to Public Shares they may have
acquired during or may acquire after our initial public offering),
a conflict of interest may arise in determining whether a
particular business combination target is appropriate for our
initial business combination.
On October 1, 2020, our Sponsor paid $25,000, or approximately
$0.004 per share, to cover certain expenses on our behalf in
consideration of 5,750,000 Class B ordinary shares, par value
$0.0001. Prior to the initial investment in the company of $25,000
by the Sponsor, the company had no assets, tangible or intangible.
The per share price of the Founder Shares was determined by
dividing the amount contributed to the company by the number of
Founder Shares issued. In December 2020, we effected a share
capitalization with respect to our Class B ordinary shares
resulting in our Sponsor holding 7,000,000 Founder Shares. Our
Sponsor subsequently transferred 25,000 Class B ordinary shares to
each of Joe Baker, Kathleen Griffin Stack, Tim O’Connor and Michael
Weinstein, our independent directors at the the time of our initial
public offering. Upon Joe Baker’s resignation, the Sponsor
repurchased the 25,000 Class B ordinary shares previously
transferred to him by our Sponsor.
The Founder Shares will be worthless if we do not complete an
initial business combination. Our Sponsor purchased an aggregate of
6,600,000 Private Placement Warrants, each exercisable to purchase
one Class A ordinary share at $11.50 per share, subject to
adjustment, for an aggregate purchase price of $5,775,500, in a
private placement that closed simultaneously with the closing of
our initial public offering. Certain of these Private Placement
Warrants are subject to forfeiture as described under “Summary —
The Offering — GEPT arrangements”. If we do not consummate an
initial business within 24 months from the closing of our initial
public offering, the Private Placement Warrants will expire
worthless. The personal and financial interests of our executive
officers and directors may influence their motivation in
identifying and selecting a target business combination, completing
an initial business combination and influencing the operation of
the business following the initial business combination. This risk
may become more acute as the 24-month anniversary of the closing of
our initial public offering nears, which is the deadline for our
consummation of an initial business combination.
We may issue notes or other debt securities, or otherwise incur
substantial debt, to complete a business combination, which may
adversely affect our leverage and financial condition and thus
negatively impact the value of our shareholders’ investment in
us.
Although we have no commitments as of the date of this Report to
issue any notes or other debt securities, or to otherwise incur
outstanding debt following our initial public offering, we may
choose to incur substantial debt to complete our initial business
combination. We and our officers have agreed that we will not incur
any indebtedness unless we have obtained from the lender a waiver
of any right, title, interest or claim of any kind in or to the
monies held in the trust account. As such, no issuance of debt will
affect the per share amount available for redemption from the trust
account. Nevertheless, the incurrence of debt could have a variety
of negative effects, including:
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default and foreclosure on our
assets if our operating revenues after an initial business
combination are insufficient to repay our debt obligations; |
|
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acceleration of our obligations to
repay the indebtedness even if we make all principal and interest
payments when due if we breach certain covenants that require the
maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant; |
|
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our immediate payment of all
principal and accrued interest, if any, if the debt security is
payable on demand; |
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our inability to obtain necessary
additional financing if the debt security contains covenants
restricting our ability to obtain such financing while the debt
security is outstanding; |
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our inability to pay dividends on
our Class A ordinary shares; |
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using a substantial portion of our
cash flow to pay principal and interest on our debt, which will
reduce the funds available for dividends on our Class A ordinary
shares if declared, expenses, capital expenditures, acquisitions
and other general corporate purposes; |
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limitations on our flexibility in
planning for and reacting to changes in our business and in the
industry in which we operate; |
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increased vulnerability to adverse
changes in general economic, industry and competitive conditions
and adverse changes in government regulation; and |
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limitations on our ability to
borrow additional amounts for expenses, capital expenditures,
acquisitions, debt service requirements, execution of our strategy
and other purposes and other disadvantages compared to our
competitors who have less debt. |
We may only be able to complete one business combination with the
proceeds of our initial public offering, the sale of the Private
Placement Warrants and the $824,500 paid by GEPT under the Forward
Purchase Agreement at the closing of our initial public offering,
which will cause us to be solely dependent on a single business
which may have a limited number of products or services. This lack
of diversification may negatively impact our operations and
profitability.
The net proceeds from our initial public offering, the sale of the
Private Placement Warrants and the $824,500 paid by GEPT under the
Forward Purchase Agreement at the closing of our initial public
offering provided us with approximately $221.9 million that we may
use to complete our initial business combination (such amount
representing the amount of proceeds held in the trust account less
approximately $8.1 million of deferred underwriting fees).
We may effectuate our initial business combination with a
single-target business or multiple-target businesses simultaneously
or within a short period of time. However, we may not be able to
effectuate our initial business combination with more than one
target business because of various factors, including the existence
of complex accounting issues and the requirement that we prepare
and file pro forma financial statements with the SEC that present
operating results and the financial condition of several target
businesses as if they had been operated on a combined basis. By
completing our initial business combination with only a single
entity, our lack of diversification may subject us to numerous
economic, competitive and regulatory developments. Further, we
would not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other
entities which may have the resources to complete several business
combinations in different industries or different areas of a single
industry. Accordingly, the prospects for our success may be:
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solely dependent upon the
performance of a single business, property or asset; or |
|
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dependent upon the development or
market acceptance of a single or limited number of products,
processes or services. |
This lack of diversification may subject us to numerous economic,
competitive and regulatory risks, any or all of which may have a
substantial adverse impact upon the particular industry in which we
may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations
with multiple prospective targets, which may hinder our ability to
complete our initial business combination and give rise to
increased costs and risks that could negatively impact our
operations and profitability.
If we determine to simultaneously acquire several businesses that
are owned by different sellers, we will need for each of such
sellers to agree that our purchase of its business is contingent on
the simultaneous closings of the other business combinations, which
may make it more difficult for us, and delay our ability, to
complete our initial business combination. With multiple business
combinations, we could also face additional risks, including
additional burdens and costs with respect to possible multiple
negotiations and due diligence (if there are multiple sellers) and
the additional risks associated with the subsequent assimilation of
the operations and services or products of the acquired companies
in a single operating business. If we are unable to adequately
address these risks, it could negatively impact our profitability
and results of operations.
We may attempt to complete our initial business combination with a
private company about which little information is available, which
may result in a business combination with a company that is not as
profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek to effectuate our
initial business combination with a privately held company. By
definition, very little public information generally exists about
private companies, and we could be required to make our decision on
whether to pursue a potential initial business combination on the
basis of limited information, which may result in a business
combination with a company that is not as profitable as we
suspected, if at all.
Our management may not be able to maintain control of a target
business after our initial business combination. Upon the loss of
control of a target business, new management may not possess the
skills, qualifications or abilities necessary to profitably operate
such business.
We may structure our initial business combination so that the
post-transaction company in which our public shareholders own
shares will own less than 100% of the equity interests or assets of
a target business, but we will only complete such business
combination if the post-transaction company owns or acquires 50% or
more of the outstanding voting securities of the target or
otherwise acquires a controlling interest in the target sufficient
for us not to be required to register as an investment company
under the Investment Company Act. We will not consider any
transaction that does not meet such criteria. Even if the
post-transaction company owns 50% or more of the voting securities
of the target, our shareholders prior to our initial business
combination may collectively own a minority interest in the post
business combination company, depending on valuations ascribed to
the target and us in the business combination. For example, we
could pursue a transaction in which we issue a substantial number
of new Class A ordinary shares in exchange for all of the
outstanding capital stock of a target. In this case, we would
acquire a 100% interest in the target. However, as a result of the
issuance of a substantial number of new Class A ordinary shares,
our shareholders immediately prior to such transaction could own
less than a majority of our outstanding Class A ordinary shares
subsequent to such transaction. In addition, other minority
shareholders may subsequently combine their holdings resulting in a
single person or group obtaining a larger share of the company’s
shares than we initially acquired. Accordingly, this may make it
more likely that our management will not be able to maintain
control of the target business.
We may seek business combination opportunities with a high degree
of complexity that require significant operational improvements,
which could delay or prevent us from achieving our desired
results.
We may seek business combination opportunities with large, highly
complex companies that we believe would benefit from operational
improvements. While we intend to implement such improvements, to
the extent that our efforts are delayed or we are unable to achieve
the desired improvements, the business combination may not be as
successful as we anticipate.
To the extent we complete our initial business combination with a
large complex business or entity with a complex operating
structure, we may also be affected by numerous risks inherent in
the operations of the business with which we combine, which could
delay or prevent us from implementing our strategy. Although our
management team will endeavor to evaluate the risks inherent in a
particular target business and its operations, we may not be able
to properly ascertain or assess all of the significant risk factors
until we complete our business combination. If we are not able to
achieve our desired operational improvements, or the improvements
take longer to implement than anticipated, we may not achieve the
gains that we anticipate. Furthermore, some of these risks and
complexities may be outside of our control and leave us with no
ability to control or reduce the chances that those risks and
complexities will adversely impact a target business. Such
combination may not be as successful as a combination with a
smaller, less complex organization.
We do not have a specified maximum redemption threshold. The
absence of such a redemption threshold may make it possible for us
to complete our initial business combination with which a
substantial majority of our shareholders do not agree.
Our Amended and Restated Memorandum and Articles of Association do
not provide a specified maximum redemption threshold, except that
in no event will we redeem our Public Shares in an amount that
would cause our net tangible assets to be less than $5,000,001 (so
that we do not then become subject to the SEC’s “penny stock”
rules). As a result, we may be able to complete our initial
business combination even though a substantial majority of our
Public Shareholders do not agree with the transaction and have
redeemed their shares or, if we seek shareholder approval of our
initial business combination and do not conduct redemptions in
connection with our initial business combination pursuant to the
tender offer rules, have entered into privately negotiated
agreements to sell their shares to our Sponsor, officers,
directors, advisors or their affiliates. 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 business combination exceed the aggregate amount of
cash available to us, we will not complete the business combination
or redeem any shares, all Class A ordinary shares submitted for
redemption will be returned to the holders thereof, and we instead
may search for an alternate business combination.
In order to effectuate an initial business combination, blank check
companies have, in the recent past, amended various provisions of
their charters and other governing instruments, including their
warrant agreements. We cannot assure you that we will not seek to
amend our Amended and Restated Memorandum and Articles of
Association or governing instruments in a manner that will make it
easier for us to complete our initial business combination that our
shareholders may not support.
In order to effectuate a business combination, blank check
companies have, in the recent past, amended various provisions of
their charters and governing instruments, including their warrant
agreements. For example, blank check companies have amended the
definition of business combination, increased redemption
thresholds, extended the time to consummate an initial business
combination and, with respect to their warrants, amended their
warrant agreements to require the warrants to be exchanged for cash
and/or other securities. Amending our Amended and Restated
Memorandum and Articles of Association require at least a Special
Resolution of our shareholders as a matter of Cayman Islands law,
and amending our warrant agreement will require a vote of holders
of at least 65% of the public warrants and, solely with respect to
any amendment to the terms of the Private Placement Warrants or any
provision of the warrant agreement with respect to the Private
Placement Warrants, 65% of the number of the then outstanding
Private Placement Warrants. In addition, our Amended and Restated
Memorandum and Articles of Association require us to provide our
Public Shareholders with the opportunity to redeem their Public
Shares for cash if we propose an amendment to our Amended and
Restated Memorandum and Articles of Association (A) that would
modify the substance or timing of our obligation to provide holders
of our Class A ordinary shares the right to have their shares
redeemed in connection with our initial business combination or to
redeem 100% of our Public Shares if we do not complete our initial
business combination within 24 months from the closing of our
initial public offering or (B) with respect to any other provision
relating to the rights of holders of our Class A ordinary shares.
To the extent any of such amendments would be deemed to
fundamentally change the nature of any of the securities offered
through the registration statement we would register, or seek an
exemption from registration for, the affected securities.
The provisions of our Amended and Restated Memorandum and Articles
of Association that relate to the rights of holders of our Class A
ordinary shares (and corresponding provisions of the agreement
governing the release of funds from our trust account) may be
amended with the approval of a Special Resolution which requires a
lower amendment threshold than that of some other blank check
companies. It may be easier for us, therefore, to amend our Amended
and Restated Memorandum and Articles of Association to facilitate
the completion of an initial business combination that some of our
shareholders may not support.
Some other blank check companies have a provision in their charter
which prohibits the amendment of certain of its provisions,
including those which relate to the rights of a company’s
shareholders, without approval by a certain percentage of the
company’s shareholders. In those companies, amendment of these
provisions typically requires approval by between 90% and 100% of
the company’s shareholders. Our Amended and Restated Memorandum and
Articles of Association provide that any of its provisions related
to the rights of holders of our Class A ordinary shares (including
the requirement to deposit proceeds of our initial public offering
and the private placement of warrants into the trust account and
not release such amounts except in specified circumstances, and to
provide redemption rights to Public Shareholders as described
herein) may be amended if approved by Special Resolution, and
corresponding provisions of the trust agreement governing the
release of funds from our trust account may be amended if approved
by holders of at least 65% of our Ordinary Shares; provided that
the provisions of our Amended and Restated Memorandum and Articles
of Association governing the appointment or removal of directors
prior to our initial business combination may only be amended by a
Special Resolution passed by not less than 90% of our Ordinary
Shares who attend and vote at our shareholder meeting. Our Sponsor
and its permitted transferees, if any, who collectively
beneficially owned, on an as-converted basis, 20% of our Class A
ordinary shares as of the closing of our initial public offering
(assuming they do not purchase any units in our initial public
offering), will participate in any vote to amend our Amended and
Restated Memorandum and Articles of Association and/or trust
agreement and will have the discretion to vote in any manner they
choose. As a result, we may be able to amend the provisions of our
Amended and Restated Memorandum and Articles of Association which
govern our pre-business combination behavior more easily than some
other blank check companies, and this may increase our ability to
complete a business combination with which you do not agree. Our
shareholders may pursue remedies against us for any breach of our
Amended and Restated Memorandum and Articles of Association.
Our Sponsor, executive officers and directors have agreed, pursuant
to agreements with us, that they will not propose any amendment to
our Amended and Restated Memorandum and Articles of Association (A)
that would modify the substance or timing of our obligation to
provide holders of our Class A ordinary shares the right to have
their shares redeemed in connection with our initial business
combination or to redeem 100% of our Public Shares if we do not
complete our initial business combination within 24 months from the
closing of our initial public offering or (B) with respect to any
other provision relating to the rights of holders of our Class A
ordinary shares, in each case, unless we provide our Public
Shareholders with the opportunity to redeem their Class A ordinary
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
income taxes, if any, divided by the number of the then-outstanding
Public Shares. Our shareholders are not parties to, or third-party
beneficiaries of, these agreements and, as a result, will not have
the ability to pursue remedies against our Sponsor, executive
officers or directors for any breach of these agreements. As a
result, in the event of a breach, our shareholders would need to
pursue a shareholder derivative action, subject to applicable
law.
We may be unable to obtain additional financing to complete our
initial business combination or to fund the operations and growth
of a target business, which could compel us to restructure or
abandon a particular business combination. If we have not
consummated our initial business combination within the required
time period, our Public Shareholders may receive only approximately
$10.00 per Public Share, or less in certain circumstances, on the
liquidation of our trust account and our warrants will expire
worthless.
Although we believe that the net proceeds of our initial public
offering and the sale of the Private Placement Warrants will be
sufficient to allow us to complete our initial business
combination, because we have not yet selected any prospective
target business we cannot ascertain the capital requirements for
any particular transaction. If the net proceeds of our initial
public offering and the sale of the Private Placement Warrants
prove to be insufficient, either because of the size of our initial
business combination, the depletion of the available net proceeds
in search of a target business, the obligation to redeem for cash a
significant number of shares from shareholders who elect redemption
in connection with our initial business combination or the terms of
negotiated transactions to purchase shares in connection with our
initial business combination, we may be required to seek additional
financing or to abandon the proposed business combination. We
cannot assure you that such financing will be available on
acceptable terms, if at all. The current economic environment may
make it difficult for companies to obtain acquisition financing. To
the extent that additional financing proves to be unavailable when
needed to complete our initial business combination, we would be
compelled to either restructure the transaction or abandon that
particular business combination and seek an alternative target
business candidate. If we have not consummated our initial business
combination within the required time period, our Public
Shareholders may receive only approximately $10.00 per Public
Share, or less in certain circumstances, on the liquidation of our
trust account and our warrants will expire worthless. In addition,
even if we do not need additional financing to complete our initial
business combination, we may require such financing to fund the
operations or growth of the target business. The failure to secure
additional financing could have a material adverse effect on the
continued development or growth of the target business. None of our
officers, directors or shareholders is required to provide any
financing to us in connection with or after our initial business
combination.
Our sponsor controls a substantial interest in us and thus may
exert a substantial influence on actions requiring a shareholder
vote, potentially in a manner that you do not support.
Our Initial Shareholders own, on an as-converted basis, 20% of our
issued and outstanding Ordinary Shares (assuming it does not
purchase any units in our initial public offering). Accordingly, it
may exert a substantial influence on actions requiring a
shareholder vote, potentially in a manner that you do not support,
including amendments to our Amended and Restated Memorandum and
Articles of Association. If our Sponsor purchases any units in our
initial public offering or if our Sponsor purchases any additional
Class A ordinary shares in the aftermarket or in privately
negotiated transactions, this would increase its control. Neither
our Sponsor nor, to our knowledge, any of our officers or
directors, have any current intention to purchase additional
securities, other than as disclosed in our final prospectus related
to the initial public offering. Factors that would be considered in
making such additional purchases would include consideration of the
current trading price of our Class A ordinary shares. In addition,
our board of directors, whose members were elected by our Sponsor,
is and will be divided into three classes, each of which will
generally serve for a term of three years with only one class of
directors being elected in each year. We may not hold an annual
meeting of shareholders to elect new directors prior to the
completion of our initial business combination, in which case all
of the current directors will continue in office until at least the
completion of the business combination. If there is an annual
meeting, as a consequence of our “staggered” board of directors,
only a minority of the board of directors will be considered for
election and our Sponsor, because of its ownership position, will
control the outcome, as only holders of our Class B ordinary shares
will have the right to vote on the election of directors and to
remove directors prior to our initial business combination.
Accordingly, our Sponsor will continue to exert control at least
until the completion of 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.
Our Sponsor contributed $25,000, or approximately $0.004 per
Founder Share, and, accordingly, you will experience immediate and
substantial dilution from the purchase of our Class A ordinary
shares.
The difference between the public offering price per share
(allocating all of the unit purchase price to the Class A ordinary
share and none to the warrant included in the unit) and the pro
forma net tangible book value per Class A ordinary share after our
initial public offering constitutes the dilution to you and the
other investors in our initial public offering. Our Sponsor
acquired the Founder Shares at a nominal price, significantly
contributing to this dilution. Upon closing of our initial public
offering, and assuming no value is ascribed to the warrants
included in the units, you and the other Public Shareholders
incurred an immediate and substantial dilution of approximately
$9.39 per share, the difference between the pro forma net tangible
book value per share of $0.61 and the initial offering price of
$10.00 per unit. This dilution would increase to the extent that
the anti-dilution provisions of the Founder Shares result in the
issuance of Class A ordinary shares on a greater than one-to-one
basis upon conversion of the Founder Shares at the time of our
initial business combination and would become exacerbated to the
extent that Public Shareholders seek redemptions from the trust for
their Public Shares. In addition, because of the anti-dilution
protection in the Founder Shares, any equity or equity-linked
securities issued in connection with our initial business
combination would be disproportionately dilutive to our Class A
ordinary shares.
We may amend the terms of the warrants in a manner that may be
adverse to holders of public warrants with the approval by the
holders of at least 65% of the then-outstanding public warrants. As
a result, the exercise price of your warrants could be increased,
the exercise period could be shortened and the number of our Class
A ordinary shares purchasable upon exercise of a warrant could be
decreased, all without your approval.
Our warrants were issued in registered form under a warrant
agreement between Continental Stock Transfer & Trust Company,
as warrant agent, and us. The warrant agreement provides that the
terms of the warrants may be amended without the consent of any
holder for the purpose of (i) curing any ambiguity or correct any
mistake, including to conform the provisions of the warrant
agreement to the description of the terms of the warrants and the
warrant agreement set forth in the final prospectus related to the
initial public offering, or defective provision (ii) amending the
provisions relating to cash dividends on Ordinary Shares as
contemplated by and in accordance with the warrant agreement or
(iii) adding or changing any provisions with respect to matters or
questions arising under the warrant agreement as the parties to the
warrant agreement may deem necessary or desirable and that the
parties deem to not adversely affect the rights of the registered
holders of the warrants, provided that the approval by the holders
of at least 65% of the then-outstanding public warrants is required
to make any change that adversely affects the interests of the
registered holders of public warrants. Accordingly, we may amend
the terms of the public warrants in a manner adverse to a holder if
holders of at least 65% of the then-outstanding public warrants
approve of such amendment and, solely with respect to any amendment
to the terms of the Private Placement Warrants or any provision of
the warrant agreement with respect to the Private Placement
Warrants, 65% of the number of the then outstanding Private
Placement Warrants. Although our ability to amend the terms of the
public warrants with the consent of at least 65% of the
then-outstanding public warrants is unlimited, examples of such
amendments could be amendments to, among other things, increase the
exercise price of the warrants, convert the warrants into cash,
shorten the exercise period or decrease the number of Class A
ordinary shares purchasable upon exercise of a warrant.
Our warrant agreement designates the courts of the State of New
York or the United States District Court for the Southern District
of New York as the sole and exclusive forum for certain types of
actions and proceedings that may be initiated by holders of our
warrants, which could limit the ability of warrant holders to
obtain a favorable judicial forum for disputes with our
company.
Our warrant agreement provides that, subject to applicable law, (i)
any action, proceeding or claim against us arising out of or
relating in any way to the warrant agreement, including under the
Securities Act, will be brought and enforced in the courts of the
State of New York or the United States District Court for the
Southern District of New York, and (ii) that we irrevocably submit
to such jurisdiction, which jurisdiction shall be the exclusive
forum for any such action, proceeding or claim. We will waive any
objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant
agreement will not apply to suits brought to enforce any liability
or duty created by the Exchange Act or any other claim for which
the federal district courts of the United States of America are the
sole and exclusive forum. Any person or entity purchasing or
otherwise acquiring any interest in any of our warrants shall be
deemed to have notice of and to have consented to the forum
provisions in our warrant agreement. If any action, the subject
matter of which is within the scope of the forum provisions of the
warrant agreement, is filed in a court other than a court of the
State of New York or the United States District Court for the
Southern District of New York (a “foreign action”) in the name of
any holder of our warrants, such holder shall be deemed to have
consented to: (x) the personal jurisdiction of the state and
federal courts located in the State of New York in connection with
any action brought in any such court to enforce the forum
provisions (an “enforcement action”), and (y) having service of
process made upon such warrant holder in any such enforcement
action by service upon such warrant holder’s counsel in the foreign
action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability
to bring a claim in a judicial forum that it finds favorable for
disputes with our company, which may discourage such lawsuits.
Alternatively, if a court were to find this provision of our
warrant agreement inapplicable or unenforceable with respect to one
or more of the specified types of actions or proceedings, we may
incur additional costs associated with resolving such matters in
other jurisdictions, which could materially and adversely affect
our business, financial condition and results of operations and
result in a diversion of the time and resources of our Management
and board of directors.
We may redeem your unexpired warrants prior to their exercise at a
time that is disadvantageous to you, thereby making your warrants
worthless.
We have the ability to redeem the outstanding public warrants at
any time after they become exercisable and prior to their
expiration, at a price of $0.01 per warrant; provided that (i) the
closing price of our Class A ordinary shares equals or exceeds
$18.00 per share (as adjusted for adjustments to the number of
shares issuable upon exercise or the exercise price of a warrant as
described under the heading “Description of Securities —
Warrants — Public Shareholders’ and Forward Purchase Warrants —
Anti-Dilution Adjustments”) for any 20 trading days within a 30
trading-day period ending on the third trading day prior to proper
notice of such redemption and (ii) certain other conditions are
met. If and when the warrants become redeemable by us, we may
exercise our redemption right even if we are unable to register or
qualify the underlying securities for sale under all applicable
state securities laws. As a result, we may redeem the warrants as
set forth above even if the holders are otherwise unable to
exercise the warrants. Redemption of the outstanding warrants could
force you to (i) exercise your warrants and pay the exercise price
therefor at a time when it may be disadvantageous for you to do so,
(ii) sell your warrants at the then-current market price when you
might otherwise wish to hold your warrants or (iii) accept the
nominal redemption price which, at the time the outstanding
warrants are called for redemption, we expect would be
substantially less than the market value of your warrants.
In addition, we have the ability to redeem the outstanding public
warrants at any time 90 days after they become exercisable and
prior to their expiration, at a price of $0.10 per warrant upon a
minimum of 30 days’ prior written notice of redemption; provided
that (i) the closing price of our Class A ordinary shares equals or
exceeds $10.00 per share (as adjusted for adjustments to the number
of shares issuable upon exercise or the exercise price of a warrant
as described under the heading “Description of Securities —
Warrants — Public Shareholders’ and Forward Purchase Warrants —
Anti-Dilution Adjustments”) for any 20 trading days within a 30
trading-day period ending on the third trading day prior to proper
notice of such redemption and (ii) certain other conditions are
met, including that holders will be able to exercise their warrants
prior to redemption for a number of Class A ordinary shares
determined based on the redemption date and the fair market value
of our Class A ordinary shares. Please see “Description of
Securities — Warrants — Public Shareholders’ and Forward Purchase
Warrants — Redemption of warrants when the price per Class A
ordinary share equals or exceeds $10.00.” The value received upon
exercise of the warrants (1) may be less than the value the holders
would have received if they had exercised their warrants at a later
time where the underlying share price is higher and (2) may not
compensate the holders for the value of the warrants, including
because the number of Ordinary Shares received is capped at 0.365
Class A ordinary shares per warrant (subject to adjustment)
irrespective of the remaining life of the warrants.
None of the Private Placement Warrants or Forward Purchase Warrants
will be redeemable by us as (except as set forth under “Description
of Securities — Warrants — Public Shareholders’ and Forward
Purchase Warrants — Redemption of warrants when the price per Class
A ordinary share equals or exceeds $10.00”) so long as they are
held by our Sponsor, GEPT or their permitted transferees.
Our warrants may have an adverse effect on the market price of our
Class A ordinary shares and make it more difficult to effectuate
our initial business combination.
We issued warrants to purchase up to 11,500,000 Class A ordinary
shares as part of the units offered, and simultaneously with the
closing of our initial public offering, we issued in a private
placement an aggregate of 6,600,000 Private Placement Warrants,
each exercisable to purchase one Class A ordinary share at $11.50
per share, subject to adjustment. In addition, if the Sponsor, its
affiliates or a member of our Management Team makes any working
capital loans, it may convert up to $1,500,000 of such loans into
up to an additional 1,500,000 Private Placement Warrants, at the
price of $1.00 per warrant. We may also issue up to 2,125,000
Forward Purchase Warrants pursuant to the Forward Purchase
Agreement. We may also issue Class A ordinary shares in connection
with our redemption of our warrants.
To the extent we issue Ordinary Shares for any reason, including to
effectuate a business combination, the potential for the issuance
of a substantial number of additional Class A ordinary shares upon
exercise of these warrants could make us a less attractive
acquisition vehicle to a target business. Such warrants, when
exercised, will increase the number of issued and outstanding Class
A ordinary shares and reduce the value of the Class A ordinary
shares issued to complete the business transaction. Therefore, our
warrants may make it more difficult to effectuate a business
transaction or increase the cost of acquiring the target
business.
Because each unit contains one-half of one warrant and only a whole
warrant may be exercised, the units may be worth less than units of
other blank check companies.
Each unit contains one-half of one redeemable warrant. Pursuant to
the warrant agreement, no fractional warrants will be issued upon
separation of the units, and only whole units will trade. If, upon
exercise of the warrants, a holder would be entitled to receive a
fractional interest in a share, we will, upon exercise, round down
to the nearest whole number the number of Class A ordinary shares
to be issued to the warrant holder. This is different from other
offerings similar to ours whose units include one ordinary share
and one whole warrant to purchase one whole share. We have
established the components of the units in this way in order to
reduce the dilutive effect of the warrants upon completion of a
business combination since the warrants will be exercisable in the
aggregate for one-half of the number of shares compared to units
that each contain a whole warrant to purchase one whole share, thus
making us, we believe, a more attractive merger partner for target
businesses. Nevertheless, this unit structure may cause our units
to be worth less than if a unit included a warrant to purchase one
whole share.
A provision of our warrant agreement may make it more difficult for
us to consummate an initial business combination.
Unlike most blank check companies, if (i) we issue additional Class
A ordinary shares or equity-linked securities for capital raising
purposes in connection with the closing of our initial business
combination (excluding any Forward Purchase Securities) at a Newly
Issued Price of less than $9.20 per ordinary share, (ii) the
aggregate gross proceeds from such issuances represent more than
60% of the total equity proceeds, and interest thereon, available
for the funding of our initial business combination on the date of
the consummation of our initial business combination (net of
redemptions), and (iii) the Market Value is below $9.20 per share,
then the exercise price of the warrants will be adjusted to be
equal to 115% of the higher of the Market Value and the Newly
Issued Price, and the $18.00 per share redemption trigger prices
described below under “Description of Securities — Warrants —
Public Shareholders’ and Forward Purchase Warrants — Redemption of
warrants when the price per Class A ordinary share equals or
exceeds $18.00” and “Redemption of warrants when the price per
Class A ordinary share equals or exceeds $10.00” 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 described below under “Description of
Securities — Warrants — Public Shareholders’ and Forward Purchase
Warrants — Redemption of warrants when the price per Class A
ordinary share equals or exceeds $10.00” will be adjusted (to the
nearest cent) to be equal to the higher of the Market Value and the
Newly Issued Price. This may make it more difficult for us to
consummate an initial business combination with a target
business.
The determination of the offering price of our units and the size
of our initial public offering was more arbitrary than the pricing
of securities and size of an offering of an operating company in a
particular industry. You may have less assurance, therefore, that
the offering price of our units properly reflects the value of such
units than you would have in a typical offering of an operating
company.
Prior to our initial public offering there was no public market for
any of our securities. The public offering price of the units and
the terms of the warrants were negotiated between us and the
underwriters. In determining the size of our initial public
offering, management held customary organizational meetings with
the underwriters, both prior to our inception and thereafter, with
respect to the state of capital markets, generally, and the amount
the underwriters believed they reasonably could raise on our
behalf. Factors considered in determining the size of our initial
public offering, prices and terms of the units, including the Class
A ordinary shares and warrants underlying the units, included:
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the history and prospects of
companies whose principal business is the acquisition of other
companies; |
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prior offerings of those
companies; |
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our prospects for acquiring an
operating business at attractive values; |
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a review of debt-to-equity ratios
in leveraged transactions; |
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an assessment of our Management and
their experience in identifying operating companies; |
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general conditions of the
securities markets at the time of our initial public offering;
and |
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other factors as were deemed
relevant. |
Although these factors were considered, the determination of our
initial offering price was more arbitrary than the pricing of
securities of an operating company in a particular industry since
we have no historical operations or financial results.
A market for our securities may not develop, which would adversely
affect the liquidity and price of our securities.
The price of our securities may vary significantly due to one or
more potential business combinations and general market or economic
conditions. Furthermore, an active trading market for our
securities may never develop or, if developed, it may not be
sustained. You may be unable to sell your securities unless a
market can be established and sustained.
Because
we must furnish our shareholders with target business financial
statements, we may lose the ability to complete an otherwise
advantageous initial business combination with some prospective
target businesses.
The
federal proxy rules require that a proxy statement with respect to
a vote on a business combination meeting certain financial
significance tests include historical and/or pro forma financial
statement disclosure in periodic reports. We will include the same
financial statements disclosure in connection with our tender offer
documents, whether or not they are required under the tender offer
rules. These financial statements may be required to be prepared in
accordance with, or be reconciled to, accounting principles
generally accepted in the United States of America, or GAAP, or
international financial reporting standards as issued by the
International Accounting Standards Board, or IFRS, depending on the
circumstances and the historical financial statements may be
required to be audited in accordance with the standards of the
Public Company Accounting Oversight Board (United States), or
PCAOB. These financial statement requirements may limit the pool of
potential target businesses we may acquire because some targets may
be unable to provide such statements in time for us to disclose
such statements in accordance with federal proxy rules and complete
our initial business combination within the prescribed time
frame.
We
are an emerging growth company and a smaller reporting company
within the meaning of the Securities Act, and if we take advantage
of certain exemptions from disclosure requirements available to
“emerging growth companies” or “smaller reporting companies,” this
could make our securities less attractive to investors and may make
it more difficult to compare our performance with other public
companies.
We
are an “emerging growth company” within the meaning of the
Securities Act, as modified by the JOBS Act, and we may take
advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not
“emerging growth companies” including, but not limited to, not
being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not
previously approved. As a result, our shareholders may not have
access to certain information they may deem important. We could be
an emerging growth company for up to five years, although
circumstances could cause us to lose that status earlier, including
if the market value of our Class A ordinary shares held by
non-affiliates exceeds $700 million as of any June 30 before that
time, in which case we would no longer be an emerging growth
company as of the following December 31. We cannot predict whether
investors will find our securities less attractive because we will
rely on these exemptions. If some investors find our securities
less attractive as a result of our reliance on these exemptions,
the trading prices of our securities may be lower than they
otherwise would be, there may be a less active trading market for
our securities and the trading prices of our securities may be more
volatile.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies
from being required to comply with new or revised financial
accounting standards until private companies (that is, those that
have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the
Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a
company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth
companies but any such an election to opt out is irrevocable. We
have elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has
different application dates for public or private companies, we, as
an emerging growth company, can adopt the new or revised standard
at the time private companies adopt the new or revised standard.
This may make comparison of our financial statements with another
public company which is neither an emerging growth company nor an
emerging growth company which has opted out of using the extended
transition period difficult or impossible because of the potential
differences in accounting standards used.
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of
Regulation S-K. Smaller reporting companies may take advantage of
certain reduced disclosure obligations, including, among other
things, providing only two years of audited financial statements.
We will remain a smaller reporting company until the last day of
the fiscal year in which (1) the market value of our Ordinary
Shares held by non-affiliates exceeds $250 million as of the prior
June 30, or (2) our annual revenues exceeded $100 million during
such completed fiscal year and the market value of our Ordinary
Shares held by non-affiliates exceeds $700 million as of the prior
June 30. To the extent we take advantage of such reduced disclosure
obligations, it may also make comparison of our financial
statements with other public companies difficult or
impossible.
Compliance
obligations under the Sarbanes-Oxley Act may make it more difficult
for us to effectuate a business combination, require substantial
financial and management resources, and increase the time and costs
of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and
report on our system of internal controls beginning with this
Annual Report on Form 10-K for the fiscal year ended December 31,
2021. Only in the event we are deemed to be a large accelerated
filer or an accelerated filer and no longer qualify as an emerging
growth company, will we be required to comply with the independent
registered public accounting firm attestation requirement on our
internal control over financial reporting. The fact that we are a
blank check company makes compliance with the requirements of the
Sarbanes-Oxley Act particularly burdensome on us as compared to
other public companies because a target business with which we seek
to complete our initial business combination may not be in
compliance with the provisions of the Sarbanes-Oxley Act regarding
adequacy of its internal controls. The development of the internal
control of any such entity to achieve compliance with the
Sarbanes-Oxley Act may increase the time and costs necessary to
complete any such acquisition.
Because
we are incorporated under the laws of the Cayman Islands, you may
face difficulties in protecting your interests, and your ability to
protect your rights through the U.S. federal courts may be
limited.
We
are an exempted company incorporated under the laws of the Cayman
Islands. As a result, it may be difficult for investors to effect
service of process within the United States upon our directors or
executive officers, or enforce judgments obtained in the United
States courts against our directors or officers.
Our
corporate affairs are governed by our Amended and Restated
Memorandum and Articles of Association, the Companies Law (as the
same may be supplemented or amended from time to time) and the
common law of the Cayman Islands. We are also subject to the
federal securities laws of the United States. The rights of
shareholders to take action against the directors, actions by
minority shareholders and the fiduciary responsibilities of our
directors to us under Cayman Islands law are to a large extent
governed by the common law of the Cayman Islands. The common law of
the Cayman Islands is derived in part from comparatively limited
judicial precedent in the Cayman Islands as well as from English
common law, the decisions of whose courts are of persuasive
authority, but are not binding on a court in the Cayman Islands.
The rights of our shareholders and the fiduciary responsibilities
of our directors under Cayman Islands law are different from what
they would be under statutes or judicial precedent in some
jurisdictions in the United States. In particular, the Cayman
Islands has a different body of securities laws as compared to the
United States, and certain states, such as Delaware, may have more
fully developed and judicially interpreted bodies of corporate law.
In addition, Cayman Islands companies may not have standing to
initiate a shareholders derivative action in a Federal court of the
United States.
We
have been advised by our Cayman Islands legal counsel that the
courts of the Cayman Islands are unlikely (i) to recognize or
enforce against us judgments of courts of the United States
predicated upon the civil liability provisions of the federal
securities laws of the United States or any state; and (ii) in
original actions brought in the Cayman Islands, to impose
liabilities against us predicated upon the civil liability
provisions of the federal securities laws of the United States or
any state, so far as the liabilities imposed by those provisions
are penal in nature. In those circumstances, although there is no
statutory enforcement in the Cayman Islands of judgments obtained
in the United States, the courts of the Cayman Islands will
recognize and enforce a foreign money judgment of a foreign court
of competent jurisdiction without retrial on the merits based on
the principle that a judgment of a competent foreign court imposes
upon the judgment debtor an obligation to pay the sum for which
judgment has been given provided certain conditions are met. For a
foreign judgment to be enforced in the Cayman Islands, such
judgment must be final and conclusive and for a liquidated sum, and
must not be in respect of taxes or a fine or penalty, inconsistent
with a Cayman Islands judgment in respect of the same matter,
impeachable on the grounds of fraud or obtained in a manner, or be
of a kind the enforcement of which is, contrary to natural justice
or the public policy of the Cayman Islands (awards of punitive or
multiple damages may well be held to be contrary to public policy).
A Cayman Islands Court may stay enforcement proceedings if
concurrent proceedings are being brought elsewhere.
As a
result of all of the above, Public Shareholders may have more
difficulty in protecting their interests in the face of actions
taken by management, members of the board of directors or
controlling shareholders than they would as Public Shareholders of
a United States company.
Provisions
in our Amended and Restated Memorandum and Articles of Association
may inhibit a takeover of us, which could limit the price investors
might be willing to pay in the future for our Class A ordinary
shares and could entrench management.
Our
Amended and Restated Memorandum and Articles of Association contain
provisions that may discourage unsolicited takeover proposals that
shareholders may consider to be in their best interests These
provisions include a staggered board of directors and the ability
of the board of directors to designate the terms of and issue new
series of preference shares, and the fact that prior to the
completion of our initial business combination only holders of our
Class B ordinary shares, which have been issued to our sponsor, are
entitled to vote on the election of directors, which may make more
difficult the removal of management and may discourage transactions
that otherwise could involve payment of a premium over prevailing
market prices for our securities.
Cyber
incidents or attacks directed at us could result in information
theft, data corruption, operational disruption and/or financial
loss.
We
depend on digital technologies, including information systems,
infrastructure and cloud applications and services, including those
of third parties with which we may deal. Sophisticated and
deliberate attacks on, or security breaches in, our systems or
infrastructure, or the systems or infrastructure of third parties
or the cloud, could lead to corruption or misappropriation of our
assets, proprietary information and sensitive or confidential data.
As an early stage company without significant investments in data
security protection, we may not be sufficiently protected against
such occurrences. We may not have sufficient resources to
adequately protect against, or to investigate and remediate any
vulnerability to, cyber incidents. It is possible that any of these
occurrences, or a combination of them, could have adverse
consequences on our business and lead to financial loss.
Since
only holders of our Founder Shares will have the right to vote on
the election of directors, upon the listing of our shares on
Nasdaq, Nasdaq may consider us to be a “controlled company” within
the meaning of the rules of Nasdaq and, as a result, we may qualify
for exemptions from certain corporate governance
requirements.
After
completion of our initial public offering and prior to any
conversion of our Founder Shares pursuant to the terms thereof,
only holders of our Founder Shares will have the right to vote on
the election of directors. As a result, Nasdaq may consider us to
be a “controlled company” within the meaning of the corporate
governance standards of Nasdaq. Under the corporate governance
standards of Nasdaq, a company of which more than 50% of the voting
power is held by an individual, group or another company is a
“controlled company” and may elect not to comply with certain
corporate governance requirements, including the requirements
that:
|
● |
we
have a board that includes a majority of “independent directors,”
as defined under the rules of Nasdaq; |
|
● |
we
have a compensation committee of our board that is comprised
entirely of independent directors with a written charter addressing
the committee’s purpose and responsibilities; and |
|
● |
we
have a nominating and corporate governance committee of our board
that is comprised entirely of independent directors with a written
charter addressing the committee’s purpose and
responsibilities. |
We do
not intend to utilize these exemptions and intend to comply with
the corporate governance requirements of Nasdaq, subject to
applicable phase-in rules. However, if we determine in the future
to utilize some or all of these exemptions, you will not have the
same protections afforded to shareholders of companies that are
subject to all of the corporate governance requirements of
Nasdaq.
As
the number of special purpose acquisition companies evaluation
targets increases, attractive targets may become scarcer and there
may be more competition for attractive targets. This could increase
the cost of our initial business combination and could even result
in our inability to find a target or to consummate an initial
business combination.
In
recent years, the number of special purpose acquisition companies
that have been formed has increased substantially. Many potential
targets for special purpose acquisition companies have already
entered into an initial business combination, and there are still
many special purpose acquisition companies seeking targets for
their initial business combination, as well as many such companies
currently in registration.
In
addition, because there are more special purpose acquisition
companies seeking to enter into an initial business combination
with available targets, the competition for available targets with
attractive fundamentals or business models may increase, which
could cause target companies to demand improved financial terms.
Attractive deals could also become scarcer for other reasons, such
as economic or industry sector downturns, geopolitical tensions
including between the U.S. and China and between Russia and
Ukraine, or increases in the cost of additional capital needed to
close business combinations or operate targets post-business
combination. This could increase the cost of, delay or otherwise
complicate or frustrate our ability to find and consummate an
initial business combination, and may result in our inability to
consummate an initial business combination on terms favorable to
our investors altogether.
Risks
Associated with Acquiring and Operating a Business in Foreign
Countries
If we
pursue a target company with operations or opportunities outside of
the United States for our initial business combination, we may face
additional burdens in connection with investigating, agreeing to
and completing such initial business combination, and if we effect
such initial business combination, we would be subject to a variety
of additional risks that may negatively impact our
operations.
If we
pursue a target a company with operations or opportunities outside
of the United States for our initial business combination, we would
be subject to risks associated with cross-border business
combinations, including in connection with investigating, agreeing
to and completing our initial business combination, conducting due
diligence in a foreign jurisdiction, having such transaction
approved by any local governments, regulators or agencies and
changes in the purchase price based on fluctuations in foreign
exchange rates.
If we
effect our initial business combination with such a company, we
would be subject to any special considerations or risks associated
with companies operating in an international setting, including any
of the following:
|
● |
costs
and difficulties inherent in managing cross-border business
operations; |
|
● |
rules
and regulations regarding currency redemption; |
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● |
complex
corporate withholding taxes on individuals; |
|
● |
laws
governing the manner in which future business combinations may be
effected; |
|
● |
exchange
listing and/or delisting requirements; |
|
● |
tariffs
and trade barriers; |
|
● |
regulations
related to customs and import/export matters; |
|
● |
local
or regional economic policies and market conditions; |
|
● |
unexpected
changes in regulatory requirements; |
|
● |
tax
issues, such as tax law changes and variations in tax laws as
compared to the United States; |
|
● |
currency
fluctuations and exchange controls; |
|
● |
challenges
in collecting accounts receivable; |
|
● |
cultural
and language differences; |
|
● |
employment
regulations; |
|
● |
underdeveloped
or unpredictable legal or regulatory systems; |
|
● |
protection
of intellectual property; |
|
● |
social
unrest, crime, strikes, riots and civil disturbances; |
|
● |
regime
changes and political upheaval; |
|
● |
terrorist
attacks and wars; and |
|
● |
deterioration
of political relations with the United States. |
We
may not be able to adequately address these additional risks. If we
were unable to do so, we may be unable to complete such initial
business combination, or, if we complete such combination, our
operations might suffer, either of which may adversely impact our
business, financial condition and results of operations.
If
our Management following our initial business combination is
unfamiliar with United States securities laws, they may have to
expend time and resources becoming familiar with such laws, which
could lead to various regulatory issues.
Following
our initial business combination, our Management may resign from
their positions as officers or directors of the company and the
management of the target business at the time of the business
combination will remain in place. Management of the target business
may not be familiar with United States securities laws. If new
management is unfamiliar with United States securities laws, they
may have to expend time and resources becoming familiar with such
laws. This could be expensive and time-consuming and could lead to
various regulatory issues which may adversely affect our
operations.
After
our initial business combination, substantially all of our assets
may be located in a foreign country and substantially all of our
revenue will be derived from our operations in such country.
Accordingly, our results of operations and prospects will be
subject, to a significant extent, to the economic, political and
legal policies, developments and conditions in the country in which
we operate.
The
economic, political and social conditions, as well as government
policies, of the country in which our operations are located could
affect our business. Economic growth could be uneven, both
geographically and among various sectors of the economy and such
growth may not be sustained in the future. If in the future such
country’s economy experiences a downturn or grows at a slower rate
than expected, there may be less demand for spending in certain
industries. A decrease in demand for spending in certain industries
could materially and adversely affect our ability to find an
attractive target business with which to consummate our initial
business combination and if we effect our initial business
combination, the ability of that target business to become
profitable.
Exchange
rate fluctuations and currency policies may cause a target
business’ ability to succeed in the international markets to be
diminished.
In
the event we acquire a non-U.S. target, all revenues and income
would likely be received in a foreign currency, and the dollar
equivalent of our net assets and distributions, if any, could be
adversely affected by reductions in the value of the local
currency. The value of the currencies in our target regions
fluctuate and are affected by, among other things, changes in
political and economic conditions. Any change in the relative value
of such currency against our reporting currency may affect the
attractiveness of any target business or, following consummation of
our initial business combination, our financial condition and
results of operations. Additionally, if a currency appreciates in
value against the dollar prior to the consummation of our initial
business combination, the cost of a target business as measured in
dollars will increase, which may make it less likely that we are
able to consummate such transaction.
We
may reincorporate in another jurisdiction in connection with our
initial business combination, and the laws of such jurisdiction may
govern some or all of our future material agreements and we may not
be able to enforce our legal rights.
In
connection with our initial business combination, we may relocate
the home jurisdiction of our business from the Cayman Islands to
another jurisdiction. If we determine to do this, the laws of such
jurisdiction may govern some or all of our future material
agreements. The system of laws and the enforcement of existing laws
in such jurisdiction may not be as certain in implementation and
interpretation as in the United States. The inability to enforce or
obtain a remedy under any of our future agreements could result in
a significant loss of business, business opportunities or
capital.
We
have identified a material weakness in our internal control over
financial reporting. This material weakness could continue to
adversely affect our ability to report our results of operations
and financial condition accurately and in a timely
manner.
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with GAAP. Our management is likewise
required, on a quarterly basis, to evaluate the effectiveness of
our internal controls and to disclose any changes and material
weaknesses identified through such evaluation in those internal
controls. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a
material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis.
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 as of December 31, 2021,
because of a material weakness in our internal control over
financial reporting. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a
material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
Specifically, the Company’s management has concluded that our
control around the interpretation and accounting for certain
complex financial instruments was not effectively designed or
maintained. This material weakness resulted in the misstatement of
the Company’s audited balance sheet as of January 20, 2021 and its
interim financial statements and notes as reported in its SEC
filings for the quarters ended March 31, 2021, June 30, 2021 and
September 30, 2021.
Any
failure to maintain effective internal control over financial
reporting or disclosure controls and procedures could adversely
impact our ability to report our financial position and results
from operations on a timely and accurate basis. If our financial
statements are not accurate, investors may not have a complete
understanding of our operations. Likewise, if our financial
statements are not filed on a timely basis, we could be subject to
sanctions or investigations by the stock exchange on which our
ordinary shares are listed, the SEC or other regulatory
authorities. In either case, there could result a material adverse
effect on our business. Failure to timely file will cause us to be
ineligible to utilize short form registration statements on Form
S-3 or Form S-4, which may impair our ability to obtain capital in
a timely fashion to execute our business strategies or issue shares
to effect an acquisition. Ineffective internal controls could also
cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading
price of our stock.
We
can give no assurance that the measures we have taken and plan to
take in the future will remediate the material weakness identified
or that any additional material weaknesses or restatements of
financial results will not arise in the future due to a failure to
implement and maintain adequate internal control over financial
reporting or circumvention of these controls. In addition, even if
we are successful in strengthening our controls and procedures, in
the future those controls and procedures may not be adequate to
prevent or identify irregularities or errors or to facilitate the
fair presentation of our financial statements.
Our management concluded that there is substantial doubt about
our ability to continue as a “going concern.”
As of December 31, 2021, we had approximately $442,000 in operating
bank account and a working capital deficit of approximately
$201,000. The company may need to raise additional capital through
loans or additional investments from its Sponsor, an affiliate of
the Sponsor, or its officers or directors. The company’s officers,
directors and Sponsor, or their affiliates, 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,
reducing overhead expenses, and extending the terms and due dates
of certain accrued expenses and other liabilities. The company
cannot provide any assurance that new financing will be available
to it on commercially acceptable terms, if at all. In connection
with the company’s assessment of going concern considerations in
accordance with FASB accounting Standards
Update (“ASU”) 2014-15, “Disclosures of
Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that the working capital
deficit, as wells as the mandatory liquidation and 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 January 20, 2023. The financial
statements do not include any adjustment that might be necessary if
the company is unable to continue as a going concern.
Item
1B. Unresolved Staff Comments
None.
Item
2. Properties
We
maintain our principal executive offices at 32 Elm Place, 2nd
Floor, Rye, NY 10580. The cost for our use of this space is
included in the $10,000 per month fee we pay to an affiliate of our
sponsor for office space, administrative and support services. We
consider our current office space adequate for our current
operations.
Item
3. Legal Proceedings
To
the knowledge of our management, there is no litigation currently
pending or contemplated against us, any of our officers or
directors in their capacity as such or against any of our
property.
Item
4. Mine Safety Disclosures
Not
applicable.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Shareholder
Matters and Issuer Purchases of Equity Securities
(a)
Market Information
Our
units, Class A ordinary shares and warrants are each traded on the
Nasdaq. Our units commenced public trading on January 15, 2021
under the symbol “AEACU.” Our Class A ordinary shares and warrants
began separate trading on March 8, 2021, under the symbols “AEAC”
and “AEACW,” respectively.
(b)
Holders
As of March 21, 2022, there was one holder of record of our units,
one holder of record of our Class A ordinary shares, four holders
of record of our Class B ordinary shares and two holders of our
warrants.
(c)
Dividends
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.
(d)
Securities Authorized for Issuance Under Equity Compensation
Plans
None.
(e)
Performance Graph
Not
applicable.
(f)
Recent Sales of Unregistered Securities; Use of Proceeds from
Registered Offerings.
None.
(g)
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
None.
Item
6. [Reserved]
Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
References
to the “Company,” “our,” “us” or “we” refer to Authentic Equity
Acquisition Corp. The following discussion and analysis of the
Company’s financial condition and results of operations should be
read in conjunction with Item 1. Business, Item 1A. Risk Factors,
and Item 15. Financial Statements and the accompanying notes and
other data, all of which appear in this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary
Note Regarding Forward-Looking Statements
This
Annual Report on Form 10-K includes forward-looking statements
within the meaning of Section 27A of the Securities Act, and
Section 21E of the Exchange Act. We have based these
forward-looking statements on our current expectations and
projections about future events. These forward-looking statements
are subject to known and unknown risks, uncertainties and
assumptions about us that may cause our actual results, levels of
activity, performance or achievements to be materially different
from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking
statements. In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “could,”
“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“continue,” or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a
discrepancy include, but are not limited to, those described in our
other U.S. Securities and Exchange Commission (“SEC”)
filings.
Overview
We
are a blank check company incorporated as a Cayman Islands company
on September 29, 2020. We were formed for the purpose entering into
a merger, share exchange, asset acquisition, share purchase,
recapitalization, reorganization or other similar business
combination with one or more target businesses (the “Business
Combination”).
Our
sponsor is Authentic Equity Sponsor LLC, a Delaware limited
liability company (the “Sponsor”). The registration statement for
the initial public offering (the “Initial Public Offering”) was
declared effective on January 14, 2021. On January 20, 2021, we
consummated an Initial Public Offering of 23,000,000 units (the
“Units” and, with respect to the Class A ordinary shares included
in the Units being offered, the “Public Shares”), including
3,000,000 additional Units to cover over-allotments (the
“Over-Allotment Units”), at $10.00 per Unit, generating gross
proceeds of $230.0 million, and incurring offering costs of
approximately $13.3 million, of which approximately $8.1 million
was for deferred underwriting commissions.
Simultaneously
with the closing of the Initial Public Offering, we consummated the
private placement (“Private Placement”) of 6,600,000 warrants
(each, a “Private Placement Warrant” and collectively, the “Private
Placement Warrants”) for an aggregate purchase price of
approximately $5.8 million, in a private placement to the Sponsor
and the sale of a certain rights to General Electric Pension Trust
(“GEPT”) for gross proceeds of $824,500 which will allow GEPT to
purchase up to $50.0 million of Forward Purchase Units (as defined
in Note 5 to the accompanying financial statements included in Item
15 to this Form Annual Report on Form 10-K) immediately prior to
the closing of an initial Business Combination.
Upon
the closing of the Initial Public Offering and the Private
Placement, $230.0 million ($10.00 per Unit) of the net proceeds of
the Initial Public Offering and certain of the proceeds of the
Private Placement were placed in a trust account (“Trust Account”)
located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and will be invested only in
United States “government securities” within the meaning of Section
2(a)(16) of the Investment Company Act having a maturity of 185
days or less or in money market funds meeting certain conditions
under Rule 2a-7 promulgated under the Investment Company Act of
1940, as amended, or the Investment Company Act, which invest only
in direct U.S. government treasury obligations, until the earlier
of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account as described below.
Our
management has broad discretion with respect to the specific
application of the net proceeds of the Initial Public Offering, the
sale of Private Placement Warrants and the sale of the GEPT Rights,
although substantially all of the net proceeds are intended to be
applied generally toward consummating a Business Combination. There
is no assurance that we will be able to complete a Business
Combination successfully. Our initial Business Combination must be
with one or more operating businesses or assets with a fair market
value equal to at least 80% of the net assets held in the Trust
Account (excluding the deferred underwriting commissions and taxes
payable on the interest earned on the trust account) at the time of
the signing of the agreement to enter into the initial Business
Combination. However, we will only complete a Business Combination
if the post-transaction company owns or acquires 50% or more of the
outstanding voting securities of the target or otherwise acquires a
controlling interest in the target sufficient for it not to be
required to register as an investment company under the Investment
Company Act.
If we
are unable to complete a Business Combination within the
Combination Period, we will (i) cease all operations except for the
purpose of winding up; (ii) as promptly as reasonably possible but
not more than ten business days thereafter, redeem the Public
Shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account and not
previously released to us to pay its tax obligations, if any (less
up to $100,000 of interest to pay dissolution expenses) divided by
the number of the then-outstanding Public Shares, which redemption
will completely extinguish Public Shareholders’ rights as
shareholders (including the right to receive further liquidation
distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the
remaining shareholders and the 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 the requirements of other applicable law.
Liquidity
and Going Concern
As of
December 31, 2021, we had approximately $442,000 in operating bank
account and a working capital deficit of approximately
$201,000.
Our
liquidity needs to date have been satisfied through a contribution
of $25,000 from Sponsor to cover for certain expenses in exchange
for the issuance of the Founder Shares, a loan of approximately
$97,000 from the Sponsor pursuant to a promissory note originally
issued on September 30, 2020 (the “Note”), and certain portion of
the proceeds from the Private Placement and sale of the GEPT Right
held outside of the Trust Account. We repaid the Note in full on
January 20, 2021. In addition, in order to finance transaction
costs in connection with a Business Combination, the Sponsor or an
affiliate of the Sponsor, or certain of our officers and directors
may, but are not obligated to, provide us Working Capital Loans. As
of December 31, 2021 and 2020, there were no amounts outstanding
under any Working Capital Loan.
We may need to raise additional capital through loans or additional
investments from our Sponsor, an affiliate of our Sponsor, or our
officers or directors. Our officers, directors and Sponsor, or
their affiliates, may, but are not obligated to, loan our Company
funds, from time to time or at any time, in whatever amount they
deem reasonable in their sole discretion, to meet our working
capital needs. Accordingly, we may not be able to obtain additional
financing. If we are unable to raise additional capital, we 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,
reducing overhead expenses, and extending the terms and due dates
of certain accrued expenses and other liabilities. We cannot
provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all.
In
connection with our assessment of going concern considerations in
accordance with FASB Accounting Standards Update (“ASU”) 2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue
as a Going Concern,” we have determined that the working capital
deficit and mandatory liquidation and subsequent dissolution raises
substantial doubt about our ability to continue as a going concern.
No adjustments have been made to the carrying amounts of assets or
liabilities should we be required to liquidate after January 20,
2023. The financial statements do not include any adjustment that
might be necessary if we are unable to continue as a going
concern.
We
continue to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as
of the date of the balance sheet. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Results
of Operations
Our
entire activity from inception to December 31, 2021 was for our
formation, preparation for our Initial Public Offering, and, since
the closing of our Initial Public Offering, a search for business
combination candidates. We will not be generating any operating
revenues until the closing and completion of our initial Business
Combination, at the earliest.
For
the year ended December 31, 2021, we had net income of
approximately $7.0 million, which consisted of approximately $10.6
million of gain from change in fair value of derivative
instruments, approximately $22,000 of net gain from investments
held in Trust Account, partially offset by approximately $1.5
million of general and administrative expenses, approximately
$702,000 offering costs associated with issuance of public and
private placement warrants, approximately $1.4 million loss on
excess of fair value over cash received for private placement
warrant and approximately $114,000 of related party administrative
fees.
For
the period from September 29, 2020 (inception) through December 31,
2020, we had net loss of approximately $34,000, which consisted
solely of general and administrative expenses.
Related
Party Transactions
Founder
Shares
On
October 1, 2020, our Sponsor paid $25,000 to cover certain expenses
on behalf of us in exchange for issuance of 5,750,000 Class B
ordinary shares, par value $0.0001, (the “Founder Shares”). In
December 2020, we effected a share capitalization with respect to
the Class B ordinary shares resulting in an aggregate of 7,000,000
Founder Shares outstanding. The Sponsor subsequently transferred
25,000 Class B ordinary shares to each of the independent
directors, which shares were not subject to forfeiture in the event
the underwriters’ over-allotment option was not exercised. The
Sponsor agreed to forfeit (a) up to 750,000 Founder Shares to the
extent that the over-allotment option was not exercised in full by
the underwriters and (b) up to 1,250,000 Founder Shares depending
on the number of units purchased under the Forward Purchase
Agreement if such number is below 5,000,000. The forfeiture would
be adjusted to the extent that the over-allotment option was not
exercised in full by the underwriters, so that the Founder Shares
would represent 20.0% of our issued and outstanding shares after
the Initial Public Offering plus the number of Class A ordinary
shares that may be sold pursuant to the Forward Purchase Agreement.
On January 20, 2021, the underwriter fully exercised its
over-allotment option; thus, 750,000 Founder Shares were no longer
subject to forfeiture.
The
Sponsor, our directors and executive officers and GEPT agreed,
subject to limited exceptions, not to transfer, assign or sell any
of their Founder Shares until the earlier to occur of: (a) one year
after the completion of the initial Business Combination and (b)
subsequent to the initial Business Combination, (x) if the closing
price of Class A ordinary shares equals or exceeds $12.00 per share
(as adjusted for share subdivisions, share capitalizations,
reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period commencing at least 150 days
after the initial Business Combination or (y) the date on which we
complete 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.
Private
Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, we consummated the
Private Placement of 6,600,000 Private Placement Warrants for an
aggregate purchase price of approximately $5.8 million, in a
private placement to our Sponsor and the sale of certain rights to
GEPT for the gross proceeds of $824,500 that allow them to purchase
up to $50.0 million of Forward Purchase Units that closed
simultaneously with the Initial Public Offering.
Each
whole Private Placement Warrant is exercisable for one whole Class
A ordinary share at a price of $11.50 per share. 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 we do not complete a Business Combination within the
Combination Period, the Private Placement Warrants will expire
worthless. The Private Placement Warrants will be non-redeemable
and exercisable on a cashless basis so long as they are held by our
Sponsor, GEPT or their permitted transferees.
Our
Sponsor and officers and directors agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private
Placement Warrants until 30 days after the completion of the
initial Business Combination.
Related
Party Loans
On
September 30, 2020, our Sponsor agreed to loan us an aggregate of
up to $300,000 to cover for expenses related to the Initial Public
Offering pursuant the Note. This loan was non-interest bearing and
payable upon the completion of the Initial Public Offering. We
borrowed $96,500 under the Note and fully repaid the Note on
January 20, 2021.
In
order to 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 (“Working Capital Loans”). If we
complete a 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 a Business
Combination does not close, we may use a portion of the proceeds
held outside the Trust Account to repay the Working Capital Loans
but no proceeds held in the Trust Account would be used to repay
the Working Capital Loans. 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 $1.5 million 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,
we had no borrowings under the Working Capital Loans.
Administrative
Support Agreement
Commencing
on the effective date of the prospectus, we agreed to pay an
affiliate of our Sponsor a total of $10,000 per month for office
space, secretarial and administrative services provided to us. Upon
completion of the initial Business Combination or liquidation, we
will cease paying these monthly fees. For the year ended December
31, 2021, we incurred approximately $114,000 in expense for these
services. As of December 31, 2021, there was $10,000 in accounts
payable - related party outstanding, as reflected in the
accompanying balance sheets. There were no such amounts for
the period from September 29, 2020 (inception) through
December 31, 2020.
Contractual
Obligations
Forward
Purchase Agreement
In
connection with the consummation of the Initial Public Offering, we
entered into a forward purchase agreement (the “Forward Purchase
Agreement”) with GEPT, pursuant to which, in exchange for $824,500
of proceeds paid to us simultaneously with the closing of the
Initial public Offering, GEPT has the right, in its discretion, to
purchase up to the lesser of (i) $50.0 million of units and (ii) a
number of units equal to 19.99% of the pro forma equity outstanding
at the time of the closing of our initial Business Combination,
including but not limited to, any ordinary shares issued in
connection with the Initial Public Offering, the Forward Purchase
Agreement or any private placement or other offering or to any
seller in the initial Business Combination (the “Forward Purchase
Units”), with each unit consisting of one Class A ordinary share
(the “Forward Purchase Shares”) and 0.425 of one warrant to
purchase one Class A ordinary share at $11.50 per share, subject to
adjustment (the “Forward Purchase Warrants”), for a purchase price
of $10.00 per unit, in a private placement to occur immediately
prior to the closing of the initial Business
Combination.
In
consideration for the purchase for the Forward Purchase Units, if
GEPT purchases the maximum number of Forward Purchase Units
available to it under the Forward Purchase Agreement, we will issue
to GEPT, at the closing of our initial Business Combination and
prior to the conversion of the Class B ordinary shares into Class A
ordinary shares in accordance with the terms thereof (the “GEPT
Issuance”):
|
● |
a
number of Class B ordinary shares (the “GEPT Class B ordinary
shares”) that is equal to 12.5% of the aggregate number of Class B
ordinary shares outstanding at the time of the initial Business
Combination prior to the conversion of such Class B ordinary shares
into Class A ordinary shares pursuant to the terms thereof and
after giving effect to the issuance of the GEPT Class B ordinary
shares and any other Class B ordinary shares as a result of
anti-dilution rights or other adjustments and the number of Class B
ordinary shares transferred, assigned, sold or forfeited in
connection with the initial Business Combination but excluding
115,000 Class B ordinary shares from such calculation (the
“Post-Business Combination Class B ordinary shares”) (provided,
however, that if the Founder Shares are converted into Class A
ordinary shares prior to the date of our initial Business
Combination, GEPT will receive a number of Class A ordinary shares
equal to the number of Class A ordinary shares that it would have
been entitled to pursuant to the GEPT Issuance); and |
| |
● |
a
number of Private Placement Warrants equal to 12.5% of the
aggregate number of Private Placement Warrants outstanding at the
time of the Company’s initial business combination prior to the
conversion of such Class B ordinary shares into Class A ordinary
shares pursuant to the terms thereof and after giving effect to any
Private Placement Warrants transferred, assigned, sold or forfeited
in connection with the initial Business Combination (the
“Post-Business Combination Private Placement
Warrants”). |
In
connection with such issuance, our Sponsor agreed to forfeit to us
for no consideration a number of Class B ordinary shares and
Private Placement Warrants (the “Sponsor Forfeiture”) such that
after the Sponsor Forfeiture and the GEPT Issuance, our Sponsor
will own (i) a number of Class B ordinary shares equal to 87.5% of
the number of Post-Business Combination Class B ordinary shares
plus 15,000 Class B ordinary shares, and (ii) a number of Private
Placement Warrants equal to 87.5% of the number of Post-Business
Combination Private Placement Warrants.
We
will determine the number of Forward Purchase Units to be sold
under the Forward Purchase Agreement and GEPT’s obligation to
purchase such units will be subject to the satisfaction of certain
conditions, including, among others, the delivery by GEPT of a
notice to us that it will purchase the Forward Purchase Units in
whole or in part. The rights of GEPT under the Forward Purchase
Agreement do not depend on whether any Class A ordinary shares are
redeemed by our public shareholders. If GEPT does not purchase the
maximum number of forward purchase units available to it under the
Forward Purchase Agreement, GEPT will not be entitled to receive
any of the Founder Shares or Private Placement Warrants described
above, and we will be entitled to retain the $824,500 paid to us by
GEPT.
The
Forward Purchase Warrants purchased by GEPT under the Forward
Purchase Agreement will have the same terms as the Public Warrants.
The Private Placement Warrants to be issued to GEPT as described
above will have the same terms and be subject to the same transfer
restrictions as the Private Placement Warrants held by our
Sponsor.
Registration
and Shareholder Rights
The
holders of Founder Shares, Private Placement Warrants and 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 Working Capital Loans) were entitled to registration
rights pursuant to a registration and shareholder rights agreement
signed upon consummation of the Initial Public Offering. These
holders were entitled to certain demand and “piggyback”
registration rights. However, the registration and shareholder
rights agreement provide that we will not permit any registration
statement filed under the Securities Act to become effective until
the termination of the applicable lock-up period for the securities
to be registered. We will bear the expenses incurred in connection
with the filing of any such registration statements.
Pursuant
to the Forward Purchase Agreement, we agreed to use reasonable best
efforts to: (i) file within 30 days after the closing of the
initial Business Combination a registration statement with the SEC
for a secondary offering of the Forward Purchase Shares and the
Forward Purchase Warrants (and underlying Class A ordinary shares);
(ii) cause such registration statement to be declared effective
promptly thereafter but in no event later than sixty (60) days
after the initial filing; (iii) maintain the effectiveness of such
registration statement until the earliest of (A) the date on which
our Sponsor or its assignees cease to hold the securities covered
thereby, and (B) the date all of the securities covered thereby can
be sold publicly without restriction or limitation under Rule 144
of the Securities Act; and (iv), after such registration statement
is declared effective, cause us to conduct firm commitment
underwritten offerings, subject to certain limitations. In
addition, the Forward Purchase Agreement provides for certain
“piggy-back” registration rights to the holders of forward purchase
securities to include their securities in other registration
statements filed by us. We will bear the cost of registering these
securities.
Underwriting
Agreement
We
granted the underwriters a 45-day option from the final prospectus
relating to the Initial Public Offering to purchase up to 3,000,000
additional Units to cover over-allotments, if any, at $10.00 per
Unit, less the underwriting discounts and commissions. On January
20, 2021, the underwriter fully exercised its over-allotment
option.
The
underwriters were entitled to an underwriting discount of $0.20 per
unit, or $4.6 million in the aggregate, paid upon the closing of
the Initial Public Offering. In addition, $0.35 per unit, or
approximately $8.1 million in the aggregate will be payable to the
underwriters for deferred underwriting commissions. The deferred
underwriting commissions will become payable to the underwriters
from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, subject to the terms of the
underwriting agreement.
Critical
Accounting Policies and Estimates
Class
A Ordinary Shares Subject to Possible Redemption
We
account for our Class A ordinary shares subject to possible
redemption in accordance with the guidance in ASC Topic 480
“Distinguishing Liabilities from Equity.” Class A ordinary shares
subject to mandatory redemption (if any) are classified as
liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A 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 our control) are classified
as temporary equity. At all other times, Class A 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 the occurrence of uncertain future
events. Accordingly, as of December 31, 2021, 23,000,000 Class A
ordinary shares subject to possible redemption are presented as
temporary equity, outside of the shareholders’ equity section of
our balance sheets. There were no Class A ordinary shares
outstanding as of December 31, 2020.
Under
ASC 480-10S99, we have elected to recognize changes in the
redemption value immediately as they occur and adjust the carrying
value of the security to equal the redemption value at the end of
each reporting period. This method would view the end of the
reporting period as if it were also the redemption date for the
security. Immediately upon the closing of the Initial Public
Offering, we recognized the accretion from initial book value to
redemption amount value. The change in the carrying value of the
redeemable Class A ordinary shares resulted in charges against
additional paid-in capital (to the extent available) and
accumulated deficit.
Net
Income (loss) per Ordinary Share
We
comply with accounting and disclosure requirements of FASB ASC
Topic 260, “Earnings Per Share.” We have two classes of shares,
which are referred to as Class A ordinary shares and Class B
ordinary shares. Income and losses are shared pro rata between the
two classes of shares. Net income (loss) per ordinary share is
calculated by dividing the net income (loss) by the weighted
average number of ordinary shares outstanding for the respective
period.
The
calculation of diluted net income (loss) per ordinary share does
not consider the effect of the warrants underlying the Units sold
in the Initial Public Offering and the Private Placement Warrants
to purchase 18,100,000 Class A ordinary shares since their exercise
is contingent upon future events. Accretion associated with the
redeemable Class A ordinary shares is excluded from earnings per
share as the redemption value approximates fair value.
Derivative
Liabilities
We do
not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks. We evaluate all of its financial
instruments, including issued share purchase warrants, to determine
if such instruments are derivatives or contain features that
qualify as embedded derivatives, pursuant to the Financial
Accounting Standards Board’s (“FASB”) Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from
Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and
Hedging” (“ASC 815”). The classification of derivative instruments,
including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each
reporting period.
The
warrants issued in connection with the Initial Public Offering (the
“Public Warrants”), the Private Placement Warrants and units
committed to be issued in connection with forward purchase
agreement are recognized as derivative assets or liabilities in
accordance with ASC 815. Accordingly, we recognize the warrant
instruments and forward purchase units as derivative assets or
liabilities at fair value and adjust the instruments to fair value
at each reporting period. The assets and liabilities are subject to
re-measurement at each balance sheet date until exercised, and any
change in fair value is recognized in our statement of operations.
The fair value of the warrants issued in connection with the
Initial Public Offering was initially measured using a binomial
lattice model and subsequently been measured at each measurement
date based on the market price of such warrants. The fair value of
warrants issued in connection with the Private Placement was
initially measured using Black-Scholes Option Pricing model and
subsequently using the market value of the public warrants when
they were separately listed and traded. The fair value of the units
committed to be issued in connection with the forward purchase
agreement has been estimated using Black-Scholes Option Pricing
model at each measurement date.
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. The ASU also removes certain
settlement conditions that are required for equity-linked contracts
to qualify for the derivative scope exception, and it simplifies
the diluted earnings per share calculation in certain areas. We
adopted ASU 2020-06 on January 1, 2021 using a modified
retrospective method for transition. Adoption of the ASU did not
impact our financial position, results of operations or cash
flows.
Our
management does not believe that any recently issued, but not yet
effective, accounting standards updates, if currently adopted,
would have a material effect on the accompanying financial
statements.
Off-Balance
Sheet Arrangements and Contractual Obligations
As of
December 31, 2021, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and
did not have any commitments or contractual obligations.
JOBS
Act
The
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”)
contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify
as an “emerging growth company” and under the JOBS Act are allowed
to comply with new or revised accounting pronouncements based on
the effective date for private (not publicly traded) companies. We
are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised
accounting standards on the relevant dates on which adoption of
such standards is required for non-emerging growth companies. As a
result, the financial statements may not be comparable to companies
that comply with new or revised accounting pronouncements as of
public company effective dates.
Additionally,
we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act.
Subject to certain conditions set forth in the JOBS Act, if, as an
“emerging growth company,” we choose to rely on such exemptions we
may not be required to, among other things, (i) provide an
auditor’s attestation report on our system of internal controls
over financial reporting pursuant to Section 404, (ii) provide all
of the compensation disclosure that may be required of non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and
Consumer Protection Act, (iii) comply with any requirement that may
be adopted by the PCAOB regarding mandatory audit firm rotation or
a supplement to the auditor’s report providing additional
information about the audit and the financial statements (auditor
discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between
executive compensation and performance and comparisons of the CEO’s
compensation to median employee compensation. These exemptions will
apply for a period of five years following the completion of our
Initial Public Offering or until we are no longer an “emerging
growth company,” whichever is earlier.
Item
7A. Quantitative and Qualitative Disclosures about Market
Risk
We
are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information
otherwise required under this item.
Item
8. Financial Statements and Supplementary Data
This
information appears following Item 15 of this Report and is
included herein by reference.
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item
9A. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the
objective of ensuring that information required to be disclosed in
our reports filed under the Exchange Act, such as this Report, 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. 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 as of December 31, 2021,
because of a material weakness in our internal control over
financial reporting. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a
material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
Specifically, the Company’s management has concluded that our
control around the interpretation and accounting for certain
complex financial instruments was not effectively designed or
maintained. This material weakness resulted in the misstatement of
the Company’s audited balance sheet as of January 20, 2021 and its
interim financial statements and Notes as reported in its SEC
filings for the quarters ended March 31, 2021, June 30, 2021 and
September 30, 2021. In light of this material weakness, we
performed additional analysis as deemed necessary to ensure that
our financial statements were prepared in accordance with U.S.
generally accepted accounting principles. Accordingly, management
believes that the financial statements included in this Annual
Report on Form 10-K present fairly in all material respects our
financial position, results of operations and cash flows for the
period presented.
We do
not expect that our disclosure controls and procedures will prevent
all errors and all instances of fraud. Disclosure controls and
procedures, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the
disclosure controls and procedures are met. Further, the design of
disclosure controls and procedures must reflect the fact that there
are resource constraints, and the benefits must be considered
relative to their costs. Because of the inherent limitations in all
disclosure controls and procedures, no evaluation of disclosure
controls and procedures can provide absolute assurance that we have
detected all our control deficiencies and instances of fraud, if
any. The design of disclosure controls and procedures also is based
partly on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future
conditions.
Management’s
Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section
404 of the Sarbanes-Oxley Act, our management is responsible for
establishing and maintaining adequate internal control over
financial reporting. Our internal control over financial reporting
is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of our
financial statements for external reporting purposes in accordance
with U.S. GAAP. Our internal control over financial reporting
includes those policies and procedures that:
|
(1) |
pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of our
company, |
|
(2) |
provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. GAAP, and that our
receipts and expenditures are being made only in accordance with
authorizations of our management and directors, and |
|
(3) |
provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a
material effect on the financial statements. |
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect errors or
misstatements in our financial statements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree or compliance with the policies or
procedures may deteriorate. Management assessed the effectiveness
of our internal control over financial reporting at December 31,
2021. In making these assessments, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control -- Integrated Framework
(2013). Based on our assessments and those criteria, management
determined that our internal controls over financial reporting were
not effective as of December 31, 2021, because of material
weaknesses in our internal control over financial reporting.
Specifically, the Company’s management has concluded that our
control around the interpretation and accounting for certain
complex financial instruments was not effectively designed or
maintained. This material weakness resulted in the misstatement of
the Company’s audited balance sheet as of January 20, 2021 and its
interim financial statements and Notes as reported in its SEC
filings for the quarters ended March 31, 2021, June 30, 2021 and
September 30, 2021.
This Annual Report on Form 10-K does not include an attestation
report of internal controls from 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
During
the most recently completed fiscal quarter, there has been no
change in our internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting, as the circumstances
that led to the restatement of our financial statements described
in this Annual Report on Form 10-K had not yet been
identified, except as described below.
The
Chief Executive Officer and Chief Financial Officer performed
additional accounting and financial analyses and other post-closing
procedures including consulting with subject matter experts related
to the accounting for certain complex financial instruments. The
Company’s management has expended, and will continue to expend, a
substantial amount of effort and resources for the remediation and
improvement of our internal control over financial
reporting. While we have processes to properly identify and
evaluate the appropriate accounting technical pronouncements and
other literature for all significant or unusual transactions, we
have expanded and will continue to improve these processes to
ensure that the nuances of such transactions are effectively
evaluated in the context of the increasingly complex accounting
standards.
Item
9B. Other Information
None.
Item
9C. Disclosure Regarding Foreign Jurisdiction that Prevent
Inspections.
Not
applicable.
PART III
Item
10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
As of
the date of this Annual Report on Form 10-K, our directors and
officers are as follows:
|
Name
|
|
Age |
|
Position |
| David
M. Hooper |
|
54 |
|
Chairman
and Chief Executive Officer |
| Thomas
Flocco |
|
59 |
|
President
and Chief Operating Officer, Director |
| Todd
Khoury |
|
56 |
|
Chief
Financial Officer, Director |
| Robert
Ernst |
|
57 |
|
Director |
| Kathleen
Griffin Stack |
|
67 |
|
Director |
| Tim
O’Connor |
|
57 |
|
Director |
| Michael
Weinstein |
|
73 |
|
Director |
David M. Hooper serves as our Chief Executive Officer and
also chairs our board of directors. Mr. Hooper co-founded Authentic
Equity in 2018. Prior to Authentic Equity, in 2006, he co-founded
Centerview Capital. At Centerview Capital, Mr. Hooper was a
Partner, managed the firm’s consumer fund and co-chaired its
investment committee. He played a leading role in each of
Centerview Capital’s consumer investments since inception,
including The Nielsen Company, Richelieu Foods, Big Heart Pet
Brands/Del Monte Foods, Ole Smoky Distillery and Advantage
Solutions. Prior to Centerview Capital, Mr. Hooper was a Managing
Director, Head of the Consumer Group and Chairman of the U.S.
Investment Committee at Vestar Capital Partners. Prior to joining
Vestar in 1994, Mr. Hooper served as a financial consultant to GPA
Group plc and was a member of The Blackstone Group’s Principal
Investment Group and Drexel Burnham Lambert’s M&A department.
Over his career, Mr. Hooper has served as a board member or board
observer of numerous consumer-oriented companies, including
Nielsen, J.M. Smucker, Big Heart Pet Brands, Advantage Solutions,
Birds Eye Foods, Richelieu Foods, Del Monte Foods, Ole Smoky
Distillery and Anvil Knitwear. Mr. Hooper holds a BSBA from
Georgetown University and an MBA from the Stanford Graduate School
of Business. Mr. Hooper serves on the Board of Advisors for
Georgetown University’s McDonough School of Business.
Thomas Flocco serves as our President and Chief Operating
Officer and was appointed to our board of directors in connection
with our initial public offering. Mr. Flocco is an established
consumer products operating executive with a more than 30 year
track record of experience in building and managing businesses and
brands, driving operational improvements and providing strategic
leadership. Mr. Flocco joined Authentic Equity in 2020 as an
Operating Partner. Prior to Authentic Equity, he served as
President and Chief Operating Officer of Utz Quality Foods (NYSE:
UTZ), a snack foods company with approximately $900 million of
revenue, from 2017 to 2019, where he was responsible for day-to-day
commercial, financial and operational activity. Mr. Flocco
previously served as President and Chief Executive Officer of Beam,
a global distilled spirits business with over $2.5 billion of
revenue and 4,000 employees, from 2003 to 2008. At Beam, he held
full general management responsibility for a global spirits
business that includes brands such as Jim Beam, Knob Creek, Maker’s
Mark, Courvoisier, Sauza, Canadian Club, Laphroaig and others. He
has also served as Chairman and CEO of Everglades Boats, where he
currently holds the title of Chairman. Earlier in his career, Mr.
Flocco was a Senior Vice President - Strategy and M&A for
Fortune Brands, Inc. and a Partner at McKinsey & Company,
where he co-led the Consumer and Supply Chain practices in North
America. He began his career in Sales and then in Brand Management
for Procter & Gamble. Over his career, Mr. Flocco has served on
multiple boards of directors of consumer companies, including
BevMo!, and currently sits on the board of directors of Everglades
Boats. Mr. Flocco holds a BA in Chemistry from Boston University
and an MBA from Harvard Business School.
Todd
Khoury serves as our Chief Financial Officer and is also a
member of our board of directors. Mr. Khoury co-founded Authentic
Equity in 2018. During his career, Mr. Khoury was a Managing
Director, Head of the Media and Communications Group and a member
of the U.S. Investment Committee at Vestar Capital Partners from
1993 to 2005. He was also a Managing Director at BlackRock, Inc.
from 2005 to 2007, where he co-led the firm’s initial effort in
private equity. He has also worked closely with a number of small
businesses on strategic and operational initiatives and started his
career at Salomon Brothers Inc. Mr. Khoury holds a BA in History
from Yale University and an MBA from Harvard Business
School.
Robert
Ernst was appointed to our board of directors on January 7,
2022. Mr. Ernst is an experienced deal advisory professional with
over 30 years of public accounting experience. He has focused in
the area of mergers and acquisitions, including business and
financial due diligence, synergy analysis, integration planning,
market assessment and transaction structuring. He has advised on
buy-side and sell-side due diligence transactions for numerous
financial and strategic buyers in domestic and international
transactions, ranging in enterprise value from $5 million to in
excess of $25 billion. Mr. Ernst was the Transaction Services
Service Line leader for KPMG’s U.S. Deal Advisory practice for
approximately eleven years before his retirement in September 2020.
Prior to joining KPMG, Mr. Ernst was a Transaction Services Partner
focusing on private equity and consumer markets transactions at
Andersen and, prior to that, at PricewaterhouseCoopers. His
industry experience includes consumer products, manufacturing,
retail and distribution, restaurant and technology. Mr. Ernst holds
a BS in Accounting and Finance from Boston College and an MBA from
Columbia University School of Business.
Tim O’Connor was appointed to our board of directors in
connection with our initial public offering. Mr. O’Connor is a
highly experienced consumer products executive with over 30 years
of leadership of food and consumer products companies, including as
Chief Executive Officer and Chief Financial Officer. Mr. O’Connor
is currently the CEO of Teasdale Foods, Inc., a producer of branded
and private label Latino and Hispanic foods. Prior to Teasdale, Mr.
O’Connor served as the CEO of Richelieu Foods, Inc., the leading
manufacturer of retail private label frozen and deli pizza in the
U.S. and a leading provider of retail salad dressings and premium
sauces, until the company’s sale to Freiberger/Sudzucker (ETR: SZU)
in 2017. As CEO of Richelieu, Mr. O’Connor delivered highly
relevant product innovation, operational improvements and strategic
development that led to significant growth in market share,
revenue, profits and cash flow. Prior to becoming CEO of Richelieu
in 2013, Mr. O’Connor served as Richelieu’s CFO from 2011 to 2013.
Earlier in his career, Mr. O’Connor served as Executive Vice
President and CFO of LoJack Corporation, a leading manufacturer of
stolen vehicle recovery systems for cars, trucks and SUVs. Mr.
O’Connor also served in senior finance roles for American Tower
Corp. (NYSE: AMT), a leading wireless and broadcast communications
infrastructure company, Procter & Gamble (NYSE: PG), and The
Gillette Company. Mr. O’Connor holds a BS in Finance and Accounting
from Northeastern University.
Kathleen
Griffin Stack was appointed to our board of directors in
connection with our initial public offering. Ms. Stack has over
three decades of experience as an investor and research analyst in
the consumer products sector. Ms. Stack served most recently as
Managing Director at J.P Morgan Asset Management until 2015, where
she was responsible for equity investments within the U.S. consumer
products sector across institutional and retail funds. Her career
at J.P Morgan Chase & Co. spanned 34 years, 32 years of which
she was the U.S. Consumer Products Research Analyst. In addition,
she served as Global Team Leader for consumer products equity
investments in the Global Analyst Portfolio, as Portfolio Manager
for the U.S. Analyst Fund, and as U.S. Equity Research Analyst for
the web hosting, internet infrastructure, regional banking and
brokerage sectors. Prior to joining Morgan Guaranty Trust Company
of New York (the predecessor to J.P Morgan Chase & Co.), Ms.
Stack was an Associate at Donaldson, Lufkin & Jenrette,
Incorporated, and an Assistant Vice President at Lehman Brothers
Kuhn Loeb, Incorporated. She began her career at Lehman Brothers
Incorporated, where she was the first Research Assistant in the
U.S. Equity Research Department. Ms. Stack was recognized over
multiple years by Institutional Investor Magazine as “Best of the
Buy Side”. Ms. Stack holds an A.B. in Mathematical Economics from
Colgate University and an M.B.A. in Finance from The Wharton
School, University of Pennsylvania.
Michael
Weinstein was appointed to our board of directors in connection
with our initial public offering. Mr. Weinstein is a consumer
marketing professional with a long and successful track record
focused on the beverage industry. Mr. Weinstein most recently was
Chairman of INOV8 Beverage Consulting Group and its predecessor,
INOV8 Beverages, which he co-founded in 2004. His career spans
nearly 50 years, starting with positions of increasing
responsibility at the Pepsi-Cola Company and Kenyon & Eckhardt
Advertising. Later in his career, he served as President and COO of
A&W Brands Inc., CEO of Triarc Beverage Group (which included
the Snapple, Royal Crown, Mistic and Stewart’s brands) until its
sale to Cadbury Schweppes, and President of Global Innovation and
Business Development at Cadbury Schweppes. Mr. Weinstein currently
serves as a board member of privately held King Juice (Calypso
Lemonade) and Eska Water. Previously, he served on the boards of
the H. J. Heinz Company, Dr. Pepper Snapple, Bob Evans Farms,
A&W Brands Inc. and Tampico Beverages. Accolades include
Beverage Industry Executive of the Year and induction into the
Beverage World Hall of Fame. Mr. Weinstein holds a BA from
Lafayette College and an MBA from Harvard Business
School.
Number
and Terms of Office of Officers and Directors
Our
board of directors is divided into three classes, with only one
class of directors being elected in each year, and with each class
(except for those directors appointed prior to our first annual
meeting of shareholders) serving a three-year term. In accordance
with the corporate governance requirements of Nasdaq, we are not
required to hold an annual meeting until one year after our first
fiscal year end following our listing on Nasdaq. The term of office
of the first class of directors, consisting of Mr. Ernst and Ms.
Stack, will expire at our first annual meeting of shareholders. The
term of office of the second class of directors, consisting of Mr.
O’Connor and Mr. Weinstein, will expire at our second annual
meeting of shareholders. The term of office of the third class of
directors, consisting of Mr. Hooper, Mr. Khoury and Mr. Flocco,
will expire at our third annual meeting of shareholders.
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 Founder Shares. In addition, prior to
the completion of an initial business combination, holders of a
simple majority of our Founder Shares may remove a member of the
board of directors for any reason.
Our
Sponsor, upon and following 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
persons to the offices set forth in our Amended and Restated
Memorandum and Articles of Association as it deems appropriate. Our
Amended and Restated Memorandum and Articles of Association will
provide that our officers may consist of one or more chairman of
the board, chief executive officer, president, chief financial
officer, vice presidents, secretary, treasurer and such other
offices as may be determined by the board of directors.
Director
Independence
Nasdaq
listing standards require that a majority of our board of directors
be independent. Our board of directors has determined that Tim
O’Connor, Kathleen Griffin Stack, Robert Ernst, and Michael
Weinstein are “independent directors” as defined in the listing
standards of Nasdaq. 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 nominating committee and a compensation committee.
Subject to phase-in rules and a limited exception, the rules of
Nasdaq and Rule 10A-3 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 Nasdaq require that the compensation committee and the
nominating committee of a listed company be comprised solely of
independent directors
Audit
Committee
Tim
O’Connor, Kathleen Griffin Stack and Michael Weinstein serve as
members of our audit committee. Our board of directors has
determined that each of Tim O’Connor, Kathleen Griffin Stack and
Michael Weinstein are independent under the listing standards of
Nasdaq and applicable SEC rules. Tim O’Connor serves as the
chairman of the audit committee. Under the listing standards of
Nasdaq and applicable SEC rules, all the directors on the audit
committee must be independent. Each member of the audit committee
is financially literate and our board of directors has determined
that Tim O’Connor qualifies as an “audit committee financial
expert” as defined in applicable SEC rules.
The
audit committee is responsible for:
|
● |
meeting
with our independent registered public accounting firm regarding,
among other issues, audits, and adequacy of our accounting and
control systems; |
|
● |
monitoring
the independence of the independent registered public accounting
firm; |
|
● |
verifying
the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner
responsible for reviewing the audit as required by law; |
|
● |
inquiring
and discussing with management our compliance with applicable laws
and regulations; |
|
● |
pre-approving
all audit services and permitted non-audit services to be performed
by our independent registered public accounting firm, including the
fees and terms of the services to be performed; |
|
● |
appointing
or replacing the independent registered public accounting
firm; |
|
● |
determining
the compensation and oversight of the work of the independent
registered public accounting firm (including resolution of
disagreements between management and the independent registered
public accounting firm regarding financial reporting) for the
purpose of preparing or issuing an audit report or related
work; |
|
● |
establishing
procedures for the receipt, retention and treatment of complaints
received by us regarding accounting, internal accounting controls
or reports which raise material issues regarding our financial
statements or accounting policies; |
|
● |
monitoring
compliance on a quarterly basis with the terms of our initial
public offering and, if any noncompliance is identified,
immediately taking all action necessary to rectify such
noncompliance or otherwise causing compliance with the terms of our
initial public offering; and |
|
● |
reviewing
and approving all payments made to our existing shareholders,
executive officers or directors and their respective affiliates.
Any payments made to members of our audit committee will be
reviewed and approved by our board of directors, with the
interested director or directors abstaining from such review and
approval. |
Nominating
Committee
The
members of our nominating committee are Michael Weinstein and
Kathleen Griffin Stack, and Michael Weinstein serves as chairman of
the nominating committee. Under the listing standards of Nasdaq, we
are required to have a nominating committee composed entirely of
independent directors. Our board of directors has determined that
each of Michael Weinstein and Kathleen Griffin Stack are
independent.
The
nominating committee is responsible for overseeing the selection of
persons to be nominated to serve on our board of directors. The
nominating committee considers persons identified by its members,
management, shareholders, investment bankers and others.
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified a charter
adopted by us, generally provide that persons to be
nominated:
|
● |
should
have demonstrated notable or significant achievements in business,
education or public service; |
|
● |
should
possess the requisite intelligence, education and experience to
make a significant contribution to the board of directors and bring
a range of skills, diverse perspectives and backgrounds to its
deliberations; and |
|
● |
should
have the highest ethical standards, a strong sense of
professionalism and intense dedication to serving the interests of
the shareholders. |
The
nominating committee will consider a number of qualifications
relating to management and leadership experience, background and
integrity and professionalism in evaluating a person’s candidacy
for membership on the board of directors. The nominating committee
may require certain skills or attributes, such as financial or
accounting experience, to meet specific board needs that arise from
time to time and will also consider the overall experience and
makeup of its members to obtain a broad and diverse mix of board
members. The nominating committee does not distinguish among
nominees recommended by shareholders and other persons.
Compensation
Committee
The
members of our compensation committee are Robert Ernst and Tim
O’Connor, and Robert Ernst serves as chairman of the compensation
committee.
Under
the listing standards of Nasdaq, we are required to have a
compensation committee composed entirely of independent directors.
Our board of directors has determined that each of Robert Ernst and
Tim O’Connor are independent. We adopted a compensation committee
charter, which will detail the principal functions of the
compensation committee, including:
|
● |
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 based on such
evaluation; |
|
● |
reviewing
and approving the compensation of all of our other Section 16
executive 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 executive 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. |
The
charter also provides that the compensation committee may, in its
sole discretion, retain or obtain the advice of a compensation
consultant, legal counsel or other adviser and is 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.
Compensation
Committee Interlocks and Insider Participation
None
of our executive officers currently serves, and in the past year
has not served, as a member of the compensation committee of any
entity that has one or more executive officers serving on our board
of directors.
Code
of Ethics
We
adopted a Code of Ethics applicable to our directors, officers and
employees. A copy of the Code of Ethics will be provided without
charge upon request from us. We intend to disclose any amendments
to or waivers of certain provisions of our Code of Ethics in a
Current Report on Form 8-K.
Conflicts
of Interest
Under
Cayman Islands law, directors and officers owe the following
fiduciary duties:
|
● |
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; |
|
● |
duty
to exercise powers for the purposes for which those powers were
conferred and not for a collateral purpose; |
|
● |
directors
should not improperly fetter the exercise of future
discretion; |
|
● |
duty
to exercise powers fairly as between different sections of
shareholders; |
|
● |
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 |
|
● |
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
amended and restated memorandum and articles of association or
alternatively by shareholder approval at general
meetings.
Certain
of our officers and directors presently have, and any of them in
the future may have additional, fiduciary or contractual
obligations to other entities, including entities that are
affiliates of our sponsor, pursuant to which such officer or
director is or will be required to present a business combination
opportunity to such entity. Accordingly, if any of our officers or
directors becomes aware of a business combination opportunity which
is suitable for an entity to which he or she has then-current
fiduciary or contractual obligations, he or she will honor his or
her fiduciary or contractual obligations to present such business
combination opportunity to such entity, subject to their fiduciary
duties under Cayman Islands law. 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:
|
Individual |
|
Entity |
|
Entity’s Business |
|
Affiliation |
| David Hooper |
|
Authentic Equity, LLC |
|
Consumer Private
Equity |
|
Founder & Partner |
| |
|
|
|
|
|
|
| Thomas Flocco |
|
Authentic Equity, LLC |
|
Consumer Private
Equity |
|
Partner |
| |
|
Everglades Boats |
|
Boating &
Manufacturing |
|
Chairman |
| |
|
L&H Advisors |
|
Investment Firm |
|
Advisor |
| |
|
Barrell Craft Spirits,
LLC |
|
Spirits, Distilling |
|
Advisor |
| |
|
Conecuh Brands LLC |
|
Spirits, Distilling |
|
Advisor |
| |
|
Monkey in Paradise
LLC |
|
Spirits, Distilling |
|
Advisor |
| |
|
Heaven’s Door Spirits |
|
Spirits, Distilling |
|
Advisor |
| |
|
|
|
|
|
|
| Todd Khoury |
|
Authentic Equity, LLC |
|
Consumer Private
Equity |
|
Co-Founder &
Partner |
| |
|
|
|
|
|
|
| Tim O’Connor |
|
Teasdale Foods,
Inc. |
|
Food
Manufacturing |
|
Chief Executive
Officer |
| |
|
|
|
|
|
|
| Michael Weinstein |
|
King Juice (Calypso
Lemonade) |
|
Beverages |
|
Director |
| |
|
Eska Water |
|
Beverages |
|
Director |
Potential
investors should also be aware of the following other potential
conflicts of interest:
|
● |
Our
executive 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 executive officers is engaged in several other business
endeavors for which he may be entitled to substantial compensation,
and our executive officers are not obligated to contribute any
specific number of hours per week to our affairs. |
|
● |
Our
Sponsor subscribed for Founder Shares prior to the date of our
final prospectus related to the initial public offering and
purchased Private Placement Warrants in a transaction that closed
simultaneously with the closing of our initial public
offering. |
|
● |
Our
Sponsor and each member of our Management Team have entered into an
agreement with us, pursuant to which they have agreed to waive
their redemption rights with respect to any Founder Shares and
Public Shares held by them in connection with (i) the completion of
our initial business combination and (ii) a shareholder vote to
approve an amendment to our Amended and Restated Memorandum and
Articles of Association (A) that would modify the substance or
timing of our obligation to provide holders of our Class A ordinary
shares the right to have their shares redeemed in connection with
our initial business combination or to redeem 100% of our Public
Shares if we do not complete our initial business combination
within 24 months from the closing of our initial public offering or
(B) with respect to any other provision relating to the rights of
holders of our Class A ordinary shares. Additionally, our Sponsor
has agreed to waive its rights to liquidating distributions from
the trust account with respect to its 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. Except as described herein, our Sponsor and
our directors and executive officers have agreed not to transfer,
assign or sell any of their Founder Shares until the earliest of
(A) one year after the completion of our initial business
combination and (B) subsequent to our initial business combination,
(x) if the closing price of our Class A ordinary shares equals or
exceeds $12.00 per share (as adjusted for share subdivisions, 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, or (y)
the date on which we complete a liquidation, merger, share exchange
or other similar transaction that results in all of our Public
Shareholders having the right to exchange their Ordinary Shares for
cash, securities or other property. Except as described herein, the
Private Placement Warrants will not be transferable until 30 days
following the completion of our initial business combination.
Because each of our executive officers and directors will 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 is included by a
target business as a condition to any agreement with respect to our
initial business combination. In addition, our Sponsor, officers
and directors may Sponsor, form or participate in other blank check
companies similar to ours during the period in which we are seeking
an initial business combination. Any such companies may present
additional conflicts of interest in pursuing an acquisition target,
particularly in the event there is overlap among investment
mandates. |
We
are not prohibited from pursuing an initial business combination
with a company that is affiliated with our Sponsor, officers or
directors. In the event we seek to complete our initial business
combination with a company that is affiliated with our Sponsor or
any of our officers or directors, we, or a committee of independent
directors, will obtain an opinion from an independent investment
banking firm or another independent entity that commonly renders
valuation opinions 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.
Furthermore,
in no event will our Sponsor or any of our existing officers or
directors, or their respective affiliates, be paid by us 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, since the consummation
of our initial public offering, we reimburse an affiliate of our
Sponsor for office space, secretarial and administrative services
provided to us in the amount of $10,000 per month.
We
cannot assure you that any of the above mentioned conflicts will be
resolved in our favor.
If we
seek shareholder approval, we will complete our initial business
combination only if a majority of the Ordinary Shares, represented
in person or by proxy and entitled to vote thereon, voted at a
shareholder meeting are voted in favor of the business combination.
In such case, our Sponsor and each member of our Management Team
have agreed to vote their Founder Shares and Public Shares 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, willful neglect, actual fraud or the
consequences of committing a crime. Our Amended and Restated
Memorandum and Articles of Association will 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 entered into agreements with our
directors and officers to provide contractual indemnification in
addition to the indemnification provided for in our Amended and
Restated Memorandum and Articles of Association. 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
(except to the extent they are entitled to funds from the trust
account due to their ownership of public shares). 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
Executive
Officer and Director Compensation
None
of our executive officers or directors have received any cash
compensation for services rendered to us. Commencing on the date
that our securities are first listed on Nasdaq through the earlier
of consummation of our initial business combination and our
liquidation, we will reimburse an affiliate of our Sponsor for
office space, secretarial and administrative services provided to
us in the amount of $10,000 per month. In addition, our Sponsor,
executive officers and directors, or their respective affiliates
will be 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 will review on
a quarterly basis all payments that were made by us to our Sponsor,
executive officers or directors, or their affiliates. Any such
payments prior to an initial business combination will be 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 executive 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, will be paid by the company to our Sponsor,
executive officers and directors, or 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 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
business combination, because the directors of the post-combination
business will be responsible for determining executive officer and
director compensation. Any compensation to be paid to our executive
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 executive 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
executive 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 share; and |
|
● |
all
our executive officers and directors as a group. |
In
the table below percentage ownership is based on 23,000,000 Class A
ordinary shares (which includes Class A ordinary shares that are
underlying the units) and 7,000,000 Class B ordinary shares
outstanding as of February 14, 2022. Unless otherwise indicated, we
believe that all persons named in the table have sole voting and
investment power with respect to all of our ordinary shares
beneficially owned by them. Voting power represents the combined
voting power of Class A ordinary shares and Class B ordinary shares
owned beneficially by such person. On all matters to be voted upon,
the holders of the Class A ordinary shares and the Class B ordinary
shares vote together as a single class. Currently, all of the Class
B ordinary shares are convertible into Class A ordinary shares on a
one-for-one basis.
| |
|
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 |
|
| Authentic
Equity Sponsor, LLC (our sponsor) (3) |
|
|
6,925,000 |
|
|
|
98.9 |
% |
|
|
— |
|
|
|
— |
|
| Adage
Capital Partners, L.P.(4) |
|
|
— |
|
|
|
— |
|
|
|
1,400,000 |
|
|
|
6.1 |
% |
| Bank
of America Corporation(5) |
|
|
— |
|
|
|
— |
|
|
|
1,373,005 |
|
|
|
6.0 |
% |
| Goldman
Sachs Group, Inc. (6) |
|
|
— |
|
|
|
— |
|
|
|
1,157,434 |
|
|
|
5.0 |
% |
| Hudson
Bay Capital Management LP (7) |
|
|
— |
|
|
|
— |
|
|
|
1,327,347 |
|
|
|
5.8 |
% |
| David
Hooper(3)(8) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Thomas
Flocco(3)(8) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Todd
Khoury(3)(8) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Robert
Ernst(8) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Kathleen
Griffin Stack |
|
|
25,000 |
|
|
|
|
* |
|
|
— |
|
|
|
— |
|
| Tim
O’Connor |
|
|
25,000 |
|
|
|
|
* |
|
|
— |
|
|
|
— |
|
| Michael
Weinstein |
|
|
25,000 |
|
|
|
|
* |
|
|
— |
|
|
|
— |
|
| All
officers and directors as a group (seven individuals) |
|
|
75,000 |
|
|
|
1.1 |
% |
|
|
— |
|
|
|
— |
|
| * |
Less
than one percent. |
| (1) |
Unless
otherwise noted, the business address of each of our shareholders
is 32 Elm Place, 2nd Floor, Rye, NY 10580. |
| (2) |
Interests
shown consist solely of Founder Shares, classified as Class B
ordinary shares. Such shares will automatically convert into Class
A ordinary shares at the time of our initial business combination
or earlier at the option of the holders thereof as described in the
section entitled “Description of Securities.” Excludes Class A
ordinary shares issuable pursuant to the Forward Purchase
Agreement, as such shares will only be issued concurrently with the
closing of our initial business combination. |
| (3) |
There
are three managers of our sponsor’s board of managers. Each manager
has one vote, and the approval of a majority is required to approve
an action of our sponsor. Under the so-called “rule of three”, if
voting and dispositive decisions regarding an entity’s securities
are made by three or more individuals, and a voting or dispositive
decision requires the approval of a majority of those individuals,
then none of the individuals is deemed a beneficial owner of the
entity’s securities. This is the situation with regard to our
sponsor. Based upon the foregoing analysis, no individual manager
of our sponsor exercises voting or dispositive control over any of
the securities held by our sponsor, even those in which he directly
holds a pecuniary interest. Accordingly, none of them will be
deemed to have or share beneficial ownership of such
shares. |
| (4) |
Includes
Class A ordinary shares beneficially held by Adage Capital
Partners, LP, a Delaware limited partnership (“ACP”), Adage Capital
Partners GP, L.L.C., a limited liability company organized under
the laws of the State of Delaware (“ACPGP”) as general partner of
ACP with respect to the Class A Ordinary Shares directly owned by
ACP, Robert Atchinson, a United States citizen, and Phillip Gross a
United States citizen, based solely on the Schedule 13G filed
jointly by ACP, ACPGP, Robert Atchinson, and Phillip Gross, with
the SEC on February 1, 2021. The business address of each of ACP,
ACPGP, Robert Atchinson, and Phillip Gross is 200 Clarendon Street,
52nd Floor, Boston, Massachusetts 02116. |
| (5) |
Includes
Class A ordinary shares beneficially held by Bank of America
Corporation, a Delaware corporation (“BOA”), based solely on the
Schedule 13G filed by BOA with the SEC on January 28, 2022. The
business address of BOA is 100 Tryon St, Charlotte, NC
28255. |
| (6) |
Includes
Class A ordinary shares beneficially held by Goldman Sachs Group,
Inc., a Delaware corporation (“GSG”) and Goldman Sachs & Co.
LLC, a New York limited liability company (“GSC”), based solely on
the Schedule 13G filed jointly by GSG and GSC with the SEC on
December 1, 2021. The business address of each of GSG and GSC is
200 West Street, New York, NY 10282. |
| (7) |
Includes
Class A ordinary shares beneficially held by Hudson Bay Capital
Management LP, a Delaware limited partnership (“HBCM”), HBCM serves
as the investment manager to HB Strategies LLC (“HBS”) and Hudson
Bay SPAC Master Fund LP (“HBSMF”) in whose name the securities
reported herein are held. As such HBCM may be deemed to be the
beneficial owner of all securities owned by HBS and HBSMF. Sander
Gerber, a United States citizen, (Mr. Gerber) serves as the
managing member of Hudson Bay Capital GP LLC, which is general
partner of HBCM. Mr. Gerber disclaims beneficial ownership of these
securities. This information is based solely on the Schedule 13G
filed jointly by HBCM and Mr. Gerber. The business address of each
of HBCM and Mr. Gerber is 28 Havemeyer Place, 2nd Floor, Greenwich,
CT 06830. |
| (8) |
Does
not include any shares indirectly owned by this individual as a
result of his or her membership interest in our
sponsor. |
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
On
October 1, 2020, the sponsor paid $25,000, or approximately $0.004
per share, to cover certain of our offering costs in consideration
of 5,750,000 Class B ordinary shares, par value $0.0001. In
December 2020, the Company effected a pro rata share capitalization
resulting in an increase in the total number of Class B ordinary
shares outstanding from 5,750,000 to 7,000,000. The number of
Founder Shares issued was determined based on the expectation that
such Founder Shares would represent 20% of the issued and
outstanding shares upon completion of our initial public offering
plus the number of Class A ordinary shares that may be purchased
pursuant to the Forward Purchase Agreement. The founder shares
(including the Class A ordinary shares issuable upon exercise
thereof) may not, subject to certain limited exceptions, be
transferred, assigned or sold by the holder.
In
addition, our Sponsor purchased an aggregate of 6,600,000 Private
Placement Warrants for an aggregate purchase price of $5.8 million
in a Private Placement that closed simultaneously with the closing
of our initial public offering. As such, our sponsor’s interest in
this transaction is valued at $5.8 million. Each Private Placement
Warrant entitles the holder thereof to purchase one Class A
ordinary share at $11.50 per share, subject to adjustment.
Simultaneously with the closing of the initial public offering, the
Company consummated the sale of certain rights to GEPT for gross
proceeds of $824,500, which will allow GEPT to purchase up to $50.0
million of Forward Purchase Securities immediately prior to any
initial business combination.
We
currently maintain our executive offices at 32 Elm Place, 2nd
Floor, Rye, NY 10580. The cost for our use of this space is
included in the $10,000 per month fee we pay to an affiliate of our
sponsor for office space, administrative and support services. We
consider our current office space adequate for our current
operations.
No
compensation of any kind, including finder’s and consulting fees,
is paid by the company to our sponsor, executive officers and
directors, or any of their respective affiliates, prior to
completion of our initial business combination. However, these
individuals will be 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, directors or our or their affiliates and will
determine which expenses and the amount of expenses that will be
reimbursed. There is no cap or ceiling on the reimbursement of
out-of-pocket expenses incurred by such persons in connection with
activities on our behalf.
In
addition, in order to finance transaction costs in connection with
an intended initial 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 an initial business combination, we may repay such
loaned amounts out of the proceeds of the trust account released to
us. In the event that the initial 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, including as to
exercise price, exercisability and exercise period. The terms of
such loans by our officers and directors, if any, have not been
determined and no written agreements exist with respect to such
loans. We do not expect to seek loans from parties other than our
Sponsor, its affiliates or our Management Team as we do not believe
third parties will be willing to loan such funds and provide a
waiver against any and all rights to seek access to funds in our
trust account.
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. It is
unlikely the amount of such compensation will be known at the time
of distribution of such tender offer materials or at the time of a
shareholder meeting held to consider our initial business
combination, as applicable, as it will be up to the directors of
the post-combination business to determine executive and director
compensation.
We
entered into a registration and shareholder rights agreement
pursuant to which our Sponsor are entitled to certain registration
rights with respect to the Private Placement Warrants, the warrants
issuable upon conversion of working capital loans (if any), any
Forward Purchase Warrants and the Class A ordinary shares issuable
upon exercise of the foregoing and upon conversion of the Founder
Shares, and, upon consummation of our initial business combination,
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.
Policy
for Approval of Related Party Transactions
The
audit committee of our board of directors operates pursuant to a
charter that provides for the review, approval and/or ratification
of “related party transactions,” which are those transactions
required to be disclosed pursuant to Item 404 of Regulation S-K as
promulgated by the SEC, by the audit committee. At its meetings,
the audit committee is provided with the details of each new,
existing, or proposed related party transaction, including the
terms of the transaction, any contractual restrictions that the
company has already committed to, the business purpose of the
transaction, and the benefits of the transaction to the company and
to the relevant related party. Any member of the committee who has
an interest in the related party transaction under review by the
committee shall abstain from voting on the approval of the related
party transaction, but may, if so requested by the chairman of the
committee, participate in some or all of the committee’s
discussions of the related party transaction. Upon completion of
its review of the related party transaction, the committee may
determine to permit or to prohibit the related party
transaction.
Director
Independence
Nasdaq
listing standards require that a majority of our board of directors
be independent. Our board of directors has determined that Tim
O’Connor, Kathleen Griffin Stack, Rob Ernst, and Michael Weinstein
are “independent directors” as defined in the listing standards of
Nasdaq. Our independent directors have regularly scheduled meetings
at which only independent directors are present.
Item
14. Principal Accountant Fees and Services
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. Audit fees consist of fees for
professional services rendered for the audit of our year-end
financial statements, reviews of our quarterly financial statements
and services that are normally provided by Withum in connection
with regulatory filings. The aggregate fees for WithumSmith+Brown,
PC for audit fees, inclusive of required filings with the SEC for
the year ended December 31, 2021 and for the period from September
29, 2020 (inception) through December 31, 2020 of services rendered
in connection with our initial public offering, totaled $64,465 and
$53,125, respectively.
Audit-Related Fees. Audit-related fees consist of
fees billed for assurance and related services that are reasonably
related to performance of the audit or review of the financial
statements and are not reported under “Audit Fees.” These services
include attest services that are not required by statute or
regulation and consultation concerning financial accounting and
reporting standards. During the year ended December 31, 2021 and
the period from September 29, 2020 (inception) to December 31,
2020, we did not pay WithumSmith+Brown, PC any audit-related
fees.
Tax Fees. Tax fees consist of fees billed for
professional services relating to tax compliance, tax planning and
tax advice. During the year ended December 31, 2021 and the period
from September 29, 2020 (inception) to December 31, 2020, we paid
WithumSmith+Brown, PC tax fees of $3,750 and $3,000,
respectively.
All Other Fees. All other fees consist of fees billed for
all other services. During the year ended December 31, 2021 and the
period from September 29, 2020 (inception) to December 31, 2020, we
did not pay WithumSmith+Brown, PC any other fees.
PART
IV
Item
15. Exhibits, Financial Statement Schedules
|
(a) |
The
following documents are filed as part of this Annual
Report: |
We
hereby file as part of this Annual Report the exhibits listed in
the attached Exhibit Index.
| * |
Filed
herewith |
| ** |
Furnished
herewith |
| (1) |
Incorporated
by reference to the registrant’s Registration Statement on Form
S-1, filed with the SEC on December 22, 2020. |
| (2) |
Incorporated
by reference to the registrant’s Current Report on Form 8-K, filed
with the SEC on January 21, 2021. |
| (3) |
Incorporated
by reference to the registrant’s Annual Report on Form 10-K, filed
with the SEC on March 31, 2021. |
| (4) |
Incorporated by reference to the registrant’s
Annual Report on Form 10-K, filed with the SEC on January 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
25, 2022 |
AUTHENTIC
EQUITY ACQUISITION CORP. |
| |
|
|
| |
/s/ David Hooper |
| |
Name: |
David
Hooper |
| |
Title: |
Chairman
and Chief Executive Officer |
| |
|
(Principal
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.
|
/s/ David Hooper |
|
Chairman
and Chief Executive Officer |
|
March
25, 2022 |
|
David
Hooper |
|
(Principal
Executive Officer) |
|
|
|
|
|
|
|
|
|
/s/ Todd Khoury |
|
Chief
Financial Officer, Director |
|
March 25, 2022 |
|
Todd
Khoury |
|
(Principal
Financial Officer and Principal Accounting Officer) |
|
|
|
|
|
|
|
|
|
/s/ Robert Ernst |
|
Director |
|
March 25, 2022 |
|
Robert
Ernst |
|
|
|
|
|
|
|
|
|
|
|
/s/ Thomas Flocco |
|
President
and Chief Operating Officer, Director |
|
March 25, 2022 |
|
Thomas
Flocco |
|
|
|
|
|
|
|
|
|
|
|
/s/ Kathleen Griffin Stack |
|
Director |
|
March 25, 2022 |
|
Kathleen
Griffin Stack |
|
|
|
|
|
|
|
|
|
|
|
/s/ Timothy O’Connor |
|
Director |
|
March 25, 2022 |
|
Timothy
O’Connor |
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael Weinstein |
|
Director |
|
March 25, 2022 |
|
Michael
Weinstein |
|
|
|
|
AUTHENTIC
EQUITY ACQUISITION CORP.
INDEX
TO FINANCIAL STATEMENTS
|
|
|
Page |
|
Report
of Independent Registered Public Accounting Firm |
|
F-2 |
|
Financial
Statements: |
|
|
|
Balance
Sheets as of December 31, 2021 and 2020 |
|
F-3 |
|
Statements
of Operations for the Year Ended December 31, 2021 and the Period
from September 29, 2020 (inception) through
December 31, 2020 |
|
F-4 |
|
Statements
of Changes in Shareholders’ Deficit for Year Ended December 31,
2021 and the Period from September 29, 2020 (inception) through
December 31, 2020 |
|
F-5 |
|
Statements
of Cash Flows for the Year Ended December 31, 2021 and the Period
from September 29, 2020 (inception) through
December 31, 2020 |
|
F-6 |
|
Notes
to Financial Statements |
|
F-7 |
Report
of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Authentic Equity Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Authentic Equity
Acquisition Corp. (the “Company”) as of December 31, 2021 and 2020,
the related statements of operations, changes in shareholders’
deficit and cash flows for the year ended December 31, 2021 and for
the period from September 29, 2020 (inception) through December 31,
2020, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and the results of
its operations and its cash flows for the year ended December 31,
2021 and the period from September 29, 2020 (inception) through
December 31, 2020, in conformity with accounting principles
generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 2 to the financial statements, if the Company is unable to
raise additional funds to alleviate liquidity needs and complete a
business combination by January 20, 2023, 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 2. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
/s/ WithumSmith+Brown, PC
We have served as the Company's auditor since 2020.
New York, New York
March 25, 2022
PCAOB ID Number 100
AUTHENTIC
EQUITY ACQUISITION CORP.
BALANCE
SHEETS
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
| Current
assets: |
|
|
|
|
|
|
| Cash |
|
$ |
442,162 |
|
|
$ |
103 |
|
|
Prepaid expenses |
|
|
233,630 |
|
|
|
-
|
|
|
Total current assets |
|
|
675,792 |
|
|
|
103 |
|
|
Investments held in Trust Account |
|
|
230,021,742 |
|
|
|
-
|
|
|
Deferred offering costs associated with the initial public
offering |
|
|
-
|
|
|
|
411,363 |
|
|
Total Assets |
|
$ |
230,697,534 |
|
|
$ |
411,466 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, Class A Ordinary Shares Subject to Possible
Redemption, and Shareholders’ Deficit |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
170,379 |
|
|
$ |
3,000 |
|
|
Accounts payable - related party |
|
|
10,000 |
|
|
|
-
|
|
|
Accrued expenses |
|
|
696,356 |
|
|
|
321,215 |
|
|
Note payable |
|
|
-
|
|
|
|
96,500 |
|
|
Total current liabilities |
|
|
876,735 |
|
|
|
420,715 |
|
|
Deferred underwriting commissions |
|
|
8,050,000 |
|
|
|
-
|
|
|
Derivative liabilities |
|
|
9,810,600 |
|
|
|
-
|
|
|
Total Liabilities |
|
|
18,737,335 |
|
|
|
420,715 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption, $0.0001 par
value; 23,000,000 and 0 shares issued and outstanding at $10.00 per
share redemption value as of December 31, 2021 and 2020,
respectively |
|
|
230,000,000 |
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Deficit |
|
|
|
|
|
|
|
|
| Preference
shares, $0.0001 par value; 1,000,000 shares authorized;
none
issued or outstanding as of December 31, 2021 and 2020 |
|
|
-
|
|
|
|
-
|
|
| Class A
ordinary shares, $0.0001 par value; 300,000,000 shares authorized;
no
non-redeemable shares issued or outstanding as of December 31, 2021
and 2020 |
|
|
-
|
|
|
|
-
|
|
| Class B
ordinary shares, $0.0001 par value; 30,000,000 shares authorized;
7,000,000 shares issued and outstanding as of December 31, 2021 and
2020 (1) |
|
|
700 |
|
|
|
700 |
|
|
Additional paid-in capital |
|
|
-
|
|
|
|
24,300 |
|
|
Accumulated deficit |
|
|
(18,040,501 |
) |
|
|
(34,249 |
) |
|
Total shareholders’ deficit |
|
|
(18,039,801 |
) |
|
|
(9,249 |
) |
|
Total Liabilities, Class A Ordinary Shares Subject to Possible
Redemption and Shareholders’ Deficit |
|
$ |
230,697,534 |
|
|
$ |
411,466 |
|
|
|
(1) |
As
of December 31, 2021 and 2020, Class B ordinary shares amount
included up to 1,250,000 Class B ordinary shares subject to
forfeiture depending on the number of units purchased under the
Forward Purchase Agreement. As of December 31, 2020,
up to 750,000 Class B ordinary shares were subject to forfeiture if
the over-allotment was not exercised in full. On January 20, 2021,
the over-allotment was exercised in full. Accordingly, none of
these shares were forfeited. |
The
accompanying notes are an integral part of these financial
statements.
AUTHENTIC
EQUITY ACQUISITION CORP.
STATEMENTS
OF OPERATIONS
|
|
|
|
|
|
For
the
Period from |
|
|
|
|
For
the
Year Ended |
|
|
September 29,
2020 (Inception)
through |
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Operating expenses |
|
|
|
|
|
|
|
General and administrative expenses |
|
$ |
1,453,201 |
|
|
$ |
34,249 |
|
|
Administrative fee - related party |
|
|
113,871 |
|
|
|
-
|
|
|
Loss from operations |
|
|
(1,567,072 |
) |
|
|
(34,249 |
) |
|
Other income (expenses) |
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liabilities |
|
|
10,561,900 |
|
|
|
-
|
|
|
Offering costs allocated to issuance of public and private
placement warrants |
|
|
(701,682 |
) |
|
|
-
|
|
|
Loss on excess of fair value over cash received for Private
Placement Warrants |
|
|
(1,352,500 |
) |
|
|
-
|
|
|
Net gain from investments held in Trust Account |
|
|
21,742 |
|
|
|
-
|
|
|
Net income (loss) |
|
$ |
6,962,388 |
|
|
$ |
(34,249 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class A ordinary shares,
basic and diluted |
|
|
21,802,740 |
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share, Class A ordinary
shares |
|
$ |
0.25 |
|
|
$ |
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class B ordinary shares,
basic (1) |
|
|
5,710,959 |
|
|
|
5,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class B ordinary shares,
diluted (1) |
|
|
5,750,000 |
|
|
|
5,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share, Class B ordinary
shares |
|
$ |
0.25 |
|
|
$ |
(0.01 |
) |
|
|
(1) |
These
numbers excluded up to 1,250,000 Class B ordinary shares subject to
forfeiture depending on the number of units purchased under the
Forward Purchase Agreement as of December 31, 2021 and 2020. For
the period from September 29, 2020 (inception) through December 31,
2020, the number excluded 750,000 Class B ordinary shares which
were subject to forfeiture if the over-allotment wasn’t exercised
in full. On January 20, 2021, the over-allotment was exercised in
full. Accordingly, none of these shares were
forfeited. |
The
accompanying notes are an integral part of these financial
statements.
AUTHENTIC
EQUITY ACQUISITION CORP.
STATEMENTS
OF CHANGES IN SHAREHOLDERS’ DEFICIT
For
the Year Ended December 31, 2021
|
|
|
Ordinary Shares |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
|
Class A |
|
|
Class B |
|
|
Paid-in |
|
|
Accumulated |
|
|
Shareholders’ |
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares (1) |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
|
|
Balance - December 31, 2020 |
|
|
- |
|
|
$ |
-
|
|
|
|
7,000,000 |
|
|
$ |
700 |
|
|
$ |
24,300 |
|
|
$ |
(34,249 |
) |
|
$ |
(9,249 |
) |
|
Accretion on Class A ordinary shares subject to possible
redemption |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(24,300 |
) |
|
|
(24,968,640 |
) |
|
|
(24,992,940 |
) |
|
Net income |
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,962,388 |
|
|
|
6,962,388 |
|
|
Balance - December 31, 2021 |
|
|
- |
|
|
$ |
-
|
|
|
|
7,000,000 |
|
|
$ |
700 |
|
|
$ |
-
|
|
|
$ |
(18,040,501 |
) |
|
$ |
(18,039,801 |
) |
For
the Period from September 29, 2020 (Inception) through December 31,
2020
|
|
|
Ordinary Shares |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
|
Class A |
|
|
Class B |
|
|
Paid-in |
|
|
Accumulated |
|
|
Shareholders’ |
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares (1) |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
|
|
Balance - September 29, 2020 (inception) |
|
|
- |
|
|
$ |
-
|
|
|
|
-
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
Issuance of Class B ordinary shares to Sponsor |
|
|
- |
|
|
|
-
|
|
|
|
7,000,000 |
|
|
|
700 |
|
|
|
24,300 |
|
|
|
-
|
|
|
|
25,000 |
|
|
Net loss |
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(34,249 |
) |
|
|
(34,249 |
) |
|
Balance - December 31, 2020 |
|
|
- |
|
|
$ |
-
|
|
|
|
7,000,000 |
|
|
$ |
700 |
|
|
$ |
24,300 |
|
|
$ |
(34,249 |
) |
|
$ |
(9,249 |
) |
|
|
(1) |
As
of December 31, 2021 and 2020, Class B ordinary shares amount
included up to 1,250,000 Class B ordinary shares subject to
forfeiture depending on the number of units purchased under the
Forward Purchase Agreement. As of December 31, 2020, up to 750,000
Class B ordinary shares were subject to forfeiture if the
over-allotment was not exercised in full. On January 20, 2021, the
over-allotment was exercised in full. Accordingly, none of these
shares were forfeited. |
The
accompanying notes are an integral part of these financial
statements.
AUTHENTIC
EQUITY ACQUISITION CORP.
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
For
the
Period from |
|
|
|
|
For
the
Year Ended |
|
|
September 29,
2020 (Inception)
through |
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
6,962,388 |
|
|
$ |
(34,249 |
) |
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities: |
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liabilities |
|
|
(10,561,900 |
) |
|
|
-
|
|
|
Loss on excess of fair value over cash received for Private
Placement Warrants |
|
|
1,352,500 |
|
|
|
-
|
|
|
Offering costs associated with issuance of public and Private
Placement Warrants |
|
|
701,682 |
|
|
|
-
|
|
|
Net gain from investments held in Trust Account |
|
|
(21,742 |
) |
|
|
-
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
(233,630 |
) |
|
|
-
|
|
|
Accounts payable |
|
|
158,545 |
|
|
|
-
|
|
|
Accounts payable - related party |
|
|
10,000 |
|
|
|
-
|
|
|
Accrued expenses |
|
|
621,356 |
|
|
|
5,000 |
|
|
Net cash used in operating activities |
|
|
(1,010,801 |
) |
|
|
(29,249 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
Cash deposited in Trust Account |
|
|
(230,000,000 |
) |
|
|
-
|
|
|
Net cash used in investing activities |
|
|
(230,000,000 |
) |
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
Repayment of note payable to related party |
|
|
(96,500 |
) |
|
|
-
|
|
|
Proceeds received from note payable to related party |
|
|
-
|
|
|
|
56,500 |
|
|
Proceeds from issuance of Class B ordianry shares to Sponsor |
|
|
-
|
|
|
|
25,000 |
|
|
Proceeds received from initial public offering, gross |
|
|
230,000,000 |
|
|
|
-
|
|
|
Proceeds received from private placement, gross |
|
|
5,775,500 |
|
|
|
-
|
|
|
Proceeds from sale of rights to purchase Forward Purchase
Agreement |
|
|
824,500 |
|
|
|
-
|
|
|
Offering costs paid |
|
|
(5,050,640 |
) |
|
|
(52,148 |
) |
|
Net cash provided by financing activities |
|
|
231,452,860 |
|
|
|
29,352 |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
|
442,059 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash - beginning of the period |
|
|
103 |
|
|
|
-
|
|
|
Cash - end of the period |
|
$ |
442,162 |
|
|
$ |
103 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of noncash activities: |
|
|
|
|
|
|
|
|
|
Offering costs included in accounts payable |
|
$ |
-
|
|
|
$ |
3,000 |
|
|
Offering costs paid by Sponsor under promissory note |
|
$ |
-
|
|
|
$ |
40,000 |
|
|
Offering costs included in accrued expenses |
|
$ |
70,000 |
|
|
$ |
316,215 |
|
|
Deferred underwriting commissions in connection with the initial
public offering |
|
$ |
8,050,000 |
|
|
$ |
-
|
|
The
accompanying notes are an integral part of these financial
statements.
AUTHENTIC
EQUITY ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
Note
1-Description of Organization and Business
Operations
Organization
and General
Authentic
Equity Acquisition Corp. (the “Company”) was incorporated as a
Cayman Islands exempted company on September 29, 2020. The Company
was formed 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 (the
“Business Combination”).
As of
December 31, 2021, the Company had not commenced any operations.
All activity through December 31, 2021, relates to the Company’s
formation, the initial public offering (the “Initial Public
Offering”) described below and the search for a target business
with which to consummate an initial Business Combination. The
Company will not generate any operating revenues until after the
completion of its initial Business Combination, at the earliest.
The Company generates non-operating income in the form of interest
income on investments held in trust account from the proceeds
derived from the Initial Public Offering and the sale of the
Private Placement Warrants (as defined below).
Sponsor
and Financing
The
Company’s sponsor is Authentic Equity Sponsor LLC, a Delaware
limited liability company (the “Sponsor”). The registration
statement for the Company’s Initial Public Offering was declared
effective on January 14, 2021. On January 20, 2021, the Company
consummated its Initial Public Offering of 23,000,000 units (the
“Units” and, with respect to the Class A ordinary shares included
in the Units being offered, the “Public Shares”), including
3,000,000 additional Units sold pursuant to the underwriters’
over-allotment option (the “Over-Allotment Units”), at $10.00 per
Unit, generating gross proceeds of $230.0 million, and incurring
offering costs of approximately $13.3 million, of which
approximately $8.1 million was for deferred underwriting
commissions (Note 5).
Simultaneously
with the closing of the Initial Public Offering, the Company
consummated the sale of 6,600,000 warrants (each, a “Private
Placement Warrant” and collectively, the “Private Placement
Warrants”) to the Sponsor for an aggregate purchase price of
approximately $5.8 million, and incurred offering costs of
approximately $18,000, in a private placement (the “Private
Placement”). In addition, the Company consummated the sale of
certain rights to General Electric Pension Trust (“GEPT” and such
rights, the “GEPT Rights”) for gross proceeds of $824,500, which
will allow GEPT to purchase up to $50.0 million of Forward Purchase
Units (as defined in Note 5) immediately prior to an initial
Business Combination, subject to certain terms and conditions set
forth in the Forward Purchase Agreement (as defined in Note
5).
Trust
Account
Upon
the closing of the Initial Public Offering and the Private
Placement, $230.0 million ($10.00 per Unit) of the net proceeds of
the Initial Public Offering and certain of the proceeds of the
Private Placement were placed in a trust account (“Trust Account”)
located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and the amount is invested only in
United States “government securities” within the meaning of Section
2(a)(16) of the Investment Company Act of 1940, as amended (the
“Investment Company Act”), having a maturity of 185 days or less or
in money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act, which invest only in
direct U.S. government treasury obligations, until the earlier of:
(i) the completion of a Business Combination and (ii) the
distribution of the Trust Account.
Initial
Business Combination
The
Company’s management has broad discretion with respect to the
specific application of the net proceeds of the Initial Public
Offering, the Private Placement and the sale of the GEPT Rights,
although substantially all of the net proceeds are intended to be
applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a
Business Combination successfully. The Company’s initial Business
Combination must be with one or more operating businesses or assets
with a fair market value equal to at least 80% of the net 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 the signing of the agreement to enter into
the initial Business Combination. However, the Company will only
complete a Business Combination if the post-transaction company
owns or acquires 50% or more of the outstanding voting securities
of the target or otherwise acquires a controlling interest in the
target sufficient for it not to be required to register as an
investment company under the Investment Company Act.
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 a Business Combination
either (i) in connection with a shareholder 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 for a
pro rata portion of the amount then in the Trust Account ($10.00
per Public Share). The per-share amount to be distributed to Public
Shareholders who redeem their Public Shares will not be reduced by
the deferred underwriting commissions the Company will pay to the
underwriters (as discussed in Note 6). These Public Shares are
classified as temporary equity upon the completion of the Initial
Public Offering in accordance with the Financial Accounting
Standards Board’s (“FASB”) Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC
480”). In such case, the Company will proceed with a Business
Combination if the Company has net tangible assets of at least
$5,000,001 upon such consummation of a Business Combination and a
majority of the shares voted are voted in favor of the Business
Combination. If a shareholder vote is not required by law 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 (the “Amended and
Restated Memorandum and Articles of Association”), conduct the
redemptions pursuant to the tender offer rules of the U.S.
Securities and Exchange Commission (the “SEC”) and file tender
offer documents with the SEC prior to completing a Business
Combination. If, however, shareholder approval of the transactions
is required by law, or the Company decides to obtain shareholder
approval for business or legal reasons, the Company will offer to
redeem shares in conjunction with a proxy solicitation pursuant to
the proxy rules and not pursuant to the tender offer rules.
Additionally, each Public Shareholder may elect to redeem their
Public Shares irrespective of whether they vote for or against the
proposed transaction. If the Company seeks shareholder approval in
connection with a Business Combination, the initial shareholders
(as defined below) agreed to vote their Founder Shares (as defined
below in Note 5) and any Public Shares purchased during or after
the Initial Public Offering in favor of a Business Combination.
Pursuant to the Company’s insider trading policy, insiders are
required to: (i) refrain from purchasing shares during certain
blackout periods and when they are in possession of any material
non-public information and (ii) clear all trades with the Company’s
Chief Financial Officer prior to execution. In addition, the
initial shareholders agreed to waive their redemption rights with
respect to their Founder Shares and Public Shares in connection
with the completion of a Business Combination.
Notwithstanding
the foregoing, the Amended and Restated Memorandum and Articles of
Association provides 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 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% or more of the Class A
ordinary shares sold in the Initial Public Offering, without the
prior consent of the Company.
The
Company’s Sponsor, officers and directors (the “initial
shareholders”) agreed not to propose an amendment to the Amended
and Restated Memorandum and Articles of Association (a) that would
modify the substance or timing of the Company’s obligation to
redeem 100% of its Public Shares if the Company does not complete a
Business Combination within 24 months from the closing of the
Initial Public Offering, or January 20, 2023, (the “Combination
Period”) or (b) 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 Class A ordinary shares in conjunction
with any such amendment.
If
the Company is unable to complete 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 ten business days thereafter,
redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account,
including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay its tax
obligations, if any (less up to $100,000 of interest to pay
dissolution expenses) divided by the number of the then-outstanding
Public Shares, which redemption will completely extinguish Public
Shareholders’ rights as shareholders (including the right to
receive further liquidation distributions, if any); and (iii) as
promptly as reasonably possible following such redemption, subject
to the approval of the remaining shareholders and the board of
directors, liquidate and dissolve, subject in the case of clauses
(ii) and (iii), to the Company’s obligations under Cayman Islands
law to provide for claims of creditors and the requirements of
other applicable law.
The
initial shareholders agreed to waive their liquidation rights with
respect to the Founder Shares if the Company fails to complete a
Business Combination within the Combination Period. However, if the
initial shareholders acquire Public Shares in or after the Initial
Public Offering, they will be entitled to liquidating distributions
from the Trust Account with respect to such Public Shares if the
Company fails to complete a Business Combination within the
Combination Period. The underwriters agreed to waive their rights
to their deferred underwriting commission (see Note 5) 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 residual assets remaining available for
distribution (including Trust Account assets) will be only $10.00
per share initially held in the Trust Account. In order to protect
the amounts held in the Trust Account, the Sponsor agreed to be
liable to the Company if and to the extent any claims by a third
party for services rendered or products sold to the Company, or a
prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds
in the Trust Account. This liability will not apply with respect to
any claims by a third party who executed a waiver of any right,
title, interest or claim of any kind in or to any monies held in
the Trust Account or to any claims under the Company’s indemnity of
the underwriters of the Initial Public Offering against certain
liabilities, including liabilities under the Securities Act of
1933, as amended (the “Securities Act”). Moreover, in the event
that an executed waiver is deemed to be unenforceable against a
third party, the Sponsor will not be responsible to the extent of
any liability for such third-party claims. The Company will seek to
reduce the possibility that the Sponsor will have to indemnify the
Trust Account due to claims of creditors by endeavoring to have all
vendors, service providers, except our 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.
Liquidity
and Going Concern
As of
December 31, 2021, the Company had approximately $442,000 of cash
in its operating bank account and a working capital deficit of
approximately $201,000.
The
Company’s liquidity needs to date have been satisfied through a
contribution of $25,000 from the Sponsor to cover certain expenses
in exchange for the issuance of the Founder Shares, a loan of
$96,500 from the Sponsor pursuant to a promissory note originally
issued on September 30, 2020 (the “Note”), and a portion of the
proceeds from the consummation of the Private Placement and sale of
the GEPT Rights not held in the Trust Account. The Company repaid
the Note in full on January 20, 2021. In addition, 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, provide the Company loans in order to finance transaction costs
in connection with a Business Combination (“Working Capital
Loans”). As of December 31, 2021 and 2020, there were no amounts
outstanding under any Working Capital Loan.
The
Company may need to raise additional capital through loans or
additional investments from its Sponsor, an affiliate of the
Sponsor, or its officers or directors. The Company’s officers,
directors and Sponsor, or their affiliates, 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,
reducing overhead expenses, and extending the terms and due dates
of certain accrued expenses and other liabilities. The Company
cannot provide any assurance that new financing will be available
to it on commercially acceptable terms, if at all. In connection
with the Company’s assessment of going concern considerations in
accordance with FASB accounting Standards
Update (“ASU”) 2014-15, “Disclosures of
Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that the working capital
deficit, as well as the mandatory liquidation and subsequent
dissolution raises substantial doubt about the Company’s ability to
continue as a going concern. Management intends to complete a
business combination prior to the mandatory liquidation date. No
adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after
January 20, 2023. The financial statements do not include any
adjustment that might be necessary if the Company is unable to
continue as a going concern.
Note
2-Basis of Presentation and Summary of Significant Accounting
Policies
Basis
of Presentation
The
accompanying financial statements are presented in U.S. dollars in
conformity with accounting principles generally accepted in the
United States of America (“GAAP”) for financial information and
pursuant to the rules and regulations of the SEC.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a)
of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), and it may take advantage of
certain exemptions from various reporting requirements that are
applicable to other public companies that are not emerging growth
companies including, but not limited to, not being required to
comply with the 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 an
emerging growth company can elect to opt out of the extended
transition period and comply with the requirements that apply to
non-emerging growth companies but any such an election to opt out
is irrevocable. The Company has elected not to opt out of such
extended transition period, which means that when a standard is
issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company,
can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the
Company’s financial statements with another public company that is
neither an emerging growth company nor an emerging growth company
that 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. 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. Such estimates may be subject to change as more current
information becomes available. 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. As of December 31, 2021 and 2020, the Company did not
have any cash equivalents.
Investments
Held in Trust Account
The
Company’s portfolio of investments held in the Trust Account is
comprised of U.S. government securities, within the meaning set
forth in Section 2(a)(16) of the Investment Company Act, with a
maturity of 185 days or less, or investments in money market funds
that invest in U.S. government securities and generally have a
readily determinable fair value, or a combination thereof. When the
Company’s investments held in the Trust Account are comprised of
U.S. government securities, the investments are classified as
trading securities. When the Company’s investments held in the
Trust Account are comprised of money market funds, the investments
are recognized at fair value. Trading securities and investments in
money market funds are presented on the balance sheets at fair
value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these securities are
included in net gain from investments held in Trust Account in the
accompanying statements of operations. The estimated fair values of
investments held in the Trust Account are determined using
available market information.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations
of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance
Corporation limit of $250,000, and investments held in Trust
Account. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant
risks on such accounts.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities which qualify as
financial instruments under the FASB ASC Topic 820, “Fair Value
Measurements” equal or approximate the carrying amounts represented
in the balance sheets, primarily due to their short-term nature
(except for derivative liabilities - see Note 9).
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 consist of:
|
● |
Level
1, defined as observable inputs such as quoted prices 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.
Offering
Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other
costs incurred through the Initial Public Offering that were
directly related to the Initial Public Offering. Offering costs are
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
derivative warrant liabilities are expensed as incurred and
presented as non-operating expenses in the statements of
operations. Offering costs associated with the Class A ordinary
shares were charged against the carrying value of the Class A
ordinary shares upon the completion of the Initial Public Offering.
The Company classifies deferred underwriting commissions as
non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the
creation of current liabilities.
Derivative
Liabilities
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 share purchase
warrants and forward purchase units, 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 classification of
derivative instruments, including whether such instruments should
be recorded as liabilities or as equity, is re-assessed at the end
of each reporting period.
The
warrants issued in connection with the Initial Public Offering (the
“Public Warrants”), the Private Placement Warrants and units that
may be issued in connection with forward purchase agreement are
recognized as derivative liabilities in accordance with ASC 815.
Accordingly, the Company recognizes the warrant instruments and
forward purchase units as derivative liabilities at fair value and
adjusts the instruments to fair value at each reporting period. The
derivative liabilities are subject to re-measurement at each
balance sheet date until exercised, and any change in fair value is
recognized in the Company’s statements of operations. The fair
value of the warrants issued in connection with the Initial Public
Offering were initially measured using a binomial lattice model and
subsequently been measured at each measurement date based on the
market price of such warrants. The fair value of warrants issued in
connection with the Private Placement was initially measured using
Black-Scholes Option Pricing model and subsequently using the
market value of the public warrants when they were separately
listed and traded. The fair value of the units that may be issued
in connection with the forward purchase agreement has been
estimated using Black-Scholes Option Pricing model at each
measurement date. The determination of the fair value of the
warrant liability may be subject to change as more current
information becomes available and accordingly the actual results
could differ significantly. Derivative liabilities are classified
as non-current as their liquidation is not reasonably expected to
require the use of current assets or require the creation of
current liabilities.
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 ASC 480.
Class A ordinary shares subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair
value. Conditionally redeemable Class A ordinary shares (including
Class A 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, Class A 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 the occurrence of uncertain future
events. Accordingly, as of December 31, 2021, 23,000,000 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. There were no Class A ordinary shares
outstanding as of December 31, 2020.
Under
ASC 480-10S99, the Company has elected to recognize changes in the
redemption value immediately as they occur and adjust the carrying
value of the security to equal the redemption value at the end of
each reporting period. This method would view the end of the
reporting period as if it were also the redemption date for the
security. Effective with the closing of the Initial Public
Offering, the Company recognized the accretion from initial book
value to redemption amount, which resulted in charges against
additional paid-in capital (to the extent available) and
accumulated deficit.
Income
Taxes
FASB
ASC 740 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For
those benefits to be recognized, a tax position must be more likely
than not to be sustained upon examination by taxing authorities.
The Company’s management determined that the Cayman Islands is the
Company’s only major tax jurisdiction. There were no unrecognized
tax benefits as of December 31, 2021 and 2020. Company recognizes
accrued interest and penalties related to unrecognized tax benefits
as income tax expense. The Company is currently not aware of any
issues under review that could result in significant payments,
accruals or material deviation from its position.
There
is currently no taxation imposed on income by the Government of the
Cayman Islands. In accordance with Cayman income tax regulations,
income taxes are not levied on the Company. Consequently, income
taxes are not reflected in the Company’s financial statements. The
Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next
twelve months.
Net
Income (Loss) per Ordinary Share
The
Company complies with accounting and disclosure requirements of
FASB ASC Topic 260, “Earnings Per Share.” The Company has two
classes of shares, which are referred to as Class A ordinary shares
and Class B ordinary shares. Income and losses are shared pro rata
between the two classes of shares. Net income (loss) per ordinary
share is calculated by dividing the net income (loss) by the
weighted average number of ordinary shares outstanding for the
respective period.
The
calculation of diluted net income (loss) per ordinary share does
not consider the effect of the warrants underlying the Units sold
in the Initial Public Offering and the Private Placement Warrants
to purchase 18,100,000 Class A ordinary shares since their exercise
is contingent upon future events Accretion associated with the
redeemable Class A ordinary shares is excluded from earnings per
share as the redemption value approximates fair value. The diluted
earnings per share calculation includes the Class B ordinary shares
subject to forfeiture in relation to the over-allotment from the
first day of the interim period in which the contingency on such
shares was resolved.
The
table below presents a reconciliation of the numerator and
denominator used to compute basic and diluted net income (loss) per
share for each class of ordinary shares:
|
|
|
For
the Year Ended |
|
|
For
the Period from September 29, 2020
(Inception) through |
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
|
|
Class A |
|
|
Class B |
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net income (loss) - basic |
|
$ |
5,517,220 |
|
|
$ |
1,445,168 |
|
|
$ |
-
|
|
|
$ |
(34,249 |
) |
|
Allocation of net income (loss) - diluted |
|
$ |
5,509,403 |
|
|
$ |
1,452,985 |
|
|
$ |
-
|
|
|
$ |
(34,249 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic
weighted average ordinary shares outstanding |
|
|
21,802,740 |
|
|
|
5,710,959 |
|
|
|
-
|
|
|
|
5,000,000 |
|
|
Effect of dilutive securities |
|
|
-
|
|
|
|
39,041 |
|
|
|
-
|
|
|
|
-
|
|
|
Diluted weighted average ordinary shares outstanding |
|
|
21,802,740 |
|
|
|
5,750,000 |
|
|
|
-
|
|
|
|
5,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per ordinary share |
|
$ |
0.25 |
|
|
$ |
0.25 |
|
|
$ |
-
|
|
|
$ |
(0.01 |
) |
|
Diluted net income (loss) per ordinary share |
|
$ |
0.25 |
|
|
$ |
0.25 |
|
|
$ |
-
|
|
|
$ |
(0.01 |
) |
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. The ASU also removes certain
settlement conditions that are required for equity-linked contracts
to qualify for the derivative scope exception, and it simplifies
the diluted earnings per share calculation in certain areas. The
Company adopted ASU 2020-06 on January 1, 2021, using a modified
retrospective method for transition. Adoption of the ASU did not
impact the Company’s financial position, results of operations or
cash flows.
The
Company’s management does not believe that any recently issued, but
not yet effective, accounting standards updates, if currently
adopted, would have a material effect on the accompanying financial
statements.
Note
3-Initial Public Offering
On
January 20, 2021, the Company consummated its Initial Public
Offering of 23,000,000 Units, including 3,000,000 Over-Allotment
Units, at $10.00 per Unit, generating gross proceeds of $230.0
million, and incurring offering costs of approximately $13.3
million, of which approximately $8.1 million was for deferred
underwriting commissions.
Each
Unit consists of one Class A ordinary share, and one-half of one
redeemable warrant. Each whole Public Warrant entitles the holder
to purchase one Class A ordinary share at a price of $11.50 per
share, subject to adjustment (see Note 8).