Item 1. Business.
Introduction
We were incorporated on December 16, 2020 and were
formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses, which we refer to throughout this annual report as our initial business combination.
We have reviewed a number of opportunities to enter into a business combination. Based on our business activities, the Company is a “shell
company” as defined under the Exchange Act because we have no operations and nominal assets consisting almost entirely of cash.
We were formed as an independent company by executives
of M3 Partners and Brigade. M3 Partners is a leading financial advisory firm which provides advisory services to companies at inflection
points in their growth trajectories. Brigade is a leading global investment advisor that was founded in 2006 to specialize in credit-focused
investment strategies and has approximately $25 billion in assets under management. M3 Partners and Brigade have agreed to provide support
to us in our pursuit of a successful initial business combination. The team at M3 Partners has successfully completed hundreds of engagements
in which it has assisted stockholders, creditors and companies in maximizing the value of businesses and assets held by them. Brigade
brings a track record of over 14 years of deep fundamental credit research driven by a disciplined investment process which has been proven
over numerous market cycles.
We are led by the team that organized M III Acquisition
Corp. (the “Initial SPAC”), M3-Brigade Acquisition III Corp. (the “Third SPAC”) and Brigade-M3 European Acquisition
Corporation (the “Euro SPAC”). Members of our team managed the Initial SPAC through an initial business combination in March
2018 to create Infrastructure and Energy Alternatives, Inc. (“IEA”) (NASDAQ:IEA). IEA is a leading engineering, procurement
and construction company which specializes in renewable energy infrastructure and was acquired by MasTec, Inc. (NYSE:MTZ) on October 7,
2022. The Third SPAC completed its initial public offering on October 26, 2021 and has entered into a business combination agreement with
Greenfire Resources Ltd., a Calgary-based energy company focused on the sustainable production and development of thermal energy resources
from the Athabasca region of Alberta, Canada, and certain of its affiliates. The transactions contemplated by such business combination
agreement remain subject to approval by the shareholders of the Third SPAC and satisfaction of certain other conditions. The Euro SPAC
completed its initial public offering on December 10, 2021 and also is currently seeking an appropriate partner for its initial business
combination.
Our amended and restated certificate of incorporation
initially provided that we had until March 8, 2023 to consummate our initial business combination. On March 7, 2023, we obtained an extension
of that expiry date to December 8, 2023. In connection with such extension and as required by the Company’s charter, each holder
of Class A common stock who was not affiliated with the Company was afforded the opportunity to cause the Company to redeem such holder’s
Class A common stock at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including
interest (net of permitted withdrawals and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding
public shares, which redemption completely extinguished such public stockholders’ rights as stockholders (including the right to
receive further liquidating distributions, if any), subject to applicable law. The holders of 35,463,019 shares of our Class A common
stock elected to have their shares redeemed. As a result, 4,536,981 shares of our Class A common stock remain outstanding on March 8,
2023 and the balance in our trust account has been reduced to $46,066,466 as of such date.
Our executive offices are located at 1700 Broadway,
19th Floor, New York, NY 10019 and our telephone number is (212) 202-2200. Our corporate website address is www.m3-brigade.com.
Our website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference
in, and is not considered part of, this annual report. You should not rely on any such information in making your decision whether to
invest in our securities.
Company History
On March 8, 2021, we completed our initial public
offering (the “Initial Public Offering” or the “IPO”) of 40,000,000 units at a price of $10.00 per unit (the “units”),
generating gross proceeds of $400,000,000. Each unit consists of one of the Company’s shares of Class A common stock, par value
$0.0001 per share, and one-third of one public warrant. Each whole public warrant entitles the holder thereof to purchase one share of
Class A common stock at a price of $11.50 per share, subject to certain adjustments.
Simultaneously with the completion of the IPO,
our sponsor purchased an aggregate of 7,500,000 warrants (the “private placement warrants”) at a price of $1.50 per warrant,
or $11,250,000.00 in the aggregate. An aggregate of $400,000,000 from the proceeds of the IPO and the private placement warrants was placed
in a trust account (the “trust account”) such that the trust account held $400,000,000 at the time of closing of the IPO.
Each whole private placement warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per
share, subject to certain adjustments.
On April 19, 2021, our sponsor forfeited at no
cost 1,500,000 shares of Class B common stock in connection with the determination by the underwriters of our public offering not to exercise
in full the over-allotment option granted to them, resulting in our initial stockholders holding 10,000,000 shares of Class B common stock
(the “Class B common stock” or “founder shares”).
On April 23, 2021, we announced that, commencing
April 26, 2021, holders of the 40,000,000 units sold in the IPO may elect to separately trade the shares of Class A common stock and the
warrants included in the units. Those units not separated continued to trade on the New York Stock Exchange (the “NYSE”) under
the symbol “MBAC.U” and the shares of Class A common stock and warrants that were separated trade under the symbols “MBAC”
and “MBAC WS,” respectively.
On December 30, 2022, our sponsor agreed to irrevocably
and unconditionally abandon and surrender, for no consideration, its interest in the 7,500,000 private placement warrants that previously
had been issued to it. The value of the private placement warrants were considered a capital contribution and recorded as equity at December
30, 2022.
Initial Business Combination
The NYSE rules provide that our initial business
combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in
the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive
agreement in connection with our initial business combination. If our board is not able to independently determine the fair market value
of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of the Financial
Industry Regulatory Authority (“FINRA”), or a qualified independent accounting firm with respect to the satisfaction of such
criteria.
We anticipate structuring our initial business
combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests
or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction
company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the
target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in
the target sufficient for us not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction
company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively
own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination
transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the
outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result
of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own
less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests
or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses
that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the 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.
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, officers or directors, we, or a committee of independent directors,
will obtain an opinion from an independent investment banking firm which is a member of FINRA or a qualified independent accounting firm
that our initial business combination is fair to our company from a financial point of view.
Members of our management team directly or indirectly
own common stock and may elect to acquire additional common stock or warrants, and, accordingly, may have a conflict of interest in determining
whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each
of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention
or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our
initial business combination.
Each of our officers and directors presently has,
and any of them in the future may have additional, fiduciary or contractual obligations to another entity, including to the Third SPAC
and the Euro SPAC, pursuant to which such officer or director is 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 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, and only present it to us if such entity rejects the opportunity. We
do not believe, however, that the fiduciary duties or contractual obligations of our executive officers will materially affect our ability
to complete our business combination. Our amended and restated certificate of incorporation provides that we renounce our interest in
any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his
or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake
and would otherwise be reasonable for us to pursue.
Terminated Business Combination
On August 16, 2021,
we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blue Steel Merger Sub Inc., a Delaware corporation
and wholly owned subsidiary of MBAC, and Syniverse Corporation, a Delaware corporation (“Syniverse”), pursuant to which Merger
Sub was to merge with and into Syniverse, with Syniverse surviving the merger as a wholly owned subsidiary of MBAC. On February 9,
2022, MBAC and Syniverse entered into a Mutual Written Consent of Termination, pursuant to which the parties agreed to terminate the Merger
Agreement effective as of February 9, 2022 due to unfavorable market conditions.
Corporate Information
We are an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart
Our Business Startups Act of 2012 (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 internal controls attestation requirements of Section 404 of the Sarbanes-Oxley
Act of 2002 (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 the 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 common stock that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the
date on which we have issued more than $1.07 billion in non-convertible debt during the prior three-year period.
Financial Position
We have available for a business combination in
the amount of approximately $32,066,466 as of March 8, 2023, assuming no further redemptions and after payment of up to $14,000,000 of
deferred underwriting fees. 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.
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. 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 highly unlikely that any of them will devote
their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management
team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel
will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel
will remain with the combined company will be made at the time of our initial business combination.
Following our initial business combination, we
may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will
have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary
to enhance the incumbent management.
Redemption rights for public stockholders
upon completion of our initial business combination
We will provide our public stockholders with the
opportunity to redeem all or a portion of their shares of common stock upon the completion of our initial business combination at a per
share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the
consummation of the initial business combination, including interest (net of permitted withdrawals), divided by the number of then outstanding
public shares, subject to the limitations described herein. At completion of the business combination, we will be required to purchase
any public shares properly delivered for redemption and not withdrawn. The amount in the trust account as of the closing of the IPO was
$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 right will include the requirement that any beneficial
owner on whose behalf a redemption right is being exercised must identify itself in order to validly redeem its shares. Our sponsor, officers
and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect
to any founder shares and any public shares held by them in connection with the completion of our initial business combination (the “letter
agreement”).
Manner of conducting redemptions
We will provide our public stockholders with the
opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination
either: (1) in connection with a stockholder meeting called to approve the business combination; or (2) by means of a tender offer. The
decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by
us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of
the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirement. Asset acquisitions
and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and
any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of
incorporation would typically require stockholder approval. If we structure a business combination transaction with a target company in
a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed
business combination. We currently intend to conduct redemptions pursuant to a stockholder vote unless stockholder approval is not required
by applicable law or stock exchange listing requirement and we choose to conduct redemptions pursuant to the tender offer rules of the
SEC for business or other reasons.
If
a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other reasons, we will, pursuant to
our amended and restated certificate of incorporation:
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conduct
the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; 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, we and our sponsor will terminate any plan established in accordance with
Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through
a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to
the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the
Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period.
In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares,
which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets,
after payment of the deferred underwriting commissions, to be less than the minimum amount required such that our Class A common stock
will not become a “penny stock” as such term is defined in Rule 3a51-1 of the Exchange Act or any greater net tangible asset
or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender
more shares than we have offered to purchase, we will withdraw the tender offer and not complete such initial business combination.
If, however, stockholder approval of the transaction
is required by applicable law or stock exchange listing requirement, or we decide
to obtain stockholder approval for business or other reasons, we will, pursuant to our amended and restated certificate of incorporation:
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conduct
the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation
of proxies, and not pursuant to the tender offer rules; and |
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file
proxy materials with the SEC. |
We expect that a final proxy statement would be
mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would be
made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions
in conjunction with a proxy solicitation. Although we are not required to do so, we currently intend to comply with the substantive and
procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our NYSE listing
or Exchange Act registration.
In the event that we seek stockholder approval
of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders
with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete
our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business
combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock
of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote
at such meeting. Our initial stockholders, officers and directors will count towards this quorum and have agreed to vote any founder shares
and any public shares held by them in favor of our initial business combination. These quorum and voting thresholds and agreements, may
make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares
without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction. In addition, our sponsor,
officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights
with respect to any founder shares and any public shares held by them in connection with the completion of a business combination.
Our amended and restated certificate of incorporation
provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets, after payment of the
deferred underwriting commissions, to be less than the minimum amount required such that our Class A common stock will not become a “penny
stock” as such term is defined in Rule 3a51-1 of the Exchange Act. Redemptions of our public shares may also be subject to a higher
net tangible asset test or cash requirement pursuant to an agreement relating to our initial business combination. For example, the proposed
business combination may require: (1) cash consideration to be paid to the target or its owners; (2) cash to be transferred to the target
for working capital or other general corporate purposes; or (3) the retention of cash to satisfy other conditions in accordance with the
terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of
Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms
of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination
or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Limitation on redemption upon completion of
our initial business combination if we seek stockholder approval
Notwithstanding the foregoing, if we seek stockholder
approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant
to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any
affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined
under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15%
of the shares sold in the IPO, without our prior consent, which we refer to as the “Excess Shares.” We believe this restriction
will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to
exercise their redemption rights against a proposed business combination as a means to force us or our affiliates to purchase their shares
at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding
more than an aggregate of 15% of the shares sold in the IPO could threaten to exercise its redemption rights if such holder’s shares
are not purchased by us or our sponsor or our affiliates at a premium to the then-current market price or on other undesirable terms.
By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in the IPO, we believe we will limit the ability
of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly
in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain
amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares)
for or against our initial business combination.
Tendering stock certificates in connection with
a tender offer or redemption rights
We may require our public stockholders seeking
to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender
their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders,
or up to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials
or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At
Custodian) System, rather than simply voting against the initial business combination at the holder’s option. The tender offer or
proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination
will indicate whether we are requiring public stockholders to satisfy such delivery requirements, which will include the requirement that
any beneficial owner on whose behalf a redemption right is being exercised must identify itself in order to validly redeem its shares.
Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer
period, or up to two business days prior to the vote on the business combination if we distribute proxy materials, as applicable, to tender
its shares if it wishes to seek to exercise its redemption rights. Pursuant to the tender offer rules, the tender offer period will be
not less than 20 business days and, in the case of a stockholder vote, a final proxy statement would be mailed to public stockholders
at least 10 days prior to the stockholder vote.
However, we expect that a draft proxy statement
would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions
in conjunction with a proxy solicitation. Given the relatively short exercise period, it is advisable for stockholders to use electronic
delivery of their public shares.
There is a nominal cost associated with the above-referenced
tendering process and the act of certificating the shares or delivering them through The Depository Trust Company’s DWAC (Deposit/
Withdrawal At Custodian) System. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker
whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require
holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption
rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures
used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check
companies would distribute proxy materials for the stockholders’ vote on an initial business combination, and a holder could simply
vote against a proposed business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her
redemption rights. After the business combination was approved, the company would contact such stockholder to arrange for him or her to
deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion
of the business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose
above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to
the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder
meeting, would become “option” rights surviving past the completion of the business combination until the redeeming holder
delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s
election to redeem is irrevocable once the business combination is approved.
Any request to redeem such shares, once made, may
be withdrawn at any time up to the date set forth in the tender offer materials or the date of the stockholder meeting set forth in our
proxy materials, as applicable. Furthermore, if a holder of a public share delivered its certificate in connection with an election of
redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request
that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders
of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If our initial business combination is not approved
or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem
their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered
by public holders who elected to redeem their shares.
If our initial proposed business combination is
not completed, we may continue to try to complete a business combination with a different target until the end of the completion window.
Redemption of Public Shares and Liquidation
if no Initial Business Combination
Our amended and restated certificate of
incorporation provides that we will have until December 8, 2023, to complete our initial business combination (the period from the
closing of the IPO until December 8, 2023, or such later date as described herein, the “completion window”). If we are
unable to complete our initial business combination within such period, we will: (1) cease all operations except for the purpose of
winding up; (2) 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 (net of
permitted withdrawals and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public
shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to
receive further liquidating distributions, if any), subject to applicable law; and (3) as promptly as reasonably possible following
such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject
in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail
to complete our initial business combination within the completion window.
Our initial stockholders, officers and directors
have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust
account with respect to any founder shares held by them if we fail to complete our initial business combination within the completion
window. However, if our sponsor or any of our officers and directors acquires public shares after the IPO, it will be entitled to liquidating
distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within
the completion window.
Our sponsor, officers and directors have agreed,
pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation
to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business
combination or to redeem 100% of our public shares if we do not complete our initial business combination within the completion window,
unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such
amendment at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest
(net of permitted withdrawals), divided by the number of then outstanding public shares. However, we may not redeem our public shares
in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than the minimum
amount required such that our Class A common stock will not become a “penny stock” as such term is defined in Rule 3a51-1
of the Exchange Act.
Although we cannot assure you that there will be
sufficient funds for such purpose, we expect that all costs and expenses associated with implementing our plan of dissolution, as well
as payments to any creditors, will be funded from amounts remaining held outside the trust account and from the permitted withdrawal from
the Trust Account of up to $100,000 of accrued interest in the Trust Account.
If we were to expend all of the net proceeds of
the IPO and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking into
account interest, if any, earned on the trust account and any tax payments or expenses for the dissolution of the trust, the per share
redemption amount received by stockholders 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 stockholders. We cannot assure
you that the actual per share redemption amount received by stockholders will not be substantially less than $10.00. Please see “Risk
Factors — If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share
redemption amount received by stockholders may be less than $10.00 per share” and other risk factors included herein. Under
Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments
to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution
of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds
sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors, service
providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we
do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account
for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such
agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement,
breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case
in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account.
If any third party refuses to execute an agreement waiving such claims
to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter
into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would
be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses
to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management
to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are 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. 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 (other than our independent registered public accounting firm) for services
rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement,
reduce the amount of funds in the trust account to below (1) $10.00 per public share or (2) the actual amount per public share held in
the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value
of the trust assets, in each case net of permitted withdrawals, except as to any claims by a third party that executed a waiver of any
and all rights to the monies held in the trust account (whether or not such waiver is enforceable) and except as to any claims under our
indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. We have not independently
verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets
are securities of our company and, therefore, our sponsor may not be able to satisfy those obligations. We have not asked our sponsor
to reserve for such obligations. 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 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: (1) $10.00 per public share; or (2) the actual amount per public share held in the trust account as of the date of
the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, in each case net
of permitted withdrawals, 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 certain instances. For example, the cost of such legal action may be deemed by the independent
directors to be too high relative to the amount recoverable or the independent directors may determine that a favorable outcome is not
likely. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per share redemption price will not
be substantially less than $10.00 per share. Please see “Risk Factors — If third parties bring claims against us, the proceeds
held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share”
and other risk factors included herein.
We will seek to reduce the possibility that our
sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers (other
than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute
agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will
also not be liable as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities
under the Securities Act. As of December 31, 2022, we had access to approximately $124,855 from the proceeds held outside the trust account
with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated
to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims
and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors.
Under the DGCL, stockholders may be held liable
for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion
of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our
initial business combination within the completion window may be considered a liquidating distribution under Delaware law. If the corporation
complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims
against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period
during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions
are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s
pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the
third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust
account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business
combination within the completion window, is not considered a liquidating distribution under Delaware law and such redemption distribution
is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six
years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable
to complete our initial business combination within the completion window, we will: (1) cease all operations except for the purpose of
winding up; (2) 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 (net of permitted
withdrawals and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which
redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating
distributions, if any), subject to applicable law; and (3) as promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem
our public shares as soon as reasonably possible following the expiry of our completion window and, therefore, we do not intend to comply
with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by
them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280,
Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all
existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we
are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses
to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target
businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors,
service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with
which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the
trust account.
As a result of this obligation, the claims that
could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the
trust account is remote.
Further, our sponsor may be liable only to the
extent necessary to ensure that the amounts in the trust account are not reduced below: (1) $10.00 per public share; or (2) the actual
amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share
due to reductions in value of the trust assets, in each case net of permitted withdrawals and will not be liable as to any claims under
our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act.
If we file a bankruptcy petition or an involuntary
bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy
law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders.
To the extent any bankruptcy claims deplete the trust account, we cannot
assure you we will be able to return $10.00 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed
under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.”
As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board may be
viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our
company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
We cannot assure you that claims will not be brought against us for these reasons. Please see “Risk Factors — If, after
we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy
petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board
of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors
and us to claims of punitive damages.”
Our public stockholders will be entitled to receive
funds from the trust account only in the event of the redemption of our public shares if we do not complete our initial business combination
within the completion window or if they redeem their respective shares for cash upon the completion of the initial business combination.
In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek stockholder
approval in connection with our initial business combination, a stockholder’s voting in connection with our initial business combination
alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such
stockholder must have also exercised its redemption rights described above.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation
contains certain requirements and restrictions relating to the IPO that will
apply to us until the consummation of our initial business combination. If we seek to amend any provisions of our amended and restated
certificate of incorporation to modify the substance or timing of our obligation to provide for the redemption of our public shares in
connection with an initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination
within the completion window or with respect to any other material provisions relating to the rights of holders of our Class A Common
Stock or pre-initial business combination business activity, we will provide public stockholders with the opportunity to redeem their
public shares in connection with any such vote. Our initial stockholders, officers and directors have agreed to waive any redemption
rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business
combination. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
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prior
to the consummation of our initial business combination, we shall either: (1) seek stockholder approval of our initial business combination
at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for,
against, or abstain from voting on, the proposed business combination, into their pro rata share of the aggregate amount on deposit
in the trust account as of two business days prior to the consummation of our initial business combination, including interest (net
of permitted withdrawals); or (2) provide our public stockholders with the opportunity to tender their shares to us by means of a
tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount
on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including
interest (net of permitted withdrawals), in each case subject to the limitations described herein; |
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we
will consummate our initial business combination only if we have net tangible assets of the minimum amount required such that our
Class A common stock will not become a “penny stock” as such term is defined in Rule 3a51-1 of the Exchange Act upon
such consummation and, solely if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted
in favor of the business combination at a duly held stockholders meeting; |
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if
our initial business combination is not consummated within the completion window, then our existence will terminate and we will distribute
all amounts in the trust account; and |
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prior
to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to
(1) receive funds from the trust account or (2) vote on any initial business combination. |
These
provisions cannot be amended without the approval of holders of 65% of our common stock. In the event we seek stockholder approval in
connection with our initial business combination, our amended and restated certificate of incorporation provides that, unless otherwise
required by applicable law or stock exchange rules, we may consummate our initial business combination only if approved by a majority
of the shares of common stock voted by our stockholders at a duly held stockholders meeting.
Certain Potential Conflicts of Interest Relating
to M3-Brigade Acquisition III Corp., Brigade-M3 European Acquisition Corp. and the Company and Our Officers and Directors
Our sponsor, officers and directors may participate
in the formation of, or become an officer or director of, any other blank check company prior to completion of our initial business combination.
As a result, our sponsor, officers or directors could have conflicts of interest in determining whether to present business combination
opportunities to us or to any other blank check company with which they may become involved. In particular, our officers and directors
have formed and are actively engaged in each of M3-Brigade Acquisition III Corp., a special purpose acquisition corporation that completed
its initial public offering in October 2021 and Brigade-M3 European Acquisition Corp., a special purpose acquisition corporation that
completed its initial public offering in December 2021. Each of M3-Brigade Acquisition III Corp. and Brigade-M3 European Acquisition Corp.,
like us, may pursue initial business combination targets in any businesses or industries. M3-Brigade Acquisition III Corp. originally
had until October 26, 2023 and extended to April 26, 2023 (with the right to extend for up to an additional six months, assuming that
M3-Brigade Acquisition III Corp. exercises its option to extend the period of time it will have to complete an initial business combination,
each by an additional 3 months for a total of up to 24 months) and Brigade-M3 European Acquisition Corp. has until June 14, 2023 to do
so, in each such case absent an extension in accordance with its respective charter. Any such companies, including M3-Brigade Acquisition
III Corp. and Brigade-M3 European Acquisition Corp., may present additional conflicts of interest in pursuing an acquisition target.
In addition, affiliates of our Sponsor,
officers and directors may own equity interests in our initial business combination target and may have the right to vote in favor of
the proposed business combination without owing any fiduciary obligation to our public stockholders with respect to their shares of our
Class A common stock. Such a conflict may make it more likely that the Company would enter into an initial business combination with a
target in which such affiliates have a pre-existing interest and could result in the Company consummating an initial business combination
that is less advantageous to our public stockholders than would otherwise be the case.
The potential conflicts described above may limit
our ability to enter into a business combination or other transactions. These circumstances could give rise to numerous situations where
interests may conflict. There can be no assurance that these or other conflicts of interest with the potential for adverse effects on
the Company and investors will not arise.
Limitations on Our Access to Investment Opportunities
M3-Brigade Acquisition III Corp. and Brigade-M3
European Acquisition Corp may compete with us for acquisition opportunities that we may target for our initial business combination. If
our management team, which includes management involved in M3-Brigade Acquisition III Corp. and Brigade-M3 European Acquisition Corp.,
may decide to pursue any such opportunity or determines in its sole discretion not to offer such opportunity to us, we may be precluded
from procuring such opportunities. In addition, investment ideas generated within the group of such involved persons who may make decisions
for us may be suitable for both us and for M3-Brigade Acquisition III Corp. or Brigade-M3 European Acquisition Corp. may be directed to
M3-Brigade Acquisition III Corp. or Brigade-M3 European Acquisition Corp. or other third parties, rather than to us.
Such involved management team members do not have any fiduciary, contractual
or other obligations or duties to our company, including, without limitation, to present us with any opportunity for a potential business
combination of which they become aware.
Our management team, in their other endeavors (including
any affiliation they may have with M3-Brigade Acquisition III Corp. and Brigade-M3 European Acquisition Corp.), may choose or be required
to present potential business combinations or other transactions to M3-Brigade Acquisition III Corp. or Brigade-M3 European Acquisition
Corp. or third parties, before they present such opportunities to us. Please see “Risk Factors — Certain of our officers
and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those
intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity
or other transaction should be presented.”
Sponsor Indemnity
Our sponsor has agreed that it will be liable to
us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered
or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the
amount of funds in the trust account to below: (1) $10.00 per public share; or (2) the actual amount per public share held in the trust
account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust
assets, in each case, net of permitted withdrawals, except as to any claims by a third party that executed a waiver of any and all rights
to the monies held in the trust account (whether or not any such waiver is enforceable) and except as to any claims under our indemnity
of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. We have not independently
verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets
are securities of our company and, therefore, our sponsor may not be able to satisfy those obligations. We have not asked our sponsor
to reserve for such obligations. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. We believe
the likelihood of our sponsor having to indemnify the trust account is limited because we will endeavor to have all vendors and prospective
target businesses as well as other entities execute agreements with us waiving any right, title, interest or claim of any kind in or to
monies held in the trust account.
Facilities
We currently maintain our executive offices at
1700 Broadway, New York, NY 10019. The cost for our use of this space is paid by our sponsor, which also provides us with utilities, secretarial
support and administrative services. We consider our current office space adequate for our current operations.
Employees
We currently have five executive officers, consisting
of Mohsin Y. Meghji, Matthew Perkal, William Gallagher, Charles Garner and Brian Griffith. Members of our management team are not obligated
to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs
until we have completed our initial business combination. The amount of time that any such person will devote in any time period to our
company will vary based on whether a target business has been selected for our initial business combination and the current stage of the
business combination process.
Periodic Reporting and Financial Information
Our units, Class A common stock and warrants are
registered under the Exchange Act and we have reporting obligations, including the requirement that we file annual, quarterly and current
reports with the SEC. The SEC maintains an internet site at http://www.sec.gov that contains such reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC. In accordance with the requirements of the Exchange Act,
our annual reports contain financial statements audited and reported on by our independent registered public accounting firm.
We will provide stockholders with audited financial
statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to shareholders
to assist them in assessing the target business. These financial statements may be required to be prepared in accordance with, or be reconciled
to United States generally accepted accounting principles (“GAAP”) or international financial reporting standards as promulgated
by the international accounting standards board (“IFRS”), depending on the circumstances and the historical financial statements
may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”).
These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable
to provide such financial statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete
our initial business combination within the completion window. We cannot assure you that any particular target business identified by
us as a potential business combination candidate will have financial statements prepared in accordance with GAAP or that the potential
target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that
these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential
business combination candidates, we do not believe that this limitation will be material.
The Sarbanes-Oxley Act requires that we evaluate
our internal control procedures for the fiscal year ending December 31, 2022. Only in the event we are deemed to be a large accelerated
filer or an accelerated filer and no longer an emerging growth company will we be required to have our internal control procedures audited.
A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls.
The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and
costs necessary to complete any such acquisition.
We are an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market
for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides
that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the
Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage
of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of: (1)
the last day of the fiscal year (a) following March 8, 2026, (b) in which we have total annual gross revenue of at least $1.07 billion,
or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates
exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more
than $1.07 billion in non-convertible debt during the prior three-year period. References herein to “emerging growth company”
shall have the meaning associated with it in the JOBS Act.
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
annual report, the prospectus associated with our IPO and the registration statement of which such prospectus forms a part 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 and additional risks and uncertainties that we are unaware of, or that we currently believe are not
material, may also become important factors that adversely affect our business, financial condition and operating results. In that event,
the trading price of our securities could decline, and you could lose all or part of your investment.
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties.
These risks include, but are not limited to:
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We are a newly formed 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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Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.” |
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Our public stockholders may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination. |
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If we seek stockholder approval of our initial business combination, our initial stockholders have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote. |
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Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of the business combination. |
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The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target. |
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The ability of our stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure. |
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The reduction in the amount currently held in trust as a result of redemptions that were effected by our stockholders in connection with the recent modification of our charter to extend the completion window may limit the quantity and quality of business combinations available to us. |
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The ability of our stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock. |
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The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business combination and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our business combination on terms that would produce value for our stockholders. |
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We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate. |
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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 any increase in the number of COVID-19 infections or the outbreak of a novel variant. |
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Our search for a business combination, our ability to finance such business combination, and any target business with which we ultimately consummate a business combination, may be material adversely affected by the continuing hostilities between The Russian Federation and Ukraine and the sanctions and other steps taken by governmental authorities around the world have taken and may in the future take in reaction to those hostilities. |
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As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business combination. |
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If we seek stockholder approval of our initial business combination, our sponsor, directors, executive officers, advisors and their affiliates may elect to purchase shares from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock. |
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If a public stockholder fails to receive notice of our offer to redeem our public shares in connection with our 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. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss. |
Risks Relating to Our Search for, and Consummation
of or Inability to Consummate, an Initial Business Combination
Our public stockholders may not be afforded
an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even though
a majority of our public stockholders do not support such a combination.
We may not hold a stockholder vote to approve our
initial business combination unless the business combination would require stockholder approval under applicable state law or the rules
of the NYSE or if we decide to hold a stockholder vote for business or other reasons. For instance, the NYSE rules currently allow us
to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we were seeking
to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore, if we were
structuring a business combination that required us to issue more than 20% of our outstanding shares, we would seek stockholder approval
of such business combination. However, except as required by law, the decision as to whether we will seek stockholder approval of a proposed
business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion,
and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise
require us to seek stockholder approval. Accordingly, we may consummate our initial business combination even if holders of a majority
of the outstanding shares of our Class A common stock do not approve of the business combination we consummate.
If we seek stockholder approval of our initial
business combination, our initial stockholders have agreed to vote in favor of such initial business combination, regardless of how our
public stockholders vote.
Unlike many other blank check companies in which
the initial stockholders agree to vote their founder shares in accordance with the majority of the votes cast by the public stockholders
in connection with an initial business combination, our initial stockholders have agreed to vote their founder shares, as well as any
public shares purchased during or after the Initial Public Offering, in favor of our initial business combination. Our initial stockholders
own 20.0% of our outstanding shares of common stock. Accordingly, if we seek stockholder approval of our initial business combination,
it is more likely that the necessary stockholder approval will be received than would be the case if our initial stockholders agreed to
vote their founder shares in accordance with the majority of the votes cast by our public stockholders.
Your only opportunity to affect the investment
decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash,
unless we seek stockholder approval of the business combination.
At the time of your investment in us, you will
not be provided with an opportunity to evaluate the specific merits or risks of one or more target businesses. Since our board of directors
may complete a business combination without seeking stockholder approval (unless stockholder approval is required by law or stock exchange
listing requirement, or we decide to obtain stockholder approval for business or other legal reasons), public stockholders may not have
the right or opportunity to vote on the business combination, unless we seek such stockholder vote. 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 stockholders
in which we describe our initial business combination.
The ability of our public stockholders to
redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it
difficult for us to enter into a business combination with a target.
We may seek to enter into a business combination
transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount
of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as
a result, would not be able to proceed with the business combination. Furthermore, in no event will we redeem our public shares in an
amount that would cause our Class A common stock to become a “penny stock” as such term is defined in Rule 3a51-1 of the Exchange
Act or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination.
Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets upon consummation of our initial
business combination to be less than the minimum amount required such that our Class A common stock will not become a “penny stock”
as such term is defined in Rule 3a51-1 of the Exchange Act 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 stockholders to
exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination
or optimize our capital structure.
At the time we enter into an agreement for our
initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to
structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our business
combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have
a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements, or
arrange for third party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected,
we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing.
Raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable
levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize
our capital structure.
The ability of our stockholders to exercise
redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would
be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our business combination agreement requires
us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing,
the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful,
you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate
liquidity, you could attempt to sell your stock in the open market; however, at such time our stock 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 stock in the open market.
The reduction in the amount currently held
in trust as a result of redemptions that were effected by our stockholders in connection with the recent modification of our charter to
extend the completion window may limit the quantity and quality of business combinations available to us.
In connection with the recent amendment of our
charter to extend the completion window to December 8, 2023, stockholders were offered the opportunity to exercise their redemption rights
and the amount held in trust was significantly reduced as a result of such redemptions. This reduction in the amount held in trust may
limit our attractiveness as a business combination partner, may limit the size of our initial business combination, and may reduce the
options available to us for consummating our initial business combination. This may result in us being unable to consummate our initial
business combination during the completion window or could impact the value and opportunity for appreciation of our common stock following
the consummation of our initial business combination.
The requirement that we complete our initial
business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business
combination and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution
deadline, which could undermine our ability to complete our business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter
into negotiations concerning a business combination will be aware that we must complete our initial business combination within the completion
window. 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.
We may not be able to complete our
initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding
up and we would redeem our public shares and liquidate.
Our sponsor, executive officers and directors have
agreed that we must complete our initial business combination within the completion window. We may not be able to find a suitable target
business and complete our initial business combination within such time period. If we have not completed our initial business combination
within such 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 working capital requirements as well as to pay our franchise and income taxes (less up to $100,000 of interest to pay
dissolution expenses and which interest shall be net of taxes payable), divided by the number of then outstanding public shares, which
redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating
distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to
the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and
(iii) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
As the number of special purpose acquisition
companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets.
This could increase the cost of our initial business combination and could even result in our inability to find a target or to consummate
an initial business combination.
In recent years, the number of special purpose
acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition companies
have already entered into an initial business combination, and there are still many special purpose acquisition companies preparing for
an initial public offering, as well as many such companies currently in registration. As a result, at times, fewer attractive targets
may be available to consummate an initial business combination.
In addition, because there are more special purpose
acquisition companies seeking to enter into an initial business combination with available targets, the competition for available targets
with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial terms.
Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or
increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could
increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an initial business combination, and
may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
Our search for a business combination, and
any target business with which we ultimately consummate a business combination, may be materially adversely affected by the continuing
COVID-19 outbreak.
On March 11, 2020, the World Health Organization
officially declared the outbreak of the COVID-19 a “pandemic” and such outbreak resulted in a widespread health crisis that
adversely affected the economies and financial markets worldwide. Any increase in COVID-19 infection rates or the emergence of a new COVID-19
variant could further impact worldwide economies and financial markets. Similarly, the business of any potential target business with
which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business
combination if concerns relating to COVID-19 give rise to new restrictions on travel, limit the ability to have meetings with potential
investors, or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction
in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which
are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions
to contain COVID-19 or treat its impact, among others. If additional disruptions posed by COVID-19 or other matters of global concern
arise and continue for an extended 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.
Our search for a business combination,
and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the continuing
hostilities between the Russian Federation and Ukraine.
In February 2022, the Russian Federation launched
a military campaign against Ukraine. In response to these actions, the United States, the European Union and other governmental authorities
have imposed a series of sanctions and penalties upon Russia and certain of its political and business leaders. In addition, a number
of companies throughout the world who were not directly restricted by those sanctions have voluntarily elected to cease doing business
with companies affiliated with Russia and it is anticipated that Russia will retaliate with its own restrictions and sanctions. As the
hostilities between Russia and Ukraine continue, additional sanctions and penalties may be imposed which further restrict the ability
of companies throughout the world to do business with Russia. It is expected that these events will have an impact upon, among other things,
financial markets for the foreseeable future. If the disruptions caused by these events continue for an extended period of time, our ability
to search for a business combination or finance such business combination, and the business, operations and financial performance of any
target business with which we ultimately consummate a business combination, may be materially adversely affected.
If we seek stockholder approval of our initial
business combination, our sponsor, directors, executive officers, advisors and their affiliates may elect to purchase public shares or
public warrants from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float”
of our Class A common stock or public warrants.
If we seek stockholder approval of our initial
business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules,
our sponsor, directors, executive officers, advisors or their affiliates may purchase public shares or public warrants in privately negotiated
transactions or in the open market either prior to or following the completion of our initial business combination, although they are
under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record
holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event
that our sponsor, directors, executive officers, advisors or their affiliates purchase public shares or public warrants in privately negotiated
transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be
required to revoke their prior elections to redeem their public shares. The purpose of such purchases could be to vote such shares in
favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or
to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash
at the closing of our business combination, where it appears that such requirement would otherwise not be met. This may result in the
completion of our business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public
“float” of our Class A common stock and the number of beneficial holders of our securities may be reduced, possibly making
it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
If a public stockholder fails to receive
notice of our offer to redeem our public shares in connection with our business combination, or fails to comply with the procedures for
tendering its shares, such shares may not be redeemed.
We will comply with the tender offer rules or proxy
rules, as applicable, when conducting redemptions in connection with our business combination. Despite our compliance with these rules,
if a public stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of
the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will furnish
to holders of our public shares in connection with our initial business combination will describe the various procedures that must be
complied with in order to validly tender or redeem public shares. In the event that a public stockholder fails to comply with these procedures,
its shares may not be redeemed.
You will not have any rights or interests
in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced
to sell your public shares or public warrants, potentially at a loss.
Our public stockholders will be entitled to receive
funds from the trust account only upon the earlier to occur of: (i) our completion of an initial business combination, and then only in
connection with those shares of our Class A common stock that such stockholder properly elected to redeem, subject to the limitations
described herein, and (ii) the redemption of our public shares if we are unable to complete an initial business combination within the
completion window, subject to applicable law and as further described herein. In addition, if we are unable to complete an initial business
combination within the completion window for any reason, compliance with Delaware law may require that we submit a plan of dissolution
to our then-existing stockholders for approval prior to the distribution of the proceeds held in our trust account. In that case, public
stockholders may be forced to wait beyond the completion window before they receive funds from our trust account. In no other circumstances
will a public stockholder have any right or interest of any kind in the trust account. Accordingly, to liquidate your investment, you
may be forced to sell your public shares or public warrants, potentially at a loss.
Because of our limited resources and the
significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination.
If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share,
on our redemption, and our warrants will expire worthless.
We expect to encounter intense competition from
other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships),
other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire.
Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly,
acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical,
human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted
with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net
proceeds of the Initial Public Offering and the sale of the private placement warrants that remain in our trust account, our ability to
compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources.
This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore,
if we are obligated to pay cash for the shares of Class A common stock redeemed and, in the event we seek stockholder approval of our
business combination, we make purchases of our Class A common stock, this may potentially reduce the resources available to us for our
initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business
combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00
per share on the liquidation of our trust account and our warrants will expire worthless.
If the net proceeds of the 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
at least the completion window, we may be unable to complete our initial business combination.
We believe it is likely that the funds currently
available to us outside of the trust account will not be sufficient to allow us to operate for at least the remainder of the completion
window. In such event, we would be required either to obtain incremental funding for our continued operations or we would not be able
to complete our initial business combination. If we entered into a letter of intent where we paid for the right to receive exclusivity
from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might
not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to
complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation
of our trust account and our warrants will expire worthless.
If the net proceeds of the Initial Public
Offering and the sale of the private placement warrants not being held in the trust account are insufficient, it could limit the amount
available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans
from our sponsor or an affiliate of our sponsor or our management team to fund our search, to pay our taxes and to complete our business
combination.
Of the net proceeds of the Initial Public Offering
and the sale of the private placement warrants, only approximately $124,855 were available to us outside the trust account on December
31, 2022 to fund our working capital requirements and we have significant accounts payable which exceed the amount available to us outside
of our trust account. If we are required to seek additional capital, we would need to borrow funds from our sponsor or an affiliate of
our sponsor, our management team or other third parties to operate or may be forced to liquidate. Neither our sponsor, members of our
management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would
be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination.
Up to $1,500,000 of such loans may be convertible into warrants of the post-business combination entity at a price of $1.50 per warrant
at the option of the lender. The warrants would be identical to the private placement warrants. If we are unable to complete our initial
business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the
trust account. Consequently, our public stockholders may only receive approximately $10.00 per share on our redemption of our public shares,
and our warrants will expire worthless.
Subsequent to our completion of our initial
business combination, we may be required to subsequently 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 our stock price, 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 surface all material issues that may be present inside
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 would 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
stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value of their shares.
Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction
was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully
bring a private claim under securities laws that the tender offer materials or proxy statement relating to the business combination contained
an actionable material misstatement or material omission.
If third parties bring claims against us,
the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than
$10.00 per share.
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, prospective target
businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind
in or to any monies held in the trust account for the benefit of our public stockholders, 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 are unable to
complete our business combination within the prescribed time frame, or upon the exercise of a redemption right in connection with our
business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against
us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less
than the $10.00 per share initially held in the trust account, due to claims of such creditors. Our sponsor has agreed that it will be
liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business
with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.00
per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust
account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except
as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any
claims under our indemnity of the underwriters of the 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. We have not independently verified whether our sponsor
has sufficient funds to satisfy its indemnity obligations and, therefore, our sponsor may not be able to satisfy those obligations. We
have not asked our sponsor to reserve for such eventuality. We believe the likelihood of our sponsor having to indemnify the trust account
is limited because we will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements
with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account.
Our directors may decide not to enforce the
indemnification obligations of our sponsor resulting in a reduction in the amount of funds in the trust account available for distribution
to our public stockholders.
In the event that the proceeds in the trust account
are reduced below the lesser of (i) $10.00 per share or (ii) other than due to the failure to obtain such waiver, such lesser amount per
share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets,
in each case net of the interest which may be withdrawn to pay taxes, 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 may choose not to do so in any particular instance. If our independent directors choose
not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public stockholders
may be reduced below $10.00 per share.
If, after we distribute the proceeds in
the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us
that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed
as having breached their fiduciary duties to 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 stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not
dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either
a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover
all amounts received by our stockholders. 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 stockholders
from the trust account prior to addressing the claims of creditors.
If, before distributing the proceeds in the
trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that
is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount
that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust
account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not
dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims
deplete the trust account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation
may be reduced.
The securities in which we invest the funds
held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the
per-share redemption amount received by public stockholders may be less than $10.00 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 certificate of incorporation,
our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income,
net of taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest). Negative
interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders
may be less than $10.00 per share.
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 business combination.
If
we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
|
● |
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 business combination.
In
addition, we may have imposed upon us burdensome requirements, including:
|
● |
registration
as an investment company; |
|
● |
adoption
of a specific form of corporate structure; and |
|
● |
reporting,
record keeping, voting, proxy and disclosure requirements and other rules and regulations. |
We do not believe that our anticipated principal
activities will subject us to the Investment Company Act. The proceeds held in the trust account may be invested by the trustee only in
United States government treasury bills with a maturity of 180 days or less or in money market funds investing solely in United States
Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Because the investment of the proceeds will
be restricted to these instruments, we believe we will meet the requirements for the exemption provided in Rule 3a-1 promulgated under
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 are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share
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, investments and results of operations.
We are subject to laws and regulations enacted
by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements.
Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations
and their interpretation and application may also change from time to time 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 and results of operations.
Because we are not limited to a particular
industry or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the
merits or risks of any particular target business’s operations.
We intend to seek a business combination with an
operating company which has been temporarily impacted by the COVID-19 pandemic and which has a strong sustainability component or opportunity,
but are not required to do so and have not limited such operating company to a particular industry, except that we will not, under our
amended and restated certificate of incorporation, be permitted to effectuate our business combination with another blank check company
or similar company with nominal operations. Because we have not yet selected 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 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 potential business combination target.
Accordingly, any stockholders who choose to remain stockholders following
the business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such
reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of
a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that
the tender offer materials or proxy statement relating to the business combination contained an actionable material misstatement or material
omission.
We may seek investment opportunities in industries
which may or may not be outside of our management’s area of expertise.
Although we intend to focus on identifying business
combination candidates which have been temporarily impacted by the COVID-19 pandemic and have a strong sustainability component or opportunity,
we are not limited to doing so and may consider a business combination which lacks such characteristics if we determine that such candidate
offers an attractive investment opportunity for our company or we are unable to identify a suitable candidate which possesses such characteristics
after having expended a reasonable amount of time and effort in an attempt to do so. Although our management will endeavor to evaluate
the risks inherent in any particular business combination candidate, 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 the Initial Public Offering than a direct investment, if an opportunity were available, in a business combination candidate.
Additionally, our management’s expertise may not be directly applicable to the evaluation or operation of the business combination
candidate selected by us, and the information contained herein regarding the target characteristics for our business combination would
not be relevant to an understanding of the business that we elect to acquire.
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 stockholders may exercise their redemption rights, which may make it difficult for
us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition,
if stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval for business or other legal
reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does
not meet our general criteria and guidelines. If we are unable to complete our initial business combination, our public stockholders may
receive only approximately $10.00 per share on the liquidation of our trust account and our warrants will expire worthless.
We may seek investment opportunities with
a financially unstable business or an entity lacking an established record of revenue or earnings.
To the extent we complete our initial business
combination with a financially unstable business or an entity lacking an established record of sales or earnings, including a company
which has recently exited the bankruptcy or restructuring process, we may be affected by numerous risks inherent in the operations of
the business with which we combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key
personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not
be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence.
Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those
risks will adversely impact a target business.
We are not required to obtain an opinion
from an independent investment banking or accounting firm, and consequently, you may have no assurance from an independent source that
the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our business combination with
an affiliated entity, we are not required to obtain an opinion from an independent investment banking or accounting firm that the price
we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the
judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community.
Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to our initial
business combination.
We may issue additional shares of common or preferred
stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination,
any one of which would dilute the interest of our stockholders and likely present other risks. We may also issue shares of Class A common
stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination
as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. Any such issuances would
dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation
authorizes the issuance of up to 501,000,000 shares of all classes of capital stock, consisting of two classes as follows: (i) 500,000,000
shares, each with a par value of $0.0001 per share, of common stock, with such class comprising two series of (a) 450,000,000 shares designated
the Class A common stock and (b) 50,000,000 shares designated the Class B common stock; and (ii) 1,000,000 shares, each with a par value
of $0.0001 per share, of preferred stock. After giving effect to the Initial Public Offering, there are 460,000,000 and 40,000,000 authorized
but unissued shares of Class A common stock and Class B common stock, respectively, available for issuance, which amount does not take
into account shares reserved for issuance upon exercise of outstanding warrants or shares issuable upon conversion of Class B common stock.
Our Class B common stock is convertible into Class A common stock initially at a one-for-one ratio but subject to adjustment as set forth
herein, including in certain circumstances in which we issue Class A common stock or equity-linked securities related to our initial business
combination. After the Initial Public Offering, there are no shares of preferred stock issued and outstanding.
We may issue a substantial number of additional
shares of common or preferred stock to complete our initial business combination or under an employee incentive plan after completion
of our initial business combination. We may also issue shares of Class A common stock upon conversion of the Class B common stock at
a ratio greater than one-to-one at the time of our initial business combination
as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. However, our amended
and restated certificate of incorporation provides, among other things, that prior to our initial business combination, we may not issue
additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on
any initial business combination. These provisions of our amended and restated certificate of incorporation, like all provisions of our
amended and restated certificate of incorporation, may be amended with a stockholder vote. The issuance of additional shares of common
or preferred stock:
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may
significantly dilute the equity interest of investors in the Initial Public Offering; |
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may
subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock; |
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could
cause a change in control if a substantial number of shares of common stock is issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers
and directors; and |
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may
adversely affect prevailing market prices for our units, Class A common stock and/or public warrants. |
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 are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00
per share 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 are unable to
complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation
of our trust account and our warrants will expire worthless.
We may only be able to complete one business combination
with the proceeds of the Initial Public Offering and the sale of the private placement warrants, which will cause us to be solely dependent
on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations
and profitability.
The net proceeds from the Initial Public Offering
and the private placement of units provided us with $31,369,810 (after giving effect to the payment of $14,000,000 of deferred underwriting
costs and after giving effect to redemptions of our Class A common stock in connection with the recent amendment of our charter) that
we may use to complete our business combination.
We may effectuate our 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 business combination with more than one target business because of various factors, including the existence of complex
accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results
and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial
business combination with only a single entity our lack of diversification may subject us to numerous economic, competitive and regulatory
risks. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting
of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different
areas of a single industry. Accordingly, the prospects for our success may be:
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solely
dependent upon the performance of a single business, property or asset, or |
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dependent
upon the development or market acceptance of a single or limited number of products, processes or services. |
This
lack of diversification may subject us to numerous economic, competitive and regulatory developments, any or all of which may
have a substantial adverse impact upon the particular industry in which we may operate subsequent to our business combination.
We may attempt to simultaneously complete
business combinations with multiple prospective targets, which may hinder our ability to complete our business combination and give rise
to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several
businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent
on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete
our initial business combination.
With multiple business combinations, we could also face additional
risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there
are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products
of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact
our profitability and results of operations.
We may attempt to complete our initial business
combination with a private company about which little information is available, which may result in a business combination with a company
that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek
to effectuate our initial business combination with a privately held company. By definition, very little public information 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. We cannot provide assurance that, upon loss of control of a target
business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure a business combination so that
the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of
a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of
the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be
required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet
such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders prior to
the business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed
to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial
number of new shares of common stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire
a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders
immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction.
In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger
share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not
be able to maintain our control of the target business.
We do not have a specified maximum redemption
threshold. The absence of such a redemption threshold may make it possible for us to complete a business combination with which a substantial
majority of our stockholders do not agree.
Our amended and restated certificate of incorporation
does not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that
would cause our Class A common stock to become a “penny stock” as such term is defined in Rule 3a51-1 of the Exchange Act
or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination.
As a result, we may be able to complete our business combination even though a substantial majority of our public stockholders do not
agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and
do not conduct redemptions in connection with our 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 shares of Class A common stock that are validly submitted for redemption plus any
amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash
available to us, and any such condition is not waived, we will not complete the business combination or redeem any shares, all shares
of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business
combination.
In order to effectuate our initial business combination,
blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments. We cannot
assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that
will make it easier for us to complete our initial business combination that our stockholders may not support.
In order to effectuate a business combination,
blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments. For example,
blank check companies have amended the definition of business combination, increased redemption thresholds and changed industry focus.
We cannot assure you that we will not seek to amend our charter or governing instruments in order to effectuate our initial business combination.
The provisions of our amended and restated certificate
of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release
of funds from our trust account) may be amended with the approval of holders of 65% of our common stock, which are lower thresholds than
that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation
to facilitate the completion of an initial business combination that some of our stockholders may not support.
Some other blank check companies have a provision
in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s pre-business
combination activity, without approval by a certain percentage of the company’s stockholders. In those companies, amendment of these
provisions requires approval by between 90% and 100% of the company’s public stockholders. Our amended and restated certificate
of incorporation provides that any of its provisions related to pre-business combination activity (including the requirement to deposit
proceeds of the 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 stockholders as described herein) may be amended if approved by
holders of 65% of our common stock, and corresponding provisions of the trust agreement governing the release of funds from our trust
account may be amended if approved by holders of 65% of our common stock. In addition, we may extend the time in which we must complete
a business combination with the approval of holders of a majority of our voting stock that is voted at a meeting to consider such extension.
In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our common stock,
subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders, who collectively beneficially
own 20% of our common stock, will participate in any vote to amend our amended and restated certificate of incorporation and/or trust
agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended
and restated certificate of incorporation which govern our pre-business combination behavior more easily than some other blank check companies,
and this may increase our ability to complete a business combination with which you do not agree. Our stockholders may pursue remedies
against us for any breach of our amended and restated certificate of incorporation.
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 certificate
of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete
our initial business combination within the completion window, unless we provide our public stockholders with the opportunity to redeem
their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account, including interest (less up to $100,000 of interest to pay dissolution expenses and which
interest shall be net of taxes payable), divided by the number of then outstanding public shares. These agreements are contained in letter
agreements that we have entered into with our sponsor, executive officers and directors. Prior to acquiring any securities from our initial
stockholders, permitted transferees must enter into a written agreement with us agreeing to be bound by the same restriction. Our stockholders
are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies
against our sponsor, executive officers or directors for any breach of these agreements. As a result, in the event of a breach, our stockholders
would need to pursue a stockholder derivative action, subject to applicable law.
We may be unable to obtain additional financing
to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure
or abandon a particular business combination.
Although we have not yet selected any prospective target business,
and thus cannot ascertain the capital requirements for our initial business combination, we anticipate that we will find the greatest
number of opportunities for our initial business combination among companies with aggregate enterprise value of approximately $300 million
to $1.5 billion. If we are unable to use our capital stock in sufficient quantity in addition to the proceeds from the Initial Public
Offering and the sale of the private placement warrants, the acquisition of a target business with enterprise value within this range
will require that we seek additional financing in excess of the net proceeds of the Initial Public Offering the sale of the private placement
warrants. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing
proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction
or abandon that particular business combination and seek an alternative target business candidate. If we are unable to complete our initial
business combination, our public stockholders may receive only approximately $10.00 per share plus any pro rata interest earned on the
funds held in the trust account and not previously released to us to pay our working capital requirements as well as franchise and income
taxes 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 business combination, we may require such financing to fund the operations or growth of the target business. The failure
to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None
of our officers, directors or stockholders is required to provide any financing to us in connection with or after our business combination.
If we are unable to complete our initial business combination, our public stockholders may only receive approximately $10.00 per share
on the liquidation of our trust account, and our warrants will expire worthless.
Risks Relating to Our Securities
The NYSE may delist our securities from trading
on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading
restrictions.
We have been approved to list our units, Class
A common stock and public warrants on the NYSE. Although we expect to meet, on a pro forma basis, the minimum initial listing standards
set forth in the NYSE listing standards, we cannot assure you that our securities will be, or will continue to be, listed on the NYSE
in the future or prior to our initial business combination. In order to continue listing our securities on the NYSE prior to our initial
business combination, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum number
of holders of our securities (generally 300 round lot holders). Additionally, in connection with our initial business combination, we
will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s
continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE. For instance, our stock price
would generally be required to be at least $4.00 per share, our aggregate market value would be required to be at least $100,000,000,
and the market value of our publicly-held shares would be required to be at least $80,000,000. We cannot assure you that we will be able
to meet those initial listing requirements at that time.
If the NYSE delists our securities from trading
on its exchange and we are not able to list our securities on another national
securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant
material adverse consequences, including:
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a
limited availability of market quotations for our securities; |
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reduced
liquidity for our securities; |
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a
determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common
stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market
for our securities; |
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a
limited amount of news and analyst coverage; and |
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a
decreased ability to issue additional securities or obtain additional financing in the future. |
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 we expect that our units and eventually our Class A common stock and public warrants will
be listed on the NYSE, our units, Class A common stock and public warrants will be covered securities. Although the states are preempted
from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion
of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular
case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check
companies, other than the state of Idaho, certain state securities regulators view blank check companies unfavorably and might use these
powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were
no longer listed on the NYSE, our securities would not be covered securities 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.
As we intend to use the net proceeds of the Initial
Public Offering and the sale of the private placement warrants to complete an initial business combination with a target business that
has not been identified, 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 upon the successful completion of the Initial Public Offering and the sale
of the private placement warrants and have 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. In accordance with SEC penny stock rules, we will calculate net tangible
assets as total assets less intangible assets and liabilities. Our net intangible assets are not less than the minimum amount required
such that our Class A common stock is not a “penny stock” as such term is defined in Rule 3a51-1 of the Exchange Act, as our
total assets primarily consist of the $400,000,000 of proceeds in the trust account and our total liabilities will consist of deferred
underwriting commissions and accrued offering costs and other payables. Among other things, this means our units will be immediately tradable
and we will have a longer period of time to complete our business combination than do companies subject to Rule 419. Moreover, if the
Initial Public Offering had been subject to Rule 419, that rule would have prohibited the release of any interest earned on funds held
in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of an
initial business combination.
If we seek stockholder approval of our initial
business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders
are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15%
of our Class A common stock.
If we seek stockholder approval of our initial
business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer
rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange
Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in the Initial
Public Offering, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholders’ ability
to vote all of their shares (including Excess Shares) for or against our business combination. Your inability to redeem the Excess Shares
will reduce your influence over our ability to complete our 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 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 stock in open market transactions, potentially at a loss.
Our stockholders may be held liable for claims
by third parties against us to the extent of distributions received by them upon redemption of their shares.
Under the Delaware General Corporation Law, or
DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them
in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares
in the event we do not complete our initial business combination within the completion window may be considered a liquidation distribution
under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it
makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought
against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting
period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution
is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any
liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our
public shares as soon as reasonably possible following the 12th month (or such later time, as described herein by the Completion Window)
from the closing of the Initial Public Offering in the event we do not complete our business combination and, therefore, we do not intend
to comply with those procedures.
Because we will not be complying with Section 280,
Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all
existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However,
because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective
target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or
prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with
respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed
to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot
assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially
be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend
beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders
upon the redemption of our public shares in the event we do not complete our initial business combination within the completion window
is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant
to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution,
instead of three years, as in the case of a liquidation distribution.
We do not currently intend to hold an annual
meeting of stockholders until after our consummation of a business combination and you will not be entitled to any of the corporate protections
provided by such a meeting.
We do not currently intend to hold an annual meeting
of stockholders until after we consummate a business combination (unless required by the NYSE), and thus may not be in compliance with
Section 211(b) of the DGCL, which requires an annual meeting of stockholders be held for the purposes of electing directors in accordance
with a company’s bylaws unless such election is made by written consent in lieu of such a meeting. Therefore, if our stockholders
want us to hold an annual meeting prior to our consummation of a business combination, they may attempt to force us to hold one by submitting
an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
Holders of shares of Class A common stock
will not be entitled to vote on any election of directors we hold prior to our initial business combination and the consent of sponsor’s
required for us to enter into a definitive agreement regarding 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. In addition, prior to the completion of an initial business combination, holders
of a majority of our founder shares may remove a member of the board of directors for any reason and the consent of sponsor’s required
for us to enter into a definitive agreement regarding our initial business combination. Accordingly, you may not have any say in the management
of our company prior to the consummation of an initial business combination.
The grant of registration rights to our initial
stockholders and holders of our private placement warrants may make it more difficult to complete our initial business combination, and
the future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to the agreement entered into concurrently
with the issuance and sale of the securities in the Initial Public Offering, our initial stockholders and their permitted transferees
can demand that we register the founder shares and holders of our private placement warrants and their permitted transferees can demand
that we register the private placement warrants and the shares of Class A common stock issuable upon exercise of the private placement
warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities
for trading in the public market may have an adverse effect on the market price of our Class A common stock. In addition, the existence
of the registration rights may make our initial business combination more costly or difficult to conclude. This is because the stockholders
of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the
negative impact on the market price of our Class A common stock that is expected when the securities owned by our initial stockholders
or holders of our private placement warrants, or their respective permitted transferees, are registered.
We may issue notes or other debt securities,
or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition
and thus negatively impact the value of our stockholders’ investment in us.
Although
we have no commitments as of the date of this annual report to issue any notes or other debt securities, or to otherwise incur outstanding
debt, we may choose to incur substantial debt to complete our business combination. We have agreed that we will not incur any indebtedness
unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust
account. As such, no issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless,
the incurrence of debt could have a variety of negative effects, including:
|
● |
default
and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt
obligations; |
|
● |
acceleration
of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants
that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
|
● |
our
immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
|
● |
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; |
|
● |
our
inability to pay dividends on our common stock; |
|
● |
using
a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends
on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations
on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased
vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
and |
| ● | limitations
on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of
our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
Our initial stockholders control a substantial
interest in us and thus may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do
not support.
After giving effect to redemptions in connection
with our recent charter amendment, our initial stockholders own 68.7% of our issued and outstanding shares of common stock. Accordingly,
they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including
amendments to our amended and restated certificate of incorporation. If our initial stockholders purchase any additional shares of common
stock in the aftermarket or in privately negotiated transactions, this would increase their control. Neither our initial stockholders
nor, to our knowledge, any of our officers or directors, have any current intention to purchase additional securities, other than as disclosed
in this annual report. Factors that would be considered in making such additional purchases would include consideration of the current
trading price of our Class A common stock. In addition, our board of directors, whose members were elected by our sponsor, is 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 stockholders to elect new directors prior to the completion of our 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 initial stockholders, because of their ownership position, will have considerable influence regarding
the outcome. In addition, prior to the completion of an initial business combination, holders of a majority of our founder shares may
remove a member of the board of directors for any reason. Accordingly, our initial stockholders will continue to exert control at least
until the completion of our business combination.
Unlike most other similarly structured blank
check companies, our initial stockholders will receive additional shares of Class A common stock if we issue shares to consummate an initial
business combination.
The founder shares will automatically convert into
shares of Class A common stock on the first business day following the consummation of our initial business combination at a ratio such
that the number of shares of Class A common stock issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted
basis, 20% of the sum of (i) the total number of shares of common stock issued and outstanding upon completion of the Initial Public Offering,
plus (ii) the sum of (a) the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion or exercise
of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation
of the initial business combination, excluding any shares of common stock or equity-linked securities exercisable for or convertible into
shares of common stock issued, or to be issued, to any seller in the initial business combination and any private placement warrants issued
to our sponsor upon conversion of working capital loans, minus (b) the number of public shares redeemed by public stockholders in connection
with our initial business combination. This is different than most other similarly structured blank check companies in which the initial
stockholders will only be issued an aggregate of 20% of the total number of shares to be outstanding prior to the initial business combination.
Our sponsor paid an aggregate of $25,000,
or approximately $0.003 per founder share, and, accordingly, you will experience immediate and substantial dilution from the purchase
of our Class A common stock. In addition, you may face additional dilution as a result of the conversion of up to $1,500,000 in loans
from our sponsor or an affiliate of our sponsor or our management into warrants.
The difference between the public offering price
per share (allocating all of the unit purchase price to the Class A common stock and none to the public warrants) and the pro forma net
tangible book value per share of our Class A common stock after the Initial Public Offering constitutes the dilution to you and the other
investors who were involved in the Initial Public Offering. Our sponsor acquired the founder shares at a nominal price, significantly
contributing to this dilution. Upon the closing of the Initial Public Offering, and assuming no value is ascribed to the public warrants,
you and the other public stockholders incurred an immediate and substantial dilution of approximately 95.7% (or $9.57 per share), the
difference between the pro forma net tangible book value per share of $0.43 and the initial offering price of $10.00 per unit. In addition,
you may face additional dilution as a result of the conversion into warrants of up to $1,500,000 in loans from our sponsor or an affiliate
of our sponsor or certain of our officers and directors in order to finance transaction costs in connection with an intended initial business
combination.
The nominal purchase price paid by our sponsor
for the founder shares may result in significant dilution to the implied value of your public shares upon the consummation of our initial
business combination.
We offered our units at an offering price of $10.00
per unit and the amount deposited in our trust account is $10.00 per public share, implying an initial value of $10.00 per public share.
However, prior to the Initial Public Offering, our sponsor paid a nominal aggregate purchase price of $25,000 for the founder shares,
or approximately $0.003 per share. As a result, the value of your public shares may be significantly diluted upon the consummation of
our initial business combination, when the founder shares are converted into public shares. For example, the following table shows the
dilutive effect of the founder shares on the implied value of the public shares upon the consummation of our initial business combination,
assuming that our equity value at that time is $386,000,000, which is the amount in cash we would have for our initial business combination
in the trust account after giving effect to the payment of $14,000,000 of deferred underwriting commissions, assuming that no interest
is earned on the funds held in the trust account and no public shares are redeemed in connection with our initial business combination,
and without taking into account any other potential impacts on our valuation at such time, such as the trading price of our public shares,
the business combination transaction costs, any equity issued or cash paid to the target’s equity holders or other third parties,
or the target’s business itself, including its assets, liabilities, management and prospects, or the impact of our public and private
warrants. At such valuation, each share of our common stock would have an implied value of $7.72 per share upon consummation of our initial
business combination, which would be a 22.8% decrease as compared to the initial implied value per public share of $10.00 (the price per
unit in the Initial Public Offering, assuming no value is ascribed to the public warrants).
Public shares | |
| 40,000,000 | |
Founder shares | |
| 10,000,000 | |
Total shares | |
| 50,000,000 | |
Total funds in trust available for initial business combination (less deferred underwriting commissions) | |
$ | 386,000,000 | |
Initial implied value per public share | |
$ | 10.00 | |
Implied value per share upon consummation of initial business combination | |
$ | 7.72 | |
We may amend the terms of the public warrants
in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then outstanding public warrants.
Our public warrants have been issued in registered
form under a public warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The public warrant
agreement provides that the terms of the public warrants may be amended without the consent of any holder to cure any ambiguity or correct
any mistake, including to conform the provisions of the public warrant agreement to the description of the terms of the public warrants
and the public warrant agreement set forth in this annual report, or to correct any defective provision contained therein, or to provide
for the delivery of an “alternative issuance” (as defined in the public warrant agreement), but requires the approval by the
holders of at least 50% of the then outstanding public warrants to make any other modification or amendment to the terms of the public
warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the
then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent
of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other
things, increase the exercise price of the public warrants, shorten the exercise period or decrease the number of shares of our Class
A common stock purchasable upon exercise of a public warrant.
Our warrant agreements designate 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 agreements provide that, subject to
applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreements, 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 agreements do not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim
for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing
or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have consented to the forum provisions
in our warrant agreements. If any action, the subject matter of which is within the scope of the forum provisions of the warrant agreements,
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. Warrant holders who are unable to bring their claims in the judicial forum of their choosing may be required to incur additional
costs in pursuit of actions which are subject to our choice-of-forum provision. Alternatively, if a court were to find these provisions
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 public
warrants prior to their exercise at a time that is disadvantageous to you, thereby making your public warrants worthless.
We have the ability to redeem outstanding public
warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per public warrant, if among other
things, the last reported sale price of the Class A common stock has been at least $18.00 per share for any ten (10) trading days within
the twenty (20)-trading-day period ending on the third trading day prior to the date on which the notice of redemption is given to the
to the public warrant holders. If and when the public 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. Redemption of the issued
and outstanding public warrants could force you (i) to exercise your public warrants and pay the exercise price therefor at a time when
it may be disadvantageous for you to do so, (ii) to sell your public warrants at the then-current market price when you might otherwise
wish to hold your public warrants or (iii) to accept the nominal redemption price which, at the time the outstanding public warrants are
called for redemption, is likely to be substantially less than the market value of your warrants.
Our management’s ability to require holders
of our public warrants to exercise such public warrants on a cashless basis will cause holders to receive fewer Class A common stock upon
their exercise of the public warrants than they would have received had they been able to exercise their public warrants for cash.
If we call our public warrants for redemption after
the redemption criteria described elsewhere in this annual report have been satisfied, our management will have the option to require
any holder that wishes to exercise its public warrants (including any public warrants held by our sponsor, officers, directors or their
permitted transferees) to do so on a “cashless basis.” If our management chooses to require holders to exercise their public
warrants on a cashless basis, the number of Class A common stock received by a holder upon exercise will be fewer than it would have been
had such holder exercised their public warrants for cash. This will have the effect of reducing the potential “upside” of
the holder’s investment in us.
Our warrants may have an adverse effect on
the market price of our Class A common stock and make it more difficult to effectuate our business combination.
We issued public warrants to purchase 13,333,333
shares of our Class A common stock as part of the units offered by the Initial Public Offering. Warrants may be exercised only for a whole
number of shares of Class A common stock. To the extent we issue shares of Class A common stock to effectuate a business transaction,
the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants could
make us a less attractive acquisition vehicle to a target business. Such warrants, when exercised, will increase the number of issued
and outstanding shares of our Class A common stock and reduce the value of the shares of Class A common stock issued to complete the business
transaction. Therefore, our warrants may make it more difficult to effectuate a business transaction or increase the cost of acquiring
the target business.
Because we must furnish our stockholders
with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination
with some prospective target businesses.
The federal proxy rules require that a proxy statement
with respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro forma financial
statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer
documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in
accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international
financing reporting standards, 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.
Compliance obligations under the Sarbanes-Oxley
Act may make it more difficult for us to effectuate our business combination, require substantial financial and management resources,
and increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act requires
that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December
31, 2022. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be required to comply with the
independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as
long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm
attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance
with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company
with which we seek to complete our business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding
adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley
Act may increase the time and costs necessary to complete any such acquisition.
Provisions in our amended and restated certificate
of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future
for our Class A common stock and could entrench management.
Our amended and restated certificate of incorporation
contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These
provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series
of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve
payment of a premium over prevailing market prices for our securities.
Risks Relating to Our Management Team
We are dependent upon our executive officers
and directors and their departure 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. We believe that our success depends on the continued
service of our executive officers and directors, at least until we have completed our 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 management 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 business
combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot
presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions
following our business combination, it is likely that some or all of the management of the target business will remain in place. While
we intend to closely scrutinize any individuals we engage after our 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 and take time
away from oversight of our operations.
Our key personnel may negotiate employment
or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for
them to receive compensation following our business combination and as a result, may cause them to have conflicts of interest in determining
whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the
company after the completion of our business combination only if they are able to negotiate employment or consulting agreements in connection
with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and
could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would
render to us after the completion of the business combination. The personal and financial interests of such individuals may influence
their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us
after the completion of our business combination will not be the determining factor in our decision as to whether or not we will proceed
with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion
of our business combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions
with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business
combination.
We may have a limited ability to assess the
management of a prospective target business and, as a result, may consummate our initial business combination with a target business whose
management may not have the skills, qualifications or abilities to manage a public company.
When evaluating the desirability of effecting our
initial business combination with a prospective target business, our ability to assess the target business’s management may be limited
due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove
to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management
not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination
business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following the business combination
could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless
they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary
duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer materials or
proxy statement relating to the business combination contained an actionable material misstatement or material omission.
The officers and directors of an acquisition candidate
may resign upon completion of our initial business combination. The departure of a potential 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 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.
Certain of our executive officers and directors
are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to
be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should
be presented to our company or to another entity.
Until we consummate our initial business combination,
we intend to engage in the business of identifying and combining with one or more businesses. Our executive officers and directors are,
or may in the future become, affiliated with entities that are engaged in a similar business.
Our officers and directors also may become aware
of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or
contractual duties. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity
should be presented to our company or to another entity. 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. Our amended and restated certificate of incorporation provides that
we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered
to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually
permitted to undertake and would otherwise be reasonable for us to pursue.
Members of our management team directly or indirectly
own common stock and warrants, and, accordingly, may have a conflict of interest in determining whether a particular target business is
an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have
a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers
and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
Certain of our officers and directors are
now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be
conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity or other
transaction 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. Our sponsor and officers and directors are,
or may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar
business. We do not have employment contracts with our officers and directors that will limit their ability to work at other businesses.
In addition, our sponsor, officers and directors may participate in the formation of, or become an officer or director of, any other blank
check company prior to completion of our initial business combination. As a result, our sponsor, officers or directors could have conflicts
of interest in determining whether to present business combination opportunities to us or to any other blank check company with which
they may become involved. In particular, our officers and directors have formed and are actively engaged in M3-Brigade Acquisition III
Corp., a special purpose acquisition corporation that completed its initial public offering in October 2021 and Brigade-M3 European Acquisition
Corp., a special purpose acquisition corporation that completed its initial public offering in December 2021. Each of M3-Brigade Acquisition
III Corp. and Brigade-M3 European Acquisition Corp., like us, may pursue initial business combination targets in any businesses, industries
or geographies. Absent an extension in accordance with its charter, M3-Brigade Acquisition III Corp. has until April 2022 (or until October
2023, pursuant to an option to extend the period of time it will have to complete an initial business combination up to four times, each
by an additional 3 months, for a total of up to 24 months, with two of such options having now been exercised) and Brigade-M3 European
Acquisition Corp. has until June 2023 to do so. Any such companies, including M3-Brigade Acquisition III Corp. and Brigade-M3 European
Acquisition Corp., may present additional conflicts of interest in pursuing an acquisition target.
Each of our officers and directors presently
has, and any of them in the future may have additional, fiduciary, contractual or other obligations or duties to one or more other entities
pursuant to which such officer or director is or will be required to present a business combination opportunity to such entities. Accordingly,
if any of our officers or directors becomes aware of a business combination opportunity which is suitable for one or more entities to
which he or she has fiduciary, contractual or other obligations or duties, he or she will honor these obligations and duties to present
such business combination opportunity to such entities first, and only present it to us if such entities reject the opportunity and he
or she determines to present the opportunity to us. 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. Our amended and restated certificate of incorporation provides that we
renounce our interest in any corporate opportunity offered to any director or officer unless (i) such opportunity is expressly offered
to such person solely in his or her capacity as a director or officer of our company, (ii) such opportunity is one we are legally and
contractually permitted to undertake and would otherwise be reasonable for us to pursue and (iii) the director or officer is permitted
to refer the opportunity to us without violating another legal obligation. 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.
We may engage in a business combination with
one or more target businesses that have relationships with entities that may be affiliated with our 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 sponsor, executive officers
and directors. Our directors also serve as officers and board members for other entities. 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 business combination with any entities with which they are affiliated, and there have been no preliminary discussions concerning a
business combination with any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction
with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for a business
combination and such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain an opinion
from an independent investment banking firm 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 executive officers, directors or existing holders, potential
conflicts of interest still may exist and, as a result, the terms of the business combination may not be as advantageous to our public
stockholders as they would be absent any conflicts of interest.
Since our sponsor, executive officers and
directors will lose their entire investment in us if our business combination is not completed, a conflict of interest may arise in determining
whether a particular business combination target is appropriate for our initial business combination.
As of the date of this annual report, our sponsor,
executive officers and directors beneficially own an aggregate of 10,000,000 founder shares, for which they paid an aggregate purchase
price of $25,000. All of these securities will be worthless if we do not complete an initial business combination.
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.
Since our sponsor, executive officers and
directors will not be eligible to be reimbursed from the trust account for their out-of-pocket expenses if our business combination is
not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our
initial business combination.
At the closing of our initial business combination,
our sponsor, executive officers and directors, or any of 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. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred in connection with activities
on our behalf. These financial interests of our sponsor, executive officers and directors may influence their motivation in identifying
and selecting a target business combination and completing an initial business combination.
Our management team and our sponsor may make
a profit on any initial business combination, even if any public stockholders who did not redeem their shares would experience a loss
on that business combination. As a result, the economic interests of our management team and our sponsor may not fully align with the
economic interests of public stockholders.
Like most SPACs, our structure may not fully align
the economic interests of our sponsor and those persons, including our officers and directors, who have interests in our sponsor with
the economic interests of our public stockholders. Our sponsor has invested in us an aggregate of $11,275,000, comprised of the $25,000
purchase price for the founder shares and the $11,250,000 purchase price for the private placement warrants (which have now been unconditionally
and irrevocably abandoned by our sponsor). Assuming a trading price of $10.00 per share upon consummation of our initial business combination,
the 10,000,000 founder shares would have an aggregate implied value of $100,000,000. Even if the trading price of our Class A common stock
was as low as $1.51 per share, and the private placement warrants were worthless, the value of the founder shares would be equal
to the sponsor’s initial investment in us. As a result, so long as we complete an initial business combination, our sponsor is likely
to be able to recoup its investment in us and make a substantial profit on that investment, even if our public shares lose significant
value. Accordingly, our sponsor and members of our management team who own interests in our sponsor may have incentives to pursue and
consummate an initial business combination quickly, with a risky or not well established target business, and/or on transaction terms
favorable to the equityholders of the target business, rather than continue to seek a more favorable business combination transaction
that could result in an improved outcome for our public stockholders or liquidate and return all of the cash in the trust to the public
stockholders. For the foregoing reasons, you should consider our sponsor’s and management team’s financial incentive to complete
an initial business combination when evaluating whether to invest in the Initial Public Offering and/or redeem your shares prior to or
in connection with an initial business combination.
Members of our management team and board
of directors have significant experience as founders, board members, officers, executives or employees of other companies. Certain of
those persons have been, may be, or may become, involved in litigation, investigations or other proceedings, including related to those
companies or otherwise. The defense or prosecution of these matters could be time-consuming and could divert our management’s attention,
and may have an adverse effect on us, which may impede our ability to consummate an initial business combination.
During the course of their careers, members of
our management team and board of directors have had significant experience as founders, board members, officers, executives or employees
of other companies. Although we are not currently aware of any pending litigation, as a result of their involvement and positions in these
companies, certain of those persons have been, may be or may in the future become involved in litigation, investigations or other proceedings,
including relating to the business affairs of such companies, transactions entered into by such companies, or otherwise.
Individual members of our management team and board of directors also
may become involved in litigation, investigations or other proceedings involving claims or allegations related to or as a result of their
previous personal conduct, either in their capacity as a corporate officer or director or otherwise, and may be personally named in such
actions and potentially subject to personal liability as a result of their previous individual conduct or otherwise. Any such liability
may or may not be covered by insurance and/or indemnification, depending on the facts and circumstances. The defense or prosecution of
these matters could be time-consuming. Any litigation, investigations or other proceedings and the potential outcomes of such actions
may divert the attention and resources of our management team and board of directors away from identifying and selecting a target business
or businesses for our initial business combination and may negatively affect our reputation, which may impede our ability to complete
an initial business combination.
Risks Associated with Acquiring and
Operating a Business in Foreign Countries
If we effect our initial business combination
with a company located in North America but with operations or opportunities outside of North America, we would be subject to a variety
of additional risks that may negatively impact our operations.
If we effect our initial business combination with
a company located in North America but with operations or opportunities outside of North America, we would be subject to any special considerations
or risks associated with companies operating in an international setting, including any of the following:
| ● | costs
and difficulties inherent in managing cross-border business operations; |
| ● | rules
and regulations regarding currency redemption; |
| ● | complex
corporate withholding taxes on individuals; |
| ● | laws
governing the manner in which future business combinations may be effected; |
| ● | tariffs
and trade barriers; |
| ● | regulations
related to customs and import/export matters; |
| ● | 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; |
| ● | crime,
strikes, riots, civil disturbances, 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, our operations might suffer, which may adversely impact our results of operations and financial
condition.
General Risk Factors
We identified a material weakness in our
internal control over financial reporting as of December 31, 2022. If we are unable to develop and maintain an effective system of internal
control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may result in
a material adverse effect on our ability to consummate an initial business combination.
Following the issuance of the SEC Staff Statement,
after consultation with our independent registered public accounting firm, management identified a material weakness in our internal control
over financial reporting related to the accounting for an approximately $1.4 million liability on account of the unexercised overallotment
option granted to the underwriter in connection with our IPO and for a $5.4 million of fees that would have been payable to a professional
services provider upon consummation of the now-terminated merger agreement with Syniverse Corporation.
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. Effective internal controls are necessary
for us to provide reliable financial reports and prevent fraud. Any failure to maintain internal control over our financial reporting
could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis, which
could delay or disrupt our efforts to consummate an initial business combination. If our financial statements are not filed on a timely
basis, we may also be subject to sanctions or investigations by the stock exchange on which our securities are listed, the SEC or other
regulatory authorities. In either case, there could result a material adverse effect on our ability to consummate an initial business
combination. We have expanded and improved our review process for complex securities and related accounting standards and continue to
evaluate other steps to remediate the material weakness.
In addition, as a result of such material weaknesses,
we could potentially face litigation or other disputes which may include, among others, claims invoking the federal and state securities
laws, contractual claims or other claims arising from the material weakness in our internal control over financial reporting and the preparation
of our financial statements. As of the date of this report, we have no knowledge of any such litigation or dispute. However, we can provide
no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not,
could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a business
combination.
We are an independent company and neither
M3 Partners nor Brigade owe any duties to investors, or any liability, for matters relating to us.
We were recently formed as an independent company.
Although certain executives of M3 Partners and Brigade serve as our officers and directors and each of M3 Partners and Brigade have agreed
to provide certain support to us without compensation, we are not controlled by or under common control with either M3 Partners or Brigade.
None of M3 Partners, Brigade or any of their respective affiliates is an affiliate of ours and each disclaims responsibility for our activities.
In the event that one or more stockholders might have claims against us, it is not anticipated that M3 Partners or Brigade would have
any obligations or liability in respect of such claims.
We are an emerging growth company within
the meaning of the Securities Act and, if we take advantage of certain exemptions from disclosure requirements available to emerging growth
companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with
other public companies.
We are an “emerging growth
company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section
404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain
information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause
us to lose that status earlier, including if the market value of our Class A common stock held by non-affiliates exceeds $700
million as of any June 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.
Our amended and restated certificate of incorporation
designate specific courts as the exclusive forum for certain litigation that may be initiated by the Company’s stockholders, which
could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our amended and restated certificate
of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware
is the sole and exclusive forum for state law claims for (1) any derivative action or proceeding brought on our behalf; (2) any action
asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders;
(3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation
or bylaws; (4) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; or (5)
any action asserting a claim governed by the internal affairs doctrine (the “Delaware Forum Provision”). The Delaware Forum
Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act. Our amended and restated certificate
of incorporation further provides that unless we consent in writing to the selection of an alternative forum, the federal courts shall
be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal
Forum Provision”). In addition, our bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares
of our capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided,
however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules
and regulations thereunder.
The Delaware Forum Provision and the Federal Forum
Provision in our bylaws may impose additional litigation costs on stockholders in pursuing any such claims. Additionally, these forum
selection clauses may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes
with us or our directors, officers or employees, which may discourage the filing of lawsuits against us and our directors, officers and
employees, even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court ruled in
March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are
“facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision.
If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters.
The Federal Forum Provision may also impose additional
litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware
and the United States District Court for the Southern District of New York may also reach different judgments or results than would other
courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such
judgments may be more or less favorable to us than to our stockholders.