As filed with the U.S. Securities and Exchange Commission on October 18, 2021.

    

Registration No. 333-257788

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

AMENDMENT NO. 1 TO

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

 

Adnant Concepcion Acquisition Corp.

(Exact name of registrant as specified in its charter)

   

Delaware

 

6770

 

86-2331905

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(IRS Employer

Identification No.)

 

The Maria Nava Building

11516 Downey Ave.

Downey, CA 90241

(323) 841-0046

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

Sabas Carrillo

The Maria Nava Building

11516 Downey Ave.

Downey, CA 90241

Telephone: (323) 841-0046

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

Copies to:

 

Andrew D. Thorpe, Esq.

Melissa V. Frayer, Esq.

Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.

44 Montgomery Street, 36th Floor

San Francisco, CA 94104

(415) 432-6000

Thomas J. Poletti, Esq.

Veronica Lah, Esq.

Manatt, Phelps & Phillips, LLP

695 Town Center Drive, 14th Floor

Costa Mesa, CA 92646

(714) 312-7500

  

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

TITLE OF EACH CLASS OF SECURITY BEING REGISTERED

 

AMOUNT

BEING REGISTERED

 

PROPOSED MAXIMUM OFFERING PRICE PER SECURITY(1)

 

 

PROPOSED MAXIMUM AGGREGATE OFFERING

PRICE(1)

 

 

AMOUNT OF REGISTRATION FEE (5)

 

Units, each consisting of one share of Class A Common Stock, $0.0001 par value, and one-ninth of one redeemable Warrant (2)

 

2,875,000 Units

 

$

10.00

 

 

$

28,750,000

 

 

$

2,665

 

Shares of Class A Common Stock included as part of the units (3)

 

2,875,000 Shares

 

 

 

 

 

 

 

 

(4)

Redeemable warrants included as part of the units (3)

 

319,443 Warrants

 

 

 

 

 

 

 

 

(4)

Redeemable warrants to be issued to the holders of record of Class A Common Stock issued in this offering that are outstanding after the Initial Business Combination Redemption Time (6)

 

638,888 Warrants

 

 

 

 

 

 

 

 

(4)

Contingent Rights (7)

 

2,875,000 Rights

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

$

28,750,000

 

 

$

2,665

(5)

_________ 

(1)

Estimated solely for the purpose of calculating the registration fee.

 

 

(2)

Includes 375,000 units, consisting of 375,000 shares of Class A Common Stock and 41,666 redeemable warrants, which may be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any.

 

 

(3)

Pursuant to Rule 416, there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions.

 

 

(4)

No fees are payable pursuant to Rule 457(g).

 

 

(5)

$1,255 previously paid.

 

 

(6)

Such warrants will be issued to the holders of the remaining shares of Class A Common Stock that were issued in this offering that remain outstanding after the Initial Business Combination Redemption. Such distribution will occur at the Adnant Distribution Time.

 

 

(7)

The contingent rights refer to the right attached to each share of Class A Common Stock issued in this offering to receive the issuance of two-ninths of a Distributable Adnant Redeemable Warrant contingent upon such shares of Class A Common Stock not being redeemed in connection with our initial business combination . Such rights will remain attached to our shares of Class A Common Stock and are not separately transferable, assignable or salable, and will not be evidenced by any form of certificate or instrument.

  

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

i

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

 

SUBJECT TO COMPLETION, DATED OCTOBER 18, 2021

 

$25,000,000

 

Adnant Concepcion Acquisition Corp.

 

2,500,000 Units

  

Adnant Concepcion Acquisition Corp. is a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to as our initial business combination. We intend to focus our search on companies in the cannabis industry with enterprise values that are greater than the net proceeds of this offering and the sale of the Private Placement Warrants. Potential areas of interest in the cannabis industry include but are not limited to domestic and international businesses that are ancillary to the production, distribution , and sale of cannabis as well as businesses that legally cultivate, process , and/or retail cannabis. We have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target.

 

This is an initial public offering of our securities. Each unit has an offering price of $10.00 and consists of (i) one share of our Class A Common Stock, (ii) one-ninth of one redeemable warrant (or 277,777 redeemable warrants in the aggregate, assuming no exercise of the underwriters’ over-allotment option), which we refer to as the “Outstanding Redeemable Warrants”, and (iii) a contingent right to receive two-ninths of one redeemable warrant following the Initial Business Combination Redemption Time under certain circumstances pursuant to our contingent rights agreement (the “Distributable Adnant Redeemable Warrants” and, collectively with the Outstanding Redeemable Warrants, the “ Redeemable Warrants ” or the “ Public Warrants”). Each whole warrant entitles the holder thereof to purchase one share of our Class A Common Stock at a price of $11.50 per share (other than the Underwriter Warrants, which have an exercise price of $12.00 per share), subject to adjustment as described in this prospectus. The warrants will become exercisable on the later of 30 days after the completion of our initial business combination or 12 months from the effective date of this offering, and will expire five years after the completion of our initial business combination or earlier upon redemption or liquidation, as described in this prospectus. The underwriters have a 45-day option from the date of this prospectus to purchase up to an additional 375,000 units to cover over-allotments, if any. If we are unable to complete our initial business combination within 18 months from the closing of this offering, we will redeem 100% of the public shares for cash, subject to applicable law and certain conditions as further described herein.

 

We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A Common Stock prior to the completion of our initial business combination, subject to the limitations described herein. Immediately after the redemption time for the initial business combination and immediately before the closing of our initial business combination, or the Adnant Distribution Time , we will issue up to an aggregate of 555,555 Distributable Adnant Redeemable Warrants , or Aggregate Warrant Amount , only to holders of record of the shares of Class A Common Stock issued in this offering (whether acquired in this offering or afterward) that are outstanding after the time at which we redeem any shares of Class A Common Stock that the holders thereof have elected to redeem in connection with our initial business combination as follows: to the extent that a public stockholders does not redeem their Class A Common Stock (whether acquired in this offering or afterwards) in connection with the initial business combination, each such public stockholder will receive two-ninths of a Distributable Adnant Redeemable Warrant. Public stockholders who exercise their redemption rights are not entitled to receive any Distributable Adnant Redeemable Warrants in respect of such redeemed public shares.

 

The right to receive Distributable Adnant Redeemable Warrants will remain attached to our public shares and will not be separately transferable, assignable or salable. Holders of our public shares issued in this offering (whether acquired by the holder thereof during or after this offering) will be entitled to receive the Distributable Adnant Redeemable Warrants only in respect of public shares that they have not redeemed.

 

Our sponsor has also agreed to purchase an aggregate of 846,000 warrants (or 972,900 warrants if the over-allotment option is exercised in full) at a price of $1.56 per warrant, for an aggregate purchase price of $1,319,760  (or $1,517,724 if the over-allotment option is exercised in full), in a private placement that will close simultaneously with the closing of this offering, which we refer to as the “Private Placement Warrants”. The Private Placement Warrants are identical to the Outstanding Redeemable Warrants included in the units being issued in this offering, subject to certain limited exceptions as described in this prospectus.

 

Prior to effective date of this offering, we intend to enter into a Forward Purchase Agreement with our sponsor, Adnant Concepcion Sponsor LLC. Pursuant to the Forward Purchase Agreement, our sponsor may purchase at a price of $1.56 per warrant an aggregate of up to 660,410 additional warrants at an exercise price of $11.50 per share, which we refer to as the “Pre-Business Combination Warrants,” for an aggregate purchase price of up to $1,030,240. The purchase of the Pre-Business Combination Warrants will take place in one or more private placements in such amounts and at such time or times as the sponsor determines, with the full amount to have been purchased no later than immediately prior to the closing of our initial business combination.

  

The Forward Purchase Agreement will also provide that our sponsor may elect to purchase at a price of $1.56 per warrant up to an aggregate of 1,309,131 additional warrants at an exercise price of $11.50 per share, which we refer to as the “Post-Business Combination Warrants” for an aggregate purchase price of up to $2,042,245. Any elections to purchase the up to 1,309,131 Post-Business Combination Warrants, which we refer to collectively with the Pre-Business Combination Warrants as, the “Forward Purchase Warrants,” will take place in one or more private placements after the closing of our initial business combination, in such amounts and at such time or times as our sponsor determines. The Forward Purchase Warrants are identical to the warrants sold in this offering, subject to certain limited exceptions as described in this prospectus. The fair market value of the Forward Purchase Warrants as of the date of this offering was determined by a third-party valuation firm.

  

We refer to the Forward Purchase Warrants collectively with the shares of Class A Common Stock underlying the Forward Purchase Warrants, the “Forward Purchase Securities.” The Forward Purchase Warrants will have no right to vote on amendments to the warrant agreement prior to our initial business combination, except with respect to certain provisions relating solely to the transfer of the Forward Purchase Securities. In all other respects, the terms of the Forward Purchase Warrants will be identical to the terms of the Private Placement Warrants. The Forward Purchase Securities, as long as they are held by the sponsor or their permitted transferees, will have certain transfer restrictions and registration rights.

  

 

ii

 

 

Unlike other blank check companies, our sponsor is not being afforded the opportunity to purchase 20% of our stock at a nominal price; our sponsor will, instead, purchase the warrants as described above, with an exercise price of $11.50 per share. Thus, unlike other situations in which the sponsor is entitled to a portion of the value of the company regardless as to whether the company increases or decreases in value, our sponsor will only participate in the value of our company if our stock price is at least 15% higher than the initial offering price in this offering (if such warrants are then-exercisable). We have formed this incentive structure to remove friction, align stockholder interests, and reward sustained, long-term performance.

 

As a result of this offering and the private placement sale of warrants to our sponsor, we expect to have a minimum of approximately $25,312,412 in equity capital (subject to redemptions in the case of the Class A Common Stock offered hereby) for use in our initial business combination (assuming no redemptions of the Class A Common Stock), before expenses.

    

Our sponsor owns an aggregate of 25 shares of our Class B Common Stock, each of which carries that number of votes such that, in the aggregate, the holders of Class B Common Stock will have 20.0% of the voting power of the issued and outstanding shares of common stock immediately following this offering. The shares of Class B Common Stock will automatically convert into shares of Class A Common Stock at the time of our initial business combination, or earlier at the option of the holder, as described herein.

 

Currently, there is no public market for our units, Class A Common Stock, or warrants. We intend to apply for our units to be quoted on the OTCQX market of the OTC Markets Group, Inc. (the “OTC”) under the symbol “[●]”. We expect that our units will be quoted on the OTC on or promptly after the date of this prospectus. We cannot guarantee that our securities will be approved for quotation on the OTC. We expect the Class A Common Stock and Outstanding Redeemable Warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless WestPark Capital, Inc. (“WestPark Capital”), the representative of the underwriters, informs us of its decision to allow earlier separate trading, subject to our satisfaction of certain conditions. No fractional warrants will be issued other than as part of the units and only whole warrants will trade. Once the securities comprising the units begin separate trading, we expect that the Class A Common Stock and Outstanding Redeemable Warrants will be quoted on the OTC under the symbols “[●]” and “[●],” respectively. The Distributable Adnant Redeemable Warrants will trade on the first trading day following their issuance at the Adnant Distribution Time, will be fully fungible with the Outstanding Redeemable Warrants , and will also trade under the symbol “[●].”

  

We are an “emerging growth company” under applicable federal securities laws and will be subject to reduced public company reporting requirements. Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 22 for a discussion of information that should be considered in connection with an investment in our securities. Investors will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings.

 

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

PER UNIT

 

 

TOTAL

 

Public offering price

 

$

10.00

 

 

$

25,000,000

 

Underwriting discounts and commissions(1)

 

$

0.50

 

 

$

1,250,000

 

Proceeds; before expenses, to Adnant Concepcion Acquisition Corp.

 

$

9.50

 

 

$

23,750,000

 

_________ 

(1)

Includes up to $0.50 per unit, or $1,250,000, in underwriting commissions to be paid in cash at the closing of this offering. Specifically, the underwriters will be entitled to commissions ranging between $500,000 and $1,250,000 (or between $575,000 and $1,437,500 if the underwriters’ over-allotment option is exercised in full) at the closing of this offering, based on commissions equal to 5.0% (or 2.0% if such funds are introduced by our Sponsor) of the gross proceeds of this offering.  We have engaged WestPark Capital, Inc. as an advisor in connection with our business combination. We will pay WestPark Capital, Inc. in cash for such services upon the consummation of our initial business combination in an amount equal to 3.0% of the gross proceeds of this offering, or $750,000 (or $862,500 if the over-allotment option is exercised in full) in the aggregate, exclusive of any applicable finders’ fees which might become payable. In addition, we will issue to WestPark Capital, Inc. warrants (a) at the closing of this offering in an amount equal to 2.0% of all securities sold in this offering and (b) at the closing of an initial business combination in an amount equal to 8.0% of all securities sold in this offering. See the section of this prospectus entitled “Underwriting” beginning on page 108 for a description of compensation and other items of value payable to the underwriters. 

 

Of the proceeds we receive from this offering and the sale of the Private Placement Warrants described in this prospectus, $25,000,000 or $28,750,000 if the underwriters’ over-allotment option is exercised in full ($10.00 per unit in either case) will be deposited into a U.S.-based trust account , with Odyssey Transfer Agent & Trust Company acting as trustee, and $840,000 will be available to pay fees and expenses in connection with the closing of this offering and for working capital following the closing of this offering. These proceeds include $750,000 (or $862,500 if the underwriters’ over-allotment option is exercised in full) in the aggregate payable to WestPark Capital, Inc. as a business combination fee as described under the section “Underwriting” representing 3.0% of the proceeds from this offering and which is to be placed in a trust account located in the United States as described herein.

  

The underwriters are offering the units for sale on a firm commitment basis. The underwriters expect to deliver the units to the purchasers on or about [●], 2021.

 

WestPark Capital, Inc.

 

[●], 2021

 

 

iii

 

 

TABLE OF CONTENTS

 

Summary

 

1

 

Risks

 

19

 

Summary Financial Data

 

21

 

Risk Factors

 

22

 

Cautionary Note Regarding Forward-Looking Statements

 

54

 

Use Of Proceeds

 

55

 

Dividend Policy

 

58

 

Dilution

 

59

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

62

 

Proposed Business

 

67

 

Management

 

85

 

Principal Stockholders

 

90

 

Certain Relationships and Related Party Transactions

 

92

 

Description Of Securities

 

94

 

Material U.S. Federal Income Tax Considerations

 

105

 

Underwriting

 

110

 

Legal Matters

 

116

 

Experts

 

116

 

Where You Can Find Additional Information

 

116

 

Signatures

 

II-5

 

 

We are responsible for the information contained in this prospectus. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give to you. We are not, and the underwriters are not, making an offer to sell securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

 

 

iv

 

 

SUMMARY

 

This summary only highlights the more detailed information appearing elsewhere in this prospectus. You should read this entire prospectus carefully, including the information under the section of this prospectus entitled “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus, before investing.

 

Unless otherwise stated in this prospectus, or the context otherwise requires, references to:

 

 

·

“Adnant Distribution Time” are to the time at which the Distributable Adnant Redeemable Warrants will be issued, which will occur immediately after the Initial Business Combination Redemption Time and immediately prior to the closing of our initial business combination;

 

 

 

 

·

“common stock” are to our Class A Common Stock and our Class B Common Stock, collectively;

 

 

 

 

·

“Distributable Adnant Redeemable Warrants” are to the redeemable warrants which our public stockholders have a contingent right to receive, in certain circumstances described in this prospectus and pursuant to the contingent rights agreement, at the Adnant Distribution Time, with two-ninths of one Distributable Adnant Redeemable Warrant receivable per each public share not redeemed in connection with our initial business combination;

 

 

 

 

·

“Forward Purchase Agreement” are to an agreement providing for the sale of our Forward Purchase Warrants to our sponsor in one or more private placements in such amounts and at such time or times as provided therein;

 

 

 

 

·

“Forward Purchase Securities” are to the Forward Purchase Warrants and shares of Class A Common Stock underlying the Forward Purchase Warrants;

 

 

 

 

·

“Forward Purchase Warrants” are to the warrants to be issued pursuant to the Forward Purchase Agreement, which will have identical terms to those of the Private Placement Warrants issued in this offering, except as described herein;

 

 

 

 

·

“Initial Business Combination Redemption Time” are to the time at which we redeem shares of Class A Common Stock that the holders thereof have elected to redeem in connection with our initial business combination, which will occur prior to the consummation of our initial business combination;  

 

 

 

 

·

“initial stockholders” are to our sponsor and any other holders of our sponsor shares prior to this offering (or their permitted transferees);

 

 

 

 

·

“management” or our “management team” are to our officers and directors;

 

 

 

 

·

“Outstanding Redeemable Warrants” are to the one-ninth of one redeemable warrants included as part of the units in this offering;

 

 

 

 

·

“Post-Business Combination Warrants” are to the aggregate 1,309,131 warrants that our sponsor may purchase pursuant to the Forward Purchase Agreement after the closing of our initial business combination;

 

 

 

 

·

“Pre-Business Combination Warrants” are to the aggregate 660,410 warrants that our sponsor may purchase pursuant to the Forward Purchase Agreement after the consummation of this offering and prior to the closing of our initial business combination;

 

 

 

 

·

“Private Placement Warrants” are to the warrants issued to our sponsor in a private placement simultaneously with the closing of this offering, which Private Placement Warrants are identical to our Outstanding Redeemable Warrants sold as part of the units in this offering, subject to certain limited exceptions as described in this prospectus;

 

 

 

 

·

“public shares” are to shares of our Class A Common Stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market);

 

 

 

 

·

“public stockholders” are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares;

 

 

 

 

·

“public warrants” are to our Outstanding Redeemable Warrants sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market), and to the Distributable Adnant Redeemable Warrants issuable to the remaining holders of our outstanding shares of Class A Common Stock issued in this offering (after we redeem any shares of Class A Common Stock that the holders thereof have elected to redeem in connection with our initial business combination), and to the Private Placement Warrants if held by third parties other than our sponsor or the underwriters (or permitted transferees), in each case, following the consummation of our initial business combination, and, for the avoidance of doubt, the term “public warrants” does not include the Forward Purchase Warrants;

 

 

 

 

·

“sponsor” are to Adnant Concepcion Sponsor LLC, a Delaware limited liability company, an affiliate of Sabas Carrillo, our Chief Executive Officer and Chairman;

 

 

 

 

·

“sponsor shares” are to shares of our Class B Common Stock initially purchased by our sponsor in a private placement prior to this offering, and the shares of our Class A Common Stock issuable upon the conversion thereof as provided herein;

 

 

 

 

·

“underwriter” are to WestPark Capital, Inc. (“WestPark Capital”), the representative of the underwriters in this offering;

 

 

 

 

·

“Underwriter Warrants” are to the warrants to be issued to WestPark Capital at the closing of this offering and at the closing of our initial business combination;

 

 

·

“warrants” are to our warrants, which includes the public warrants as well as the Private Placement Warrants, the Forward Purchase Warrants, and the Underwriter Warrants; and

 

 

 

 

·

“we,” “us,” “company” or “our company” are to Adnant Concepcion Acquisition Corp.

  

Each unit consists of one share of Class A Common Stock, one-ninth of one Outstanding Redeemable Warrant (or 277,777 Outstanding Redeemable Warrants in the aggregate), and one contingent right to receive, in certain circumstances described in this prospectus and pursuant to the contingent rights agreement, at the Adnant Distribution Time, two-ninths of one Distributable Adnant Redeemable Warrant . Each whole warrant entitles the holder thereof to purchase one share of our Class A Common Stock at a price of $11.50 per share  (other than the Underwriter Warrants, which have an exercise price of $12.00 per share), subject to adjustment as described in this prospectus. No fractional redeemable warrants will be issued upon the separation of our redeemable warrants or the issuance of the Distributable Adnant Redeemable Warrants  other than as part of the units, no cash will be paid in lieu of fractional redeemable warrants and only whole redeemable warrants will trade. Accordingly, unless you purchase at least nine units, you will not be able to receive or trade a whole Outstanding Redeemable Warrant. Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option.

  

 
1

Table of Contents

 

Our Company

 

We are a blank check company formed under the laws of the State of Delaware on February 24, 2021. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” We may pursue a business combination opportunity in any business or industry we choose. To date, our efforts have been limited to organizational activities as well as activities related to this offering.

 

While our efforts to identify a target business may span many industries and regions worldwide, we intend to focus our search on companies in the cannabis industry with enterprise values that are greater than the net proceeds of this offering and the sale of the Private Placement Warrants. Potential areas of interest in the cannabis industry include but are not limited to domestic and international businesses that are ancillary to the production, distribution and sale of cannabis as well as businesses that legally cultivate, process, and/or retail cannabis. Our ability to locate a potential target is subject to the uncertainties discussed elsewhere in this prospectus.

   

Although the cannabis industry has evolved significantly and continues to mature, we believe the industry is still undercapitalized and companies operating across multiple verticals consistently have trouble accessing capital from traditional sources. Historically, businesses that operate within the legal cannabis industry in the U.S. have relied largely on private money — friends and family, high net-worth individuals and small-to-medium-sized private investment firms – as institutional investors have shied away from companies in the cannabis industry, especially those that are directly involved in the production, distribution, and retail sale of cannabis. Even businesses that do not touch the plant and instead provide ancillary services to the industry have found it extremely difficult to access large pools of institutional capital. As a result, we believe we have the opportunity to create a compelling structure that will enable a target company to go public, thereby accessing significant capital for both organic growth and for acquisitions of synergistic and often undercapitalized assets. Given the rapid growth of the legal cannabis market, management believes that the ability to move quickly to capitalize on new opportunities will be critical to success in creating stakeholder value.

  

None of our officers, directors, promoters and other affiliates has engaged in any substantive discussions on our behalf with representatives of other companies regarding the possibility of a potential business combination with us.

 

Our Management Team

 

Our management team and board of directors will consist of experienced deal makers, operators, and investors. Our Director, Chairman and Chief Executive Officer, Mr. Sabas Carrillo is the Founder and CEO of Adnant, LLC, an accounting and consulting firm focused on the cannabis industry with an expertise in advising companies on the go-public process. Mr. Carrillo has over 18 years of experience in accounting and over 12 years of experience working exclusively with start-ups, having helped found, grow, and lead companies through successful exits. He focuses on creating and taking public innovative companies with high growth potential. Mr. Carrillo is an SEC financial reporting expert with extensive experience in M&A work. He serves as Interim CFO for Cookies Creative Consulting & Promotions Inc. and was on the go-public team for Weedmaps and General Cannabis, Inc., a publicly traded company (OTC: CANN) from 2010 to 2012. In 2014, Mr. Carrillo led the team that took the first cannabis dispensary public, Blüm Oakland, on behalf of Terra Tech Corp. (OTC: TRTC). Mr. Carrillo is co-founder and CFO of two cannabis-focused funds: Mesh Ventures and 1212 Ventures. Among his advisory roles to companies and brands in the industry, Mr. Carrillo’s client list includes MedMen, GlassHouse Group, Loudpack, GTI, NorCal Cannabis Company, Beboe, Acreage Holdings, Verano Holdings and Grass Lands (first cannabis licensed concessions at a venue). Passionate about working with non-profits such as Las Fotos Project, Downtown Women’s Center, The Good Shepherd Center, and Brilliant Corners, Mr. Carrillo is also the founder of Alta Loma Group, LLC, a real estate holding company on a mission to provide quality affordable housing in South Central Los Angeles. Mr. Carrillo received his B.A. in Economics with a minor in computer programming from the University of California, Los Angeles.

 

We believe the expertise and experience of Mr. Carrillo in sourcing and creating unique opportunities as well as structuring complex transactions involving creative capital deployment, will make us a partner of choice for potential business combination targets. We intend to focus our efforts on evaluating business combination targets by leveraging the management team and board of directors’ deep network of public and private enterprises, experienced operators, restructuring advisors, attorneys, accountants, family offices, hedge funds, and private equity firms.

 

Cathy Ong, our Director and Chief Financial Officer has over five years of accounting experience, providing financial statement audit services to private and public companies in the manufacturing, distribution, technology, and automotive industries and advisory and consulting services in the cannabis industry. She currently serves as an Accounting Manager at Adnant LLC. Since joining Adnant in 2018, Ms. Ong has worked with cannabis businesses from start-ups to multi-state operators, primarily focusing on accounting for complex transactions and financial reporting, including those subject to CSE and SEC filing requirements. Ms. Ong serves as an advisor to financial executives within the industry and an active liaison with stakeholders, executives, attorneys, auditors, and other parties involved in the public filing process. Her focus is on helping clients navigate through unique accounting scenarios in the cannabis industry and setting the precedent in accounting interpretation for industry participants. She is an advocate of challenging industry norms, having left public accounting to join Adnant and trailblazing a career in the cannabis industry. Ms. Ong holds a Bachelor of Science degree in Business Administration with an option in Accounting from California State University, Long Beach and is a licensed CPA in the state of California.

  

 
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Robert Baca, our Director, Vice President and Secretary has over a decade of experience as a corporate attorney and consultant navigating Private Equity M&A and Leveraged Finance transactions for clients while at institutions including Kirkland & Ellis LLP, Paul Hastings LLP, and Goldman Sachs. He has represented U.S. and foreign financial institutions including JP Morgan Chase, Bank of America, Morgan Stanley, Barclays, UBS, and RBC, private equity sponsors including KKR, Warburg Pincus, Blackstone, and Saw Mill Capital, and public and private companies in connection with mergers and acquisitions, securities offerings, and commercial financings including secured and unsecured credit facilities and acquisition financings. Before joining Adnant LLC in 2020 he spent three years overseeing the licensing and compliance efforts of cannabis operations in Northern California including retail, manufacturing, distribution, and cultivation companies during the turn of adult-use legalization in the state. He also served as Executive Director of the Sacramento Cannabis Industry Association working closely with state and local regulators, stakeholders, and key community constituencies including neighborhood and business associations, business owners, and residents. He now serves as General Counsel to Adnant LLC and participates in the leadership of their Strategic Initiatives department. Mr. Baca graduated with a BA from Dartmouth College with honors, a JD from the University of Chicago Law School, and a Master of Science in Finance from Indiana University’s Kelley School of Business. He is a licensed member of the State Bars of New York and California and is an adjunct professor of law at the University of the Pacific's McGeorge School of Law teaching Marijuana Law.

  

Jaime Nava, our Vice President and Treasurer has over five years of operational accounting and management experience in the cannabis industry having built the accounting and finance infrastructure for over 50 dispensaries and cultivations in California and advised on the same for public cannabis multi-state operators.  He is a pioneer in cannabis banking and compliance having guided key constituencies in the development and launch of cannabis related business account and compliance pilot programs for both national financial institutions and local federal credit unions.  Mr. Nava has also provided extensive support for cannabis focused investment fund development, strategy, capital deployment, and investor relations.  At Adnant, LLC he provides advisory and consulting services for cannabis companies and investment funds particularly related to their accounting, banking, and management policies and operating procedures.  Prior and current clients include Cookies, AmericannMade, 1212 Ventures, and Mesh Ventures.  He has focused principally on helping industry clients navigate and execute early stage and enterprise hypergrowth strategies.  Mr. Nava holds a Bachelor of Science degree in Biology from California State University, San Bernardino.

 

Past performance of our management team or Adnant Concepcion Sponsor LLC is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to identify a suitable candidate for our initial business combination. You should not rely on the historical performance record of our management team or Adnant Concepcion Sponsor LLC as indicative of our future performance. Additionally, in the course of their respective careers, members of our management team have been involved in businesses and deals that were unsuccessful. Our officers and directors have no experience with blank check companies or special purpose acquisition companies. In addition, our executive officers and directors may have conflicts of interest with other entities to which they owe fiduciary or contractual obligations with respect to initial business combination opportunities. For a list of our executive officers, directors and entities for which a conflict of interest may or does exist between such persons and the company, as well as the priority and preference that such entity has with respect to performance of obligations and presentation of business opportunities to us, please refer to the table and subsequent explanatory paragraph under “Management — Conflicts of Interest”.

 

Our Forward Purchase Agreement

 

We believe our ability to complete our initial business combination will be enhanced by the sale of the Private Placement Warrants and the possible sale of Post-Business Combination Warrants under a Forward Purchase Agreement which are intended to provide us with appropriate funding for our initial business combination.

 

Under the Forward Purchase Agreement, which we intend to enter into prior to the effective date of this offering, our sponsor may purchase an aggregate of up to 660,410 Pre-Business Combination Warrants at a price of $1.56 per warrant. The purchase of the 660,410 Forward Purchase Warrants will take place in one or more private placements in such amounts and at such time or times as our sponsor determines, with the full amount to have been purchased no later than immediately prior to the closing of our initial business combination.

 

The Forward Purchase Agreement will also provide that our sponsor may elect to purchase up to an aggregate of 1,309,131 Post-Business Combination Warrants, at a purchase price of $1.56 per warrant. Any elections to purchase the up to 1,309,131 Post-Business Combination Warrants will take place in one or more private placements after the closing of our initial business combination in such amounts and at such time or times as our sponsor determines.

 

The terms of the Forward Purchase Warrants will be identical to the terms of the Outstanding Redeemable Warrants included in the units being issued in this offering, except that, among other things, the Forward Purchase Warrants will have no right to vote on amendments to the warrant agreement prior to our initial business combination (with limited exceptions) and, as long as the Forward Purchase Securities are held by our sponsor or its permitted transferee, they will be subject to certain transfer restrictions and have certain registration rights.

    

Our Business Strategy & Competitive Strengths

 

Our strategy is to pursue one or more business combinations with companies servicing and operating adjacent, or ancillary, to the cannabis sector and companies that legally cultivate, process, and/or retail cannabis.

  

We intend to focus our search for an initial business combination on private companies that have either positive operating cash flow or compelling unit economics combined with a clear path to positive operating cash flow, tangible or intangible assets with significant barriers to entry, and experienced incentivized management teams. Our selection process is expected to leverage a unique set of relationships with proven deal-sourcing capabilities to provide us with a strong pipeline of potential targets.

 

We expect to distinguish ourselves with our ability to:

 

 

·

Leverage our Extensive Network of Relationships to Create a Unique Pipeline of Cannabis Acquisition Opportunities. We believe the combination of Mr. Carrillo’s broad investment and advisory experience in addition to our ability to access a deep network of public and private enterprises, experienced operators, restructuring advisors, attorneys, accountants, family offices, hedge funds, and private equity firms will enable us to identify and evaluate compelling target businesses.

 

 

 

 

·

Employ a Rigorous Systematic Process of Identifying Target Companies and Acquiring a Business that will be Well-Received by the Public Markets. We believe that our management’s strong M&A and investment track record in both private and public markets, combined with extensive public market financial reporting and compliance experience, will provide a distinct advantage for identifying, valuing and completing a business combination that will meet our investors’ expectations.

 

 

 

 

·

Providing an Alternative Path to Becoming Public. We believe our structure will make us an attractive business combination partner to prospective target businesses that desire to become a publicly traded company. A merger with us will offer a target business an alternative process to a public quotation rather than the traditional initial public offering process. We believe that target businesses may favor this alternative, which we believe is less expensive, while offering greater certainty of execution than the traditional initial public offering. Furthermore, once a proposed business combination is approved by our stockholders and the transaction is consummated, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions that could prevent the offering from occurring. Once public, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholder’s interests than it would as a private company. A public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented management. With public company corporate governance standards, a target business may become attractive to public investors. 

 

 
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·

Strong and Stable Financial Position with Flexibility. With funds in the trust account of $25,000,000 (or approximately $28,750,000 if the over-allotment option is exercised in full), which is the amount we would have available to use for a business combination, we offer a target business a variety of options such as providing the owners of a target business with shares in a public company and a public means to sell such shares, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to consummate 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, since we have no specific business combination under consideration, we have not taken any steps to secure third party financing and there can be no assurance that it will be available to us.

    

We intend to pursue opportunities across a number of verticals in the cannabis industry with enterprise values that are greater than the net proceeds of this offering and the sale of the Private Placement Warrants, and with a particular focus on companies within the following sectors:

 

 

·

Hardware. Vaporization products, cannabis accessories and other products featuring a recurring revenue model

 

 

 

 

·

Software. Seed to sale tracking, dispensary business software, point of sale solutions and compliance-related software

 

 

 

 

·

Labs. Cannabis testing across flower, concentrates and infused products

 

 

 

 

·

Distribution. Supply chain partners, inventory management, shipping and logistics

 

 

 

 

·

Real Estate. Retail and industrial properties for recreational and medical cannabis facilities

 

 

 

 

·

Brands and Retail. Focus on unique business models such as licensing and direct to consumer distribution and the retail sale of cannabis and cannabis products

 

 

 

 

·

Packaging and Manufacturing. Premier cannabis compliant packaging across all product types; extraction, infusion, and other manufacturing services for cannabis products

 

 

 

 

·

Cultivation. Cultivation facilities and operations with proven management teams and supply contracts

 

 

 

In pursuit of our business strategy, we intend to:

 

 

 

 

·

Opportunity Identification. Utilize the extensive network of our management team to identify candidates for a possible business combination including cannabis industry investors, business owners, industry thought leaders, advisors, members of our sponsor, financial intermediaries, managers and others;

 

 

 

 

·

Target and Industry Evaluation. Conduct a thorough assessment of the growth potential for possible targets including research and analysis of current and future market opportunities;

 

 

 

 

·

Transaction Assessment. Conduct rigorous due diligence on one or more targets, including a review of company-specific information as well as an analysis of the overall industry and competitive landscape;

 

 

 

 

·

Financing. Arrange appropriate financing to provide the target company with adequate capital to execute its business plan;

 

 

 

 

·

Transaction Pricing. Structure the transaction at a price that management deems attractive relative to its view of intrinsic value and future potential;

 

 

 

 

·

Operational Optimization. Implementation of operational and financial business planning which we believe can accelerate the growth of the target while providing it with appropriate financial and operational flexibility; and

 

 

 

 

·

Follow-on Acquisition Opportunities. Seek further strategic acquisitions, divestitures or other transactions following a business combination with the goal of further enhancing stockholder value.

 

Acquisition Criteria

 

Consistent with our strategy, we have identified the following general criteria and guidelines which we believe are important in evaluating prospective target businesses with enterprise values that are greater than the net proceeds of this offering and the sale of the Private Placement Warrants, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines. We intend to acquire one or more businesses that we believe has the following characteristics:

 

 

·

Benefits from access to public equity markets. Access to the public equity markets could allow the target company to utilize additional forms of capital, enhancing its ability to pursue acquisitions and capital projects, and/or strengthen its balance sheet and recruit and retain key employees through the use of publicly-traded equity compensation.

 

 

 

 

·

Has a strong competitive position and growing platform. We will seek to invest in companies that we believe possess not only established business models and sustainable competitive advantages, but also a growing platform for equity investors.

 

 

 

 

·

Has a strong professional management team with deep networks within the cannabis sector and the ability to adapt to a quickly changing business environment.

  

 
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·

Operated by a talented and incentivized management team. We will focus on companies with strong and experienced management teams that desire a significant equity stake in the post-business combination company. We will seek to partner with a management team and/or seller who is well-incentivized and aligned in an effort to create stockholder value.

 

 

 

 

·

Benefits from our ability to uniquely structure a transaction to unlock and maximize value. We will look for situations where our extensive experience and creativity can architect a win-win solution for both sides of the transaction.

 

These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to our initial business combination, which, as discussed in this prospectus, would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC.

 

Initial Business Combination

  

Our initial business combination will be with a target business or businesses with an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects.

   

We will have until 18 months from the closing of this offering to consummate an initial business combination. We anticipate structuring our initial business combination either (i) in such a way 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, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other reasons. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the “Investment Company Act”. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination.  If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of the 80% of net assets test. If the initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the transactions and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.

  

Our Business Combination Process

 

We believe our management team’s operational and investment track record in the cannabis industry and related sectors will provide us with a deep understanding of challenges faced by business operators and owners of cannabis-related assets. We expect to conduct robust due diligence as we evaluate a prospective target business to assess attributes that differentiate sustainable cannabis-servicing businesses from unattractive assets. We expect that our diligence will include an assessment of the company’s competitive advantage through meetings with management and key employees, key customers, interactions with consultants and experts within our network, visits of key operating facilities and a review of financial, legal and operational documents. We intend to utilize our ability to bring creative solutions from a capital structure, growth, vision and operational standpoint to unlock stockholder value. In addition, we expect to retain and work with financial advisors and legal counsel as well as industry consultants to conduct due diligence, develop strategic plans, and implement operational strategies.

 

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 or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view.

 

Certain of our officers and directors presently have fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations to present the opportunity to such entity, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We believe, however, that the fiduciary duties or contractual obligations of our officers or directors will not materially affect our ability to complete our initial business combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.

 

 
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Corporate Information

 

Our executive offices are located at The Maria Nava Building, 11516 Downey Ave., Downey, CA 90241, and our telephone number is (323) 841-0046.

 

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, or 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 of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

 

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this 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 $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to emerging growth company will have the meaning associated with it in the JOBS Act.

  

Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior December 31st.

 

 
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THE OFFERING

 

In deciding whether to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section of this prospectus entitled “Risk Factors.”

 

Securities offered

 

 

 

2,500,000 units, at $10.00 per unit, each unit consisting of:

 

 one share of Class A Common Stock;

• one Outstanding Redeemable Warrant (representing one-ninth of one Redeemable Warrant), with each whole warrant exercisable for one share of Class A Common Stock at a price of $11.50 per share; and

• a contingent right to receive one Distributable Adnant Redeemable Warrant (representing two-ninths of one Redeemable Warrant).

 

 

 

Proposed OTC symbols

 

 

 

Units: “[●]”

Class A Common Stock : “[●]”

Warrants: “[●]”

 

 

 

Issuance of additional Distributable

  Adnant Redeemable Warrants a t

the Adnant Distribution Time

 

 

 

At the Adnant Distribution Time, up to an aggregate of 555,555 Distributable Adnant Redeemable Warrants will be issued to holders of record of the shares of Class A Common Stock issued in this offering (whether such shares were acquired during or after this offering) that remain outstanding after we redeem any shares of Class A Common Stock that the holders thereof have elected to redeem in connection with our initial business combination. Public stockholders who elect to redeem their shares of Class A Common Stock will not receive any issuance of Distributable Adnant Redeemable Warrants in respect of such redeemed shares of Class A Common Stock .

 

The issuance of the Distributable Adnant Redeemable Warrants in respect of a share of Class A Common Stock is contingent upon such share not being redeemed in connection with our initial business combination, and the number of Distributable Adnant Redeemable Warrants to be issued in respect of each such unredeemed share of Class A Common Stock will be contingent upon the aggregate number of shares of Class A Common Stock that are redeemed. The contingent rights to receive Distributable Adnant Redeemable Warrants will remain attached to our shares of Class A Common Stock, will not be separately transferable, assignable or salable, and will not be evidenced by any certificate or instrument.

 

 

 

Adnant Distribution Time

 

 

 

The issuance of the Distributable Adnant Redeemable Warrants is expected to occur following the time at which we redeem any shares of Class A Common Stock that the holders thereof have elected to redeem in connection with our initial business combination and prior to the consummation of our initial business combination .

 

 

 

Trading commencement and separation of Class A Common Stock and Outstanding Redeemable Warrants

 

 

 

The units will begin trading on or promptly after the date of this prospectus. We expect the Class A Common Stock and Outstanding Redeemable Warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless WestPark Capital informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the shares of Class A Common Stock and Outstanding Redeemable Warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of Class A Common Stock and Outstanding Redeemable Warrants. The Distributable Adnant Redeemable Warrants will trade on the first trading day following their issuance at the Adnant Distribution Time, will be fully fungible with the Outstanding Redeemable Warrants and will also trade under the symbol “[●].” No fractional warrants will be issued other than as part of the units and only whole warrants will trade. Accordingly, unless you purchase at least nine units, you will not be able to receive or trade a whole Outstanding Redeemable Warrant. The contingent right to receive Distributable Adnant Redeemable Warrants will not detach from our Class A Common Stock.

 

Separate trading of the Class A Common Stock and Outstanding Redeemable Warrants is prohibited until we have filed a Current Report on Form 8-K

 

 

 

In no event will the Class A Common Stock and Outstanding Redeemable Warrants be traded separately until we have filed a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place no later than three business days from the date of this prospectus. If the underwriters’ over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters’ over-allotment option.

 

 

 

Trading commencement of Distributable Adnant Redeemable Warrants

 

We expect that the Distributable Adnant Redeemable Warrants will become tradable on the first trading day following the Adnant Distribution Time. Once issued, the Distributable Adnant Redeemable Warrants will be fully fungible with the Outstanding Redeemable Warrants and will trade under the same ticker symbol. No fractional Distributable Adnant Redeemable Warrants will be issued upon the issuance of the Distributable Adnant Redeemable Warrants other than as part of the units, no cash will be paid in lieu of fractional Distributable Adnant Redeemable Warrants and only whole Distributable Adnant Redeemable Warrants will trade.

 

Up to an aggregate of 555,555 Distributable Adnant Redeemable Warrants (the “Aggregate Warrant Amount”) will be issued only to holders of record of the shares of Class A Common Stock issued in this offering (whether acquired in this offering or afterward) that are outstanding after the Initial Business Combination Redemption Time as follows: to the extent that a public stockholder does not redeem their public shares in connection with the initial business combination, each such public stockholder will receive two-ninths of a Distributable Adnant Redeemable Warrant. The Distributable Adnant Redeemable Warrants will be issued at the Adnant Distribution Time, which will be immediately after the Initial Business Combination Redemption Time and immediately before the closing of our initial business combination. Public stockholders who exercise their redemption rights are not entitled to receive any Distributable Adnant Redeemable Warrants in respect of such redeemed public shares.

 

 

 

Units:

 

 

 

 

 

Number outstanding before this offering

 

 

 

0

 

Number outstanding after this offering

 

 

 

2,500,000 (1)

 

Common stock:

 

 

 

 

Number outstanding before this offering

 

 

 

25 shares of Class B Common Stock

 

Number outstanding after this offering

 

2,500,025 shares of Class A Common Stock and Class B Common Stock (1)(2)

  

 
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Warrants:

 

 

 

 

 

Number outstanding before this offering

 

 

 

0

 

Number of Private Placement Warrants to be sold in a private placement simultaneously with this offering

 

 

 

846,000 (1)

 

Number of warrants to be outstanding after this offering and the private placement

 

 

 

1,173,777 (1)(3)

Number of warrants outstanding after issuance of the Distributable Adnant Redeemable Warrants and Underwriter Warrants in connection with our initial business combination

 

 

1,929,332(4)

Exercisability

 

 

 

Each whole warrant entitles the holder thereof to purchase one share of Class A Common Stock .

 

(1) Assumes no exercise of the underwriters’ over-allotment option.

 

(2) Comprised of 2,500,000 shares of Class A Common Stock included in the units to be sold in this offering and 25 shares of Class B Common Stock. The 25 shares of Class B Common Stock will have such number of votes per share such that they will, in the aggregate, represent 20.0% of the total voting power of the issued and outstanding shares of Class A Common Stock and Class B Common Stock immediately following this offering. The Class B Common Stock is convertible into shares of our Class A Common Stock on a one-for-one basis as described below adjacent to the caption “Sponsor shares conversion”.

 

(3) Comprised of 277,777 public warrants included in the units to be sold in this offering, 846,000 Private Placement Warrants to be sold in the private placement and 50,000 Underwriter Warrants to be issued to WestPark Capital at the closing of this offering, in each case, assuming the underwriters’ over-allotment is not exercised. 

 

(4) Comprised of 277,777 public warrants included in the units to be sold in this offering, up to 555,555 Distributable Adnant Redeemable Warrants, 846,000 Private Placement Warrants to be sold in the private placement, and up to 250,000 Underwriter Warrants to be issued to WestPark Capital, in each case, assuming the underwriters’ over-allotment is not exercised. 

 

Exercise price

 

 

 

$11.50 per share, subject to adjustment as described herein. In addition, if (x) we issue additional shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A Common Stock (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any sponsor shares held by our sponsor or its affiliates, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the volume weighted average trading price of our common stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our initial business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.

 

The Private Placement Warrants and Forward Purchase Warrants will have the same exercise price as the public warrants and be subject to the same price adjustments described above. The Underwriter Warrants will have an exercise price of $12.00 per share.

 

Exercise period

 

 

 

The warrants will become exercisable on the later of:

 

· 30 days after the completion of our initial business combination, or

· 12 months from the effective date of this offering;

 

provided in each case that we have an effective registration statement under the Securities Act covering the shares of Class A Common Stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement).

 

We are not registering the shares of Class A Common Stock issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement covering the shares of Class A Common Stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A Common Stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A Common Stock issuable upon exercise of the warrants is not effective within 90 days after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.

 

Notwithstanding the above, if our Class A Common Stock is at the time of any exercise of a warrant not quoted on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

 

The warrants will expire at 5:00 p.m., New York City time, five years after the completion of our initial business combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to us and not placed in the trust account.

  

 
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Redemption of warrants

 

 

 

Once the warrants become exercisable, we may redeem the outstanding warrants :

 

· in whole and not in part;

 

· at a price of $0.01 per warrant;

 

· upon a minimum of 30 days’ prior written notice of redemption, which we refer to as the 30-day redemption period; and

 

· if, and only if, the last sale price of our Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders.

 

We will not redeem the warrants unless a registration statement under the Securities Act covering the shares of Class A Common Stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A Common Stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in this offering.

 

If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Class A Common Stock issuable upon the exercise of our warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

 

Please see the section of this prospectus entitled “Description of Securities — Redeemable Warrants — Public Warrants” for additional information.

 

None of the Private Placement Warrants and Forward Purchase Warrants will be redeemable by us so long as they are held by the sponsor, the underwriters, or its permitted transferees.

 

 
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Sponsor shares and warrants

 

 

 

On February 25, 2021, our sponsor purchased 287,500 sponsor shares for an aggregate purchase price of $25,000, or approximately $0.087 per share, of which 287,475 shares were relinquished on September 27, 2021. As of the date of this prospectus, our sponsor owns an aggregate of 25 sponsor shares. The per share purchase price of the sponsor shares was determined by dividing the amount of cash contributed to the company by the aggregate number of sponsor shares issued. The number of votes carried by each share of Class B Common Stock will be such that the 25 shares of Class B Common Stock will, in the aggregate, hold 20.0% of the voting power of the Class A Common Stock and Class B Common Stock issued and outstanding immediately after this offering. Neither our sponsor nor any of our officers or directors have expressed an intention to purchase any units in this offering.

 

The sponsor shares are identical to the shares of Class A Common Stock included in the units being sold in this offering, except that:

 

· each share of Class B Common Stock will carry a number of votes such that, in the aggregate, the 25 shares of Class B Common Stock will have the voting power of 20.0% of our issued and outstanding common stock immediately following this offering, while the shares of Class A Common Stock will have, in the aggregate, 80.0% of the voting power of our issued and outstanding common stock immediately following this offering;

 

· the sponsor shares are shares of Class B Common Stock that automatically convert into shares of our Class A Common Stock at the time of our initial business combination, or at any time prior thereto at the option of the holder, on a one-for-one basis;

 

· the sponsor shares are subject to certain transfer restrictions, as described in more detail below;

 

· our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to (i) waive their redemption rights with respect to their sponsor shares, public shares , warrants and shares of common stock issued or issuable upon conversion or exercise of such warrants in connection with the completion of our initial business combination, (ii) waive their redemption rights with respect to their sponsor shares , public shares , warrants and shares of common stock issued or issuable upon conversion or exercise of such warrants in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligations with respect to redemption rights as described in this prospectus or (B) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity and (iii) waive their rights to liquidating distributions from the trust account with respect to their sponsor shares, warrants and shares of common stock issued or issuable upon conversion or exercise of such warrants if we fail to complete our initial business combination within 18 months from the closing of this offering, although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame. Permitted transferees of the sponsor shares, warrants and shares of common stock issued or issuable upon conversion or exercise of such warrants held by our sponsor, initial stockholders, officers and directors would be subject to the same restrictions;

 

· pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any sponsor shares held by them , any shares issued upon conversion or exercise of the warrants held by them and any public shares purchased during or after this offering (including in open market and privately negotiated transactions) in favor of our initial business combination. If we submit our initial business combination to our public stockholders for a vote, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. As a result, in addition to our initial stockholder’s sponsor shares, we would need only 1,275,013,  or 51.0%, of the 2,500,000  public shares sold in this offering to be voted in favor of an initial business combination (assuming all outstanding shares are voted or 637,481, or 25.5%, assuming only the minimum number of shares representing a quorum are voted and assuming our sponsor, officers, directors and their affiliates do not purchase any units in or after this offering) in order to have our initial business combination approved (assuming the over-allotment option is not exercised); and

 

· the sponsor shares are entitled to registration rights, as long as they are held by the sponsor or their permitted transferees .

  

 
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Transfer restrictions on sponsor shares

 

 

 

Our initial stockholders have agreed not to transfer, assign or sell any of their sponsor shares until the earlier to occur of (i) 180 days after the date of the consummation of our initial business combination or (ii) the date on which we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property (except as described herein under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Sponsor Shares and Warrants”). Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any sponsor shares . Notwithstanding the foregoing, if the closing price of our shares of Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing 150 days after our initial business combination, the sponsor shares will no longer be subject to such transfer restrictions. We refer to such transfer restrictions throughout this prospectus as the lock-up.

 

Sponsor shares conversion

 

 

 

The shares of Class B Common Stock will automatically convert into shares of our Class A Common Stock at the time of our initial business combination on a one-for-one basis.

 

Voting Rights

 

 

 

Holders of the Class A Common Stock and holders of the Class B Common Stock will vote together as a single class on all matters submitted to a vote of our stockholders, with each share of common stock entitling the holder to one vote.   Each share of Class B Common Stock will carry a number of votes such that the 25 shares of Class B Common Stock will have, in the aggregate, 20.0% of the voting power of our issued and outstanding common stock immediately following this offering, while the shares of Class A Common Stock will have in the aggregate, 80.0% of the voting power of our issued and outstanding common stock immediately following this offering.  In addition, only the holders of our Class B Common Stock may vote on the election or removal of directors prior to our initial business combination.

 

 
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Forward Purchase Agreement

 

We intend to enter into a Forward Purchase Agreement with our sponsor, pursuant to which our sponsor may purchase an aggregate of up to 660,410 Pre-Business Combination Warrants at a price of $1.56 per warrant for an aggregate purchase price of up to $1,030,240. The purchase of the Pre-Business Combination Warrants will take place in one or more private placements after the consummation of this offering in such amounts and at such time or times as the sponsor determines, with the full amount to have been purchased no later than immediately prior to the closing of our initial business combination.

 

The Forward Purchase Agreement will also provide that our sponsor may elect to purchase up to an aggregate of 1,309,131 Post-Business Combination Warrants, which will also have a purchase price of $1.56 per warrant. Any elections to purchase the up to 1,309,131 Post-Business Combination Warrants will take place in one or more private placements after the closing of our initial business combination, in such amounts and at such time or times as our sponsor determines.

 

The proceeds of any sales of Forward Purchase Warrants will not be deposited in the trust account. The Forward Purchase Warrants will have no right to vote on amendments to the warrant agreement prior to our initial business combination, except with respect to certain provisions relating solely to restrictions on the transfer of the Forward Purchase Securities. The Forward Purchase Securities may not, subject to certain limited exceptions, be transferred, assigned or sold by the holders until after the completion of our initial business combination. The holders will be permitted to transfer the Forward Purchase Warrants held by them to certain permitted transferees, including our officers and directors and other persons or entities affiliated with or related to them, but the transferees receiving such securities will be subject to the same agreements with respect to such securities as our sponsor. The sponsor’s obligation to purchase the Forward Purchase Warrants may not be transferred to any other parties.

 

Except as described above, the terms of the Forward Purchase Warrants will be identical to the terms of the Private
Placement Warrants being issued concurrent with this offering. Refer to exemptions described below.

 

 

 

Private Placement Warrants and underlying securities

 

 

 

Our sponsor has agreed to purchase an aggregate of 846,000 warrants (or 972,900 warrants if the over-allotment option is exercised in full) at a price of $1.56 per warrant, for an aggregate purchase price of $1,319,760, or $1,517,724 if the over-allotment option is exercised in full. The Private Placement Warrants are identical to the warrants sold in this offering except that the Private Placement Warrants, so long as they are held by our sponsor or the underwriters or their permitted transferees, (i) will not be redeemable by us, (ii) may not (including the Class A Common Stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until after the completion of our initial business combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights. The holders will be permitted to transfer the Private Placement Warrants held by them to certain permitted transferees, including our officers and directors and other persons or entities affiliated with or related to them, but the transferees receiving such securities will be subject to the same agreements with respect to such securities as our sponsor.  A portion of the purchase price of the Private Placement Warrants will be added to the proceeds from this offering to be held in the trust account such that at the time of closing $25,000,000 (or $28,750,000 if the underwriters exercise their over-allotment option in full) will be held in the trust account. If we do not complete our initial business combination within 18 months from the closing of this offering, the proceeds from the sale of the Private Placement Warrants held in the trust account will be used to fund the redemption of our public shares (subject to the requirements of applicable law) and the Private Placement Warrants (and the underlying securities) will expire worthless.

 

The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the sponsor, the underwriters or their permitted transferees. If the Private Placement Warrants are held by holders other than the sponsor, the underwriters or their permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. In addition, for as long as the Private Placement Warrants are held by the underwriters or their designees or affiliates, they may not be exercised after five years from the effective date of the registration statement of which this prospectus forms a part.

  

Transfer restrictions on Private Placement Warrants, Forward Purchase Warrants, and underlying securities

 

 

 

The Private Placement Warrants and Forward Purchase Warrants (including the shares of Class A Common Stock issuable upon exercise of the Private Placement Warrants and Forward Purchase Warrants ) will not be transferable, assignable or salable until after the completion of our initial business combination (except as described under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Sponsor Shares and Warrants”). Following such period, the Private Placement Warrants (including the shares of Class A Common Stock issuable upon exercise of the Private Placement Warrants) will be transferable, assignable or salable .

 

 
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Underwriter Warrants

 

We have agreed to issue to WestPark Capital, Inc. warrants to purchase up to a total of 57,500 shares of Class A Common Stock (2.0% of the total Units sold in this offering) (the “Underwriter Offering Warrants”). The Underwriter Offering Warrants are exercisable at $12.00 per share (120% of the public offering price) commencing on the effective date of this offering and expiring on a date which is no more than five (5) years from the effective date of this offering.

 

In addition, we have agreed to issue to WestPark Capital, Inc. warrants to purchase up to a total of 230,000 shares of Class A Common Stock (8.0% of the total Units sold in this offering) (the “Underwriter Combination Warrants” and together with the Underwriter Offering Warrants, the “Underwriter Warrants”) at the closing of our initial business combination. The Underwriter Combination Warrants are exercisable at $12.00 per share (120% of the public offering price) commencing on the effective date of this offering and expiring on a date which is no more than five (5) years from the effective date of this offering.

 

The Underwriter Warrants provide that in the event the Underwriters’ Warrants may not be transferred in reliance upon Rule 144 promulgated under the Securities Act, then the holder of the Underwriters’ Warrants will have a right to one demand registration of the sale of the underlying shares of common stock for a period of five (5) years after the commencement of sales of this offering at our expense. In addition, the Underwriter Warrants provide for unlimited “piggyback” registration rights at our expense with respect to the underlying shares of common stock which shall terminate on the earlier of (i) the seventh anniversary of the commencement sales of this offering and (ii) the date that Rule 144 would allow the holder to sell its shares during any ninety (90) day period, and shall not be applicable so long as a registration statement registering the warrant shares remains effective. The exercise price and number of shares issuable upon exercise of the Underwriter Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation.

 

 

 

Proceeds to be held in trust account

 

 

 

Of the net proceeds of this offering and the sale of the Private Placement Warrants, $25,000,000, or $10.00 per unit ($28,750,000, or $10.00 per unit, if the underwriters’ over-allotment option is exercised in full) will be placed into a U.S.-based trust account, with Odyssey Transfer Agent & Trust Company acting as trustee. These proceeds include $750,000 (or $862,500 if the underwriters’ over-allotment option is exercised in full) in the aggregate payable to WestPark Capital, Inc. as a business combination fee as described under the section “Underwriting” representing 3.0% of the proceeds from this offering and which is to be placed in a trust account located in the United States as described herein.

 

Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our franchise and income tax obligations (less up to $100,000 of interest to pay dissolution expenses), the proceeds from this offering and the sale of the Private Placement Warrants will not be released from the trust account until the earliest of (a) the completion of our initial business combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering (ii) with respect to any other provision relating to stockholder’s rights or pre-business combination activity, and (c) the redemption of our public shares if we are unable to complete our initial business combination within 18 months from the closing of this offering, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.

 

Anticipated expenses and funding sources

 

 

 

Except as described above with respect to the payment of taxes, unless and until we complete our initial business combination, no proceeds held in the trust account will be available for our use. The proceeds held in the trust account will be invested only in U.S. government securities 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. We will disclose in each quarterly and annual report filed with the SEC prior to our initial business combination whether the proceeds deposited in the trust account are invested in U.S. government treasury obligations or money market funds or a combination thereof. Based upon current interest rates, we expect the trust account to generate approximately $87,500 of interest annually assuming an interest rate of 0.35% per year; however, we can provide no assurances regarding this amount. Unless and until we complete our initial business combination, we may pay our expenses only from:

 

· the net proceeds of this offering and the sale of the Private Placement Warrants not held in the trust account, which will be approximately $840,000 in working capital after the payment of approximately $1,750,000 in expenses relating to this offering; and

 

· any loans or additional investments from our sponsor, members of our management team or their affiliates or other third parties, although they are under no obligation to advance funds or invest in us, and provided that any such loans will not have any claim on the proceeds held in the trust account unless such proceeds are released to us upon completion of an initial business combination.

 

Conditions to completing our initial business combination

 

 

 

Our initial business combination will be with a target business or businesses with an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. There is no limitation on our ability to raise funds privately, or through loans in connection with our initial business combination.

 

We anticipate structuring our initial business combination either (i) in such a way 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, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other reasons. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of the 80% of net assets test. If the initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the transactions and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.

 

 
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Permitted purchases of public shares and public warrants by our affiliates

 

 

 

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and the OTC rules. However, they have no current commitments, plans , or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination. See “Proposed Business — Permitted purchases of our securities” for a description of how our sponsor, initial stockholders, directors, officers, advisors or any of their affiliates will select from which stockholders to purchase securities in any private transaction.

 

The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of Public Warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A Common Stock or Public Warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

 

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 public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be $10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the business combination fee we will pay to the underwriters. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. 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 sponsor shares, warrants or shares issuable upon conversion or exercise of such warrants held by them and any public shares they may acquire during or after this offering in connection with the completion of our initial business combination or otherwise.

 

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 initial 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, 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.

 

 
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Manner of conducting redemptions

 

 

 

We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed initial 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 the law or stock exchange requirements. We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange requirements or we choose to seek stockholder approval for business or other legal reasons. So long as we obtain and maintain a quotation for our securities on the OTC, we will be required to comply with such rules.

 

If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:

 

· conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and

 

· file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.

 

Such provisions may be amended if approved by holders of 65% of our common stock entitled to vote thereon.

 

Whether or not we maintain our registration under the Exchange Act or our quotation on the OTC, we will provide our public stockholders with the opportunity to redeem their public shares by one of the two methods listed above. Upon the public announcement of our initial business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we or 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, in order to comply with Rule 14e-5 under the Exchange Act.

 

In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public 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 to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.

 

If, however, stockholder approval of the transaction is required by law or stock exchange listing requirements, or we decide to obtain stockholder approval for business or other legal reasons, we will:

 

· conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and

 

· file proxy materials with the SEC.

 

If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the 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 will count towards this quorum and, pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote their sponsor shares, any shares issued upon exercise of conversion of warrants and any public shares purchased during or after this offering (including in open market and privately negotiated transactions) in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial stockholder’s sponsor shares, we would need only 1,275,013, or 51.0%, of the 2,500,000 public shares sold in this offering to be voted in favor of an initial business combination (assuming all outstanding shares are voted or 637,481, or 25.5%, assuming only the minimum number of shares representing a quorum are voted and assuming our sponsor, officers, directors and their affiliates do not purchase any units in or after this offering) in order to have our initial business combination approved (assuming the over-allotment option is not exercised). We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, 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.

 

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 mailed to such holders, or up to two business days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. We believe that this will allow our transfer agent to efficiently process any redemptions without the need for further communication or action from the redeeming public stockholders, which could delay redemptions and result in additional administrative cost. If the proposed initial business combination is not approved and we continue to search for a target company, we will promptly return any certificates delivered, or shares tendered electronically, by public stockholders who elected to redeem their shares.

 

Our amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial 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 initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of Class A Common Stock submitted for redemption will be returned to the holders thereof.

 

 
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Limitation on redemption rights of stockholders holding 15% or more of the shares sold in this offering if we hold stockholder vote

 

 

 

Notwithstanding the foregoing redemption rights, 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 will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in this offering, without our prior consent. We believe the restriction described above will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in this offering could threaten to exercise its redemption rights against an initial business combination if such holder’s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholder’s ability to redeem to no more than 15% of the shares sold in this offering, 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 an initial 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 stockholder’s ability to vote all of their shares (including all shares held by those stockholders that hold more than 15% of the shares sold in this offering) for or against our initial business combination.

 

Redemption rights in connection with proposed amendments to our certificate of incorporation

 

 

 

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 this 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 entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the Delaware General Corporation Law, or DGCL, or applicable stock exchange rules. Under our amended and restated certificate of incorporation, we may not issue additional securities that can vote on amendments to our amended and restated certificate of incorporation or on our initial business combination or that would entitle holders thereof to receive funds from the trust account. Our initial stockholders, who will collectively hold 20% of the voting power of our issued and outstanding shares of common stock (not including the shares of Class A Common Stock underlying the Private Placement Warrants and assuming it does not purchase any units in this offering), 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. 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 (i) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (ii) with respect to any other provision relating to stockholder’s rights or pre-business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A Common Stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public 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 sponsor shares, warrants, shares issued upon conversion or exercise of such warrants and any public shares held by them in connection with the completion of our initial business combination.

 

 
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Release of funds in trust account on closing of our initial business combination

 

 

 

On the completion of our initial business combination, the funds held in the trust account will be used to pay amounts due to any public stockholders who exercise their redemption rights as described above under “Redemption rights for public stockholders upon completion of our initial business combination.” We will use the remaining funds to pay the underwriters the business combination fee, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination , and to pay other expenses associated with our initial business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies , or for working capital.

 

Redemption of public shares and distribution and liquidation if no initial business combination

 

 

 

Our amended and restated certificate of incorporation provides that we will have only 18 months from the closing of this offering to complete our initial business combination. If we are unable to complete our initial business combination within such 18-month period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, 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 franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 18-month time period.

 

Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any sponsor shares, warrants or shares issued upon conversion or exercise of such warrants held by them if we fail to complete our initial business combination within 18 months from the closing of this offering. However, if our initial stockholders acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 18-month time period.

 

The underwriters have agreed to waive their rights to the business combination fee held in the trust account in the event we do not complete our initial business combination and subsequently liquidate and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of our public shares.

 

 
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Limited payments to insiders

 

 

 

There will be no finder’s fees, reimbursement, consulting fee, non-cash payments, monies in respect of any payment of a loan , or other compensation paid by us to our sponsor, officers or directors, or any affiliate of our sponsor or officers prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, the following payments will be made to our sponsor, officers or directors, or our or their affiliates, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination:

 

· Repayment of up to an aggregate of $300,000 in loans made to us by our sponsor to cover offering-related and organizational expenses;

 

· Payment to our sponsor of $10,000 per month, for up to 18 months, for office space, utilities and secretarial and administrative support;

 

· Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; and

 

· Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which have not been determined nor have any written agreements been executed with respect thereto.

 

Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates.

 

Audit Committee

 

 

 

We will establish and maintain an audit committee to, among other things, monitor compliance with the terms described above and the other terms relating to this offering. If any noncompliance is identified, then the audit committee will be charged with the responsibility to immediately take all action necessary to rectify such noncompliance or otherwise to cause compliance with the terms of this offering. For more information, see the section of this prospectus entitled “Management — Committees of the Board of Directors — Audit Committee.”

 

Indemnity

 

 

 

Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

  

 
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SUMMARY RISK FACTORS

 

We are a newly formed company that has conducted no operations and has generated no revenues. Until we complete our initial business combination, we will have no operations and will generate no operating revenues. In making your decision whether to invest in our Class A Common Stock , you should take into account not only the background of our management team, but also the special risks we face as a blank check company. This offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. Accordingly, you will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. For additional information concerning how Rule 419 blank check offerings differ from this offering, please see the section of this prospectus entitled “Proposed Business — Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419.” You should carefully consider these and the other risks set forth in the section of this prospectus entitled “Risk Factors” beginning on page 22 of this prospectus. Such risks include, but are not limited to:

  

 

·

Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19) pandemic.

 

 

 

 

·

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.

 

 

 

 

·

Changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination.

 

 

 

 

·

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.

 

 

 

 

·

Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination, and 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.

 

 

 

 

·

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 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, and the ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.

 

 

 

 

·

The ability of our public 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.

 

 

 

 

·

The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating an initial 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 initial business combination on terms that would produce value for our stockholders.

 

 

 

 

·

We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances.

 

 

 

 

·

If we seek stockholder approval of our initial business combination, our sponsor, directors, officers, advisors and their affiliates may elect to purchase shares from public stockholders, which may influence a vote on a proposed initial business combination and reduce the public “float” of our Class A Common Stock.

 

 

 

 

·

If you elect to exercise your redemption rights with respect to your shares of Class A Common Stock, you will not receive any Distributable Adnant Redeemable Warrants.

 

 

 

 

·

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, potentially at a loss.

 

 

 

 

·

You may be unable to sell your securities or acquire additional securities during the offering period due to the lack of a liquid and reliable market for the securities.

   

 
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·

You will not be entitled to protections normally afforded to investors of many other blank check companies.

 

 

 

 

·

If the net proceeds of this 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 management team to fund our search for an initial business combination, to pay our taxes and to complete our initial business combination. If we are unable to obtain these loans, we may be unable to complete our initial business combination.

 

 

 

 

·

Subsequent to the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

 

 

 

 

·

The nominal purchase price paid by our sponsor for the sponsor shares may result in significant dilution to the implied value of your public shares upon the consummation of our initial business combination.

 

 

 

 

·

The value of the sponsor shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our common stock at such time is substantially less than $10.00 per share.

 

 

 

 

·

We may amend the terms of the contingent rights in a way that may be adverse to holders with the consent or vote of the holders of not less than two-thirds of the then outstanding contingent rights, as evidenced by their ownership of the ordinary shares.

 

 

 

 

·

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 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.

 

 

 

 

·

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 we and our board may be exposed to claims of punitive damages.

 

 

 

 

·

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 we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.

 

 

 

 

·

The grant of registration rights to our initial stockholders 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.

 

 

 

 

·

Because we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.

 

 

 

 

·

If we determine to change our acquisition criteria or guidelines, many of the disclosures contained in this prospectus would not be applicable and you would be investing in our company without any basis on which to evaluate the potential target business we may acquire.

 

 

 

 

·

Past performance by our management team may not be indicative of future performance of an investment in the Company.

 

 

 

 

·

We may seek business combination opportunities with a financially unstable business or an entity lacking an established record of revenue, cash flow or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.

 

 

 

 

·

We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.

 

 

 

 

·

Our officer 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.

 

 

 

 

·

Certain of our officer 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 allocating their time and determining to which entity a particular business opportunity should be presented.

 

 

 

 

·

Our officers and directors may not have significant experience or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.

 

 

 

 

·

There are risks related to the cannabis industry to which we may be subject.

 

 

 

 

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.” As of September 30, 2021, we had $2,000 in cash and a working capital deficiency of $350,650. Further, we have incurred and expect to continue to incur significant costs in pursuit of an initial business combination. Management’s plans to address this need for capital through this offering are discussed in the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We cannot assure you that our plans to raise capital or to consummate an initial business combination will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this prospectus do not include any adjustments that might result from our inability to consummate this offering or our inability to continue as a going concern. 

   

 
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SUMMARY FINANCIAL DATA

 

The following table summarizes the relevant financial data for our business and should be read with our financial statements, which are included in this prospectus. We have not had any significant operations to date, so only balance sheet data is presented.

 

 

 

September 30, 2021

 

 

 

Actual

 

 

As Adjusted

 

Balance Sheet Data:

 

 

 

 

 

 

Working capital (deficiency)(1)

 

$ (350,650 )

 

$ 24,562,412

 

Total assets(2)

 

$ 345,302

 

 

$ 25,312,412

 

Total liabilities(3)

 

$ 352,650

 

 

$ 750,000

 

Value of Class A Common Stock that may be redeemed in connection with our initial business combination ($10.00 per share)(4)

 

$ -

 

 

$ 25,750,000

 

Stockholder’s equity(5)

 

$ (7,348 )

 

$ (1,187,588 )

__________

(1)

The “as adjusted” calculation includes $25,000,000 cash held in trust from the proceeds of this offering, plus $840,000 in cash held outside the trust account, plus $(7,348) of actual stockholder’s equity as of September 30, 2021, less the $750,000 business combination fee.

 

 

(2)

The “as adjusted” calculation equals $25,000,000 cash held in trust from the proceeds of this offering, plus $840,000 in cash held outside the trust account, plus $(7,348) of actual stockholder’s equity as of September 30, 2021. 

 

 

(3)

The “as adjusted” calculation includes the $750,000 business combination fee.

 

 

(4)

The “as adjusted” calculation equals the “as adjusted” total assets, less the “as adjusted” total liabilities, less the “as adjusted” stockholder’s equity, which is set to approximate the minimum net tangible assets threshold of at least $5,000,001.

 

 

(5)

Excludes 2,500,000 public shares which are subject to redemption in connection with our initial business combination. The “as adjusted” calculation equals the “as adjusted” total assets, less the “as adjusted” total liabilities, less the value of Class A Common Stock that may be redeemed in connection with our initial business combination (initially $10.00 per share).

 

 

 

The “as adjusted” information gives effect to the sale of the units in this offering, the sale of the Private Placement Warrants, repayment of up to an aggregate of $300,000 in loans made to us by our sponsor and the payment of the estimated expenses of this offering and assumes no exercise of the underwriters’ over-allotment option. The “as adjusted” total assets amount includes the $25,000,000 held in the trust account (which would be $28,750,000 if the underwriters’ over-allotment option is exercised in full) for the benefit of our public stockholders, which amount, less the business combination fee, will be available to us only upon the completion of our initial business combination within 18 months from the closing of this offering. The “as adjusted” working capital and “as adjusted” total assets include $25,000,000 being held in the trust account (which would be $28,750,000 if the underwriters’ over-allotment option is exercised in full) representing the business combination fee. The underwriters will not be entitled to any interest accrued on the business combination fee. 

  

 
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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 prospectus, before making a decision to invest in our units. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

 

Risks Relating to Searching for and Consummating a Business Combination.

 

Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19) outbreak.

 

The significant outbreak of COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected. We may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors, and services providers who become 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 the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.

 

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.

 

We are a newly formed company with no operating results, and we will not commence operations until obtaining funding through this offering. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination with one or more target businesses. We have no plans, arrangements, or understandings with any prospective target business concerning an initial business combination and may be unable to complete our initial business combination. If we fail to complete our initial business combination, we will never generate any operating revenues.

 

Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.

 

We may choose not to hold a stockholder vote to approve our initial business combination unless the initial business combination would require stockholder approval under applicable law or stock exchange requirements or if we decide to hold a stockholder vote for business or other legal reasons. Except as required by law, the decision as to whether we will seek stockholder approval of a proposed initial 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 complete our initial business combination even if holders of a majority of our public shares do not approve of the initial business combination we complete. Please see the section of this prospectus entitled “Proposed Business — Stockholders May Not Have the Ability to Approve Our Initial Business Combination” for additional information.

 

If we seek stockholder approval of our initial business combination, our initial stockholders have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.

 

Pursuant to a letter agreement, our sponsor, officers and directors have agreed to vote their sponsor shares, shares issued upon exercise or conversion of warrants, as well as any public shares purchased during or after this offering (including in open market and privately negotiated transactions), in favor of our initial business combination. As a result, in addition to our initial stockholder’s sponsor shares would need only 1,275,013, or 51.0%, of the 2,500,000 public shares sold in this offering to be voted in favor of an initial business combination (assuming all outstanding shares are voted or 637,481, or 25.5%, assuming only the minimum number of shares representing a quorum are voted and assuming our sponsor, officers, directors and their affiliates do not purchase any units in or after this offering) in order to have our initial business combination approved (assuming the over-allotment option is not exercised). The Class B Common Stock will have, in the aggregate, 20.0% of the voting power of our outstanding shares of common stock immediately following the completion of this offering. Accordingly, if we seek stockholder approval of our initial business combination, the agreement by our initial stockholders to vote in favor of our initial business combination will increase the likelihood that we will receive the requisite stockholder approval for such initial business combination.

 

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 initial 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 our initial business combination. Since our board of directors may complete an initial business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the initial business combination, unless we seek such stockholder vote. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.

 

 
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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 an initial business combination with a target.

 

We may seek to enter into an initial business combination 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 initial business combination. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions 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 an initial business combination with us.

 

The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.

 

At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements, or arrange for third party financing. In addition, if a larger number of shares 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 amount of the business combination fee payable to the underwriters will not be adjusted for any shares that are redeemed in connection with an initial business combination. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the business combination fee and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the business combination fee.

 

The ability of our public 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 initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the 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 requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating an initial 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 initial business combination on terms that would produce value for our stockholders.

 

Any potential target business with which we enter into negotiations concerning an initial business combination will be aware that we must complete our initial business combination within  18 months from the closing of this offering. Consequently, such target business may obtain leverage over us in negotiating an initial business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.

 

 
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We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.

 

Our amended and restated certificate of incorporation provides that we must complete our initial business combination within  18 months from the closing of this offering. 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 franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may only receive $10.00 per share, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.

 

If we seek stockholder approval of our initial business combination, our sponsor, directors, officers, advisors and their affiliates may elect to purchase shares or warrants from public stockholders, which may influence a vote on a proposed initial business combination and reduce the public “float” 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 sponsor, directors, officers, advisors or their affiliates may purchase shares or public warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares or public warrants in such transactions.

 

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, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination, or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.

 

In addition, if such purchases are made, the public “float” of our Class A Common Stock or public warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on a national securities exchange.

  

Our sponsor 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.

 

Following the completion of this offering and until we consummate our business combination, we intend to engage in the business of identifying and combining with one or more businesses. Our sponsor may in the future become affiliated with entities that are engaged in a similar business. Our sponsor 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 duties or contractual obligations. Accordingly, our sponsor may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor or that a potential target business would not be presented to another entity prior to its presentation to us.

   

 
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In evaluating a prospective target business for our initial business combination, our management will rely on the availability of the funds from the sale of the Pre-Business Combination Warrants under the Forward Purchase Agreement to be used as part of the consideration to the sellers in our initial business combination. If the sale of the Pre-Business Combination Warrants fails to close, for any reason, we may lack sufficient funds to consummate our initial business combination.

 

We intend to enter into a Forward Purchase Agreement with our sponsor, pursuant to which it has the right, but not the obligation, to purchase an aggregate of up to $1,030,240 of Pre-Business Combination Warrants at a price of $1.56 per warrant, in one or more private placements.

  

The funds from the sale of the Pre-Business Combination Warrants are expected to be used as part of the consideration to the sellers in our initial business combination, and to pay expenses in connection with our initial business combination and may be used for working capital in the post-combination business. If our sponsor does not agree to fund more than the amount necessary to complete our initial business combination, the post-combination business may not have enough cash available for working capital. These purchases are intended to provide us with appropriate funding for our initial business combination. If the sale of the Pre-Business Combination Warrants does not close by reason of the failure of our sponsor to fund the purchase price, for example, or for any other reason, we may lack sufficient funds to consummate our initial business combination.

 

Our warrant agreement will 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 agreement will 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 agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

 

Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.

 

This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

 

Since our sponsor will lose the investment opportunity presented by the Forward Purchase Warrants, if our initial business combination is not completed, our sponsor may have a conflict of interest in determining whether a particular business combination target is appropriate for our initial business combination.

 

We intend to enter into a Forward Purchase Agreement with our sponsor pursuant to which it will agree to purchase up to 1,969,542 Forward Purchase Warrants for an aggregate investment of up to $3,072,485. Purchases of the Forward Purchase Warrants will take place in one or more private placements either prior to or subsequent to the closing of our initial business combination. If we do not complete an initial business combination, our sponsor will lose the investment opportunity presented by the Forward Purchase Agreement.

  

 
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Risks Relating to our Securities.

  

If you elect to exercise your redemption rights with respect to your shares of Class A Common Stock, you will not receive any Distributable Adnant Redeemable Warrants.

 

In connection with our initial business combination, and in connection with certain amendments to our amended and restated certificate of incorporation, public stockholders will have the opportunity to exercise their right to redeem their shares of Class A Common Stock for cash. However, our Distributable Adnant Redeemable Warrants will be issued only to the holders of record of those shares of Class A Common Stock that remain outstanding after redemptions in connection with our initial business combination. The Distributable Adnant Redeemable Warrants will be issued at the Adnant Distribution Time on a pro-rata basis in respect of such remaining shares of Class A Common Stock. Accordingly, to the extent that you elect to redeem your shares of Class A Common Stock, you will receive no Distributable Adnant Redeemable Warrants in respect of such shares. The contingent right to receive the Distributable Adnant Redeemable Warrants will remain attached to our shares of Class A Common Stock, will not be separately transferable, assignable or salable and will not be evidenced by any certificate or instrument.

  

The potential impact of redemptions on the issuance of the Distributable Adnant Redeemable Warrants is noted below. For example, in the event that public stockholders redeem 25% of their shares of Class A Common Stock for cash, the holders of records will be issued Distributable Adnant Redeemable Warrants on a pro-rata basis of the remaining shares of Class A Common Stock, which is 75% of the original issuance of Class A Common Stock upon the completion of the public offering.

 

Public Holders Equity Ownership Stake

Redemption
Rate

 

 

Shares of Class A
Common Stock
Remaining

 

 

Distributable Adnant Redeemable Warrants
to be Issued

 

 

Redeemable Warrants

 

 

Total Warrants

 

 

Total Equity Interests

 

 

100

%

 

 

-

 

 

 

-

 

 

 

319,443

 

 

 

319,443

 

 

 

319,443

 

 

75

%

 

 

718,750

 

 

 

159,722

 

 

 

319,443

 

 

 

479,165

 

 

 

1,197,915

 

 

50

%

 

 

1,437,500

 

 

 

319,444

 

 

 

319,443

 

 

 

638,887

 

 

 

2,076,387

 

 

25

%

 

 

2,156,250

 

 

 

479,166

 

 

 

319,443

 

 

 

798,609

 

 

 

2,954,859

 

 

0

%

 

 

2,875,000

 

 

 

638,888

 

 

 

319,443

 

 

 

958,331

 

 

 

3,833,331

 

   

If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.

 

We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, proxy materials or tender offer documents, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares. For example, 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 mailed to such holders, or up to two business days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or any other procedures, its shares may not be redeemed. See the section of this prospectus entitled “Proposed Business — Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination — Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights.”

 

 
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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.

 

Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) our completion of an initial business combination, and then only in connection with those shares of Class A Common Stock that such stockholder properly elected to redeem, subject to the limitations described herein, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (B) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity and (iii) the redemption of our public shares if we are unable to complete an initial business combination within 18 months from the closing of this offering, subject to applicable law and as further described herein. In no other circumstances will a public stockholder have any right or interest of any kind in the trust account. Holders of warrants will not have any right to the proceeds held in the trust account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.

  

We intend to have our securities quoted on the OTCQX, which will limit the liquidity and price of our securities more than if our securities were quoted or listed on the Nasdaq Global Market or a national exchange, and stockholders may experience negative volatility on the market price of our securities.

 

Our securities will be traded in the over-the-counter market. It is anticipated that they will be quoted on the OTCQX, which is the top tier of the three marketplaces for the OTC trading of securities. Quotation of our securities on the OTCQX will limit the liquidity and price of our securities more than if our securities were quoted or listed on the Nasdaq Global Market or a national exchange. The OTCQX can be significantly illiquid, in part because it does not have a national quotation system by which potential investors can follow the market price of shares except through information received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities that trade on the OTCQX as compared to a national securities exchange, such as the New York Stock Exchange, the Nasdaq Global Market or the NYSE Amex. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Our stockholders may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, stockholders may not be able to realize a fair price from their securities when they determine to sell them or may have to hold them for a substantial period of time until the market for our securities improves.

 

We have not voluntarily implemented various corporate governance measures, in the absence of which, stockholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.

 

Recent federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements; others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges or Nasdaq, are those that address the board of directors’ independence, audit committee oversight, and the adoption of a code of ethics. We have not yet adopted any of these corporate governance measures, and since our securities are not listed on a national securities exchange or Nasdaq, we are not required to do so. If we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages and recommendations for director nominees, may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

 

You may be unable to sell your securities or acquire additional securities during the offering period due to the lack of a liquid and reliable market for the securities.

 

Although the securities issued in the offering are transferable and we expect that the securities will be quoted on the OTCQX market of the OTC during the offering period provided a market maker establishes a market for such securities, we cannot give any assurance that the securities will trade on the OTCQX market, that an active market for the securities will develop or be maintained during the course of the offering period or, if a market does develop, the prices at which the securities will trade. You may have difficulty selling your securities should you decide to do so. Any market price of our securities may not necessarily bear any relationship to our book value, assets, past results of operations, financial condition or any other established criteria of value, and may not be indicative of the market price for shares of our securities in the future.

 

You will not be entitled to protections normally afforded to investors of many other blank check companies.

 

Since the net proceeds of this offering and the sale of the Private Placement Warrants are intended to be used to complete an initial business combination with a target business that has not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However, because we will have net tangible assets in excess of $5,000,000 upon the successful completion of this offering and the sale of the Private Placement Warrants and will file a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means our units will be immediately tradable and we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419. Moreover, if this offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of an initial business combination. For a more detailed comparison of our offering to offerings that comply with Rule 419, please see the section of this prospectus entitled “Proposed Business — Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419.”

  

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 will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in this offering without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholder’s ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our initial business combination. And as a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.

 

 
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Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on our redemption of our public shares, or less than such amount in certain circumstances, 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 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 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 this offering and the sale of the Private Placement Warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, because we are obligated to pay cash for the shares of Class A Common Stock which our public stockholders redeem in connection with our initial business combination, target companies will be aware that this may reduce the resources available to us for our initial business combination. This may place us at a competitive disadvantage in successfully negotiating an 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 the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share upon our liquidation. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.

 

If the net proceeds of this 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 next  18 months, we may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.

 

The funds available to us outside of the trust account may not be sufficient to allow us to operate for at least the next 18 months, assuming that our initial business combination is not completed during that time. We believe that, upon the closing of this offering, the funds available to us outside of the trust account will be sufficient to allow us to operate for at least the next 18 months; however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement 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. In certain circumstances, our public stockholders may receive less than $10.00 per share upon our liquidation. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.

 

If the net proceeds of this 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 management team to fund our search for an initial business combination, to pay our franchise and income taxes and to complete our initial business combination. If we are unable to obtain these loans, we may be unable to complete our initial business combination.

 

Of the net proceeds of this offering and the sale of the Private Placement Warrants, only approximately $840,000 will be available to us initially outside the trust account to fund our working capital requirements. In the event that our offering expenses exceed our estimate of $840,000, we may fund such excess with funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. The amount held in the trust account will not be impacted as a result of such increase or decrease. Conversely, in the event that the offering expenses are less than our estimate of $840,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount. If we are required to seek additional capital, we would need to borrow funds from our sponsor, management team or other third parties to operate or may be forced to liquidate. None of our sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to 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. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. If we are unable to obtain these loans, we may be unable to complete our initial business combination. 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. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.

   

Subsequent to the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and 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 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 debt financing to partially finance the initial business combination. Accordingly, any stockholders who choose to remain stockholders following the initial 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 proxy solicitation or tender offer materials, as applicable, relating to the initial business combination constituted an actionable material misstatement or omission.

 

 
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The nominal purchase price paid by our sponsor for the sponsor shares may result in significant dilution to the implied value of your public shares upon the consummation of our initial business combination.

 

We are offering our units at an offering price of $10.00 per unit and the amount in our trust account is initially anticipated to be $10.00 per public share, implying an initial value of $10.00 per public share. However, prior to this offering, our sponsor paid a nominal aggregate purchase price of $25,000 for the sponsor shares, or approximately $1,000 per share. Concurrent with this offering, our sponsor has agreed to purchase an aggregate of 846,000 Private Placement Warrants at a price of $1.56 per warrant, for an aggregate purchase price of $1,319,760. In addition, our sponsor may purchase up to 660,410 additional Pre-Business Combination Warrants at a price of $1.56 per warrant, for an aggregate purchase price of up to $1,030,240 under the Forward Purchase Agreement. As a result, the value of your public shares may be significantly diluted upon the consummation of our initial business combination, when the sponsor shares, warrants or shares issued upon conversion or exercise of such warrants are converted into public shares. For example, the following table shows the dilutive effect of the sponsor 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 $24,250,000, which is the amount we would have for our initial business combination in the trust account after payment of the $750,000 business combination fee, assuming the underwriters’ over-allotment option is not exercised, 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 sellers or other third parties, or the target’s business itself, including its assets, liabilities, management and prospects, as well as the value of our public and private warrants. At such valuation, each of our shares of common stock would have an implied value of $9.70 per share upon consummation of our initial business combination, which would be a 3.0% decrease as compared to the initial implied value per public share of $10.00 (the price per unit in this offering, assuming no value to the public warrants).

  

Public shares

 

 

2,500,000

 

Sponsor shares

 

 

25

 

Total shares

 

 

2,500,025

 

 

 

 

 

Total funds in trust available for initial business combination (less business combination fee)

 

$

24,250,000

 

Initial implied value per public share

 

$

10.00

 

Implied value per share upon consummation of initial business combination

 

$

9.70

 

  

The value of the sponsor shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our common stock at such time is substantially less than $10.00 per share.

 

Upon the closing of this offering, assuming no exercise of the underwriters’ over-allotment option, our sponsor will have invested in us an aggregate of $1,344,760, comprised of the $25,000 purchase price for the sponsor shares and the $1,319,760 purchase price for the Private Placement Warrants. Assuming a trading price of $10.00 per share upon consummation of our initial business combination, the 25 sponsor shares would have an aggregate implied value of $250. Even if the trading price of our common stock was $53,790 per share, and the Private Placement Warrants were worthless, the value of the sponsor shares would be equal to the sponsor’s initial investment in us. As a result, 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 have lost significant value. Accordingly, our management team, which owns interests in our sponsor, may have an economic incentive that differs from that of the public stockholders to pursue and consummate an initial business combination rather than to liquidate and to return all of the cash in the trust to the public stockholders, even if that business combination were with a riskier or less-established target business. For the foregoing reasons, you should consider our management team's financial incentive to complete an initial business combination when evaluating whether to redeem your shares prior to or in connection with the initial business combination.

  

We may amend the terms of the contingent rights in a way that may be adverse to holders with the consent or vote of the holders of not less than two-thirds of the then outstanding contingent rights, as evidenced by their ownership of the ordinary shares.

 

Our contingent rights will be issued under a contingent rights agreement between Odyssey Transfer Agent & Trust Company, as rights agent, and us. The contingent rights agreement provides that the terms of the contingent rights may be amended without the consent of any holder for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained therein or adding or changing any other provision with respect to matters or questions arising under the contingent rights agreement as the parties may deem necessary or desirable. The contingent rights agreement requires the consent or vote of the holders of not less than two-thirds of the then outstanding contingent rights, as evidenced by their ownership of the ordinary shares, in order to make any change that will adversely affect the interests of the holders of the contingent rights. As a result, a change that is approved by two-third of the holders of the contingent rights, as evidenced by their ownership of the ordinary shares, could adversely affect your contingent rights, without your approval.

 

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 and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Marcum LLP, our independent registered public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in the trust account.

 

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 initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. 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. Pursuant to the letter agreement, the form of which is filed as Exhibit 10.1 to the registration statement of which this prospectus forms a part, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

   

 
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Our directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.

 

In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.00 per share and (ii) the actual amount per 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 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 and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. 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.

 

We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.

 

We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.

 

If, after we distribute the proceeds in the trust account to our public 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 we and our board may be exposed 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.

 

If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.

 

If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:

 

 

·

restrictions on the nature of our investments; and

 

 

 

 

·

restrictions on the issuance of securities, each of which may make it difficult for us to complete our initial business combination.

 

In addition, we may have imposed upon us burdensome requirements, including:

 

 

·

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.

 

In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify and complete an initial business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.

 

 
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We do not believe that our anticipated principal activities will subject us to the Investment Company Act. To this end, the proceeds held in the trust account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. This offering is not intended for persons who are seeking a return on investments in government securities or investment securities. The trust account is intended as a holding place for funds pending the earliest to occur of: (i) the completion of our initial business combination; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (B) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity; or (iii) absent an initial business combination within 18 months from the closing of this offering, our return of the funds held in the trust account to our public stockholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete an initial business combination or may result in our liquidation. 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, including our ability to negotiate and complete our initial business combination and results of operations.

 

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly.

 

Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination and results of operations.

 

Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.

 

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months from the closing of this offering may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 24th month from the closing of this offering in the event we do not complete our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.

 

Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months from the closing of this offering is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.

 

 
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We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors.

 

In accordance with the OTC corporate governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our quotation on the OTC. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial 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.

 

We are not registering the shares of Class A Common Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis. If the issuance of the shares upon exercise of warrants is not registered, qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.

 

We are not registering the shares of Class A Common Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of Class A Common Stock issuable upon exercise of the warrants and thereafter will use our best efforts to cause the same to become effective within 90 days following our initial business combination and to maintain a current prospectus relating to the Class A Common Stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if our Class A Common Stock is at the time of any exercise of a warrant not quoted or listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A Common Stock included in the units. If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in this offering. However, there may be instances in which holders of our public warrants may be unable to exercise such public warrants but holders of our Private Placement Warrants may be able to exercise such Private Placement Warrants.

 

If you exercise your public warrants on a “cashless basis,” you will receive fewer shares of Class A Common Stock from such exercise than if you were to exercise such warrants for cash.

 

There are circumstances in which the exercise of the public warrants may be required or permitted to be made on a cashless basis. First, if a registration statement covering the shares of Class A Common Stock issuable upon exercise of the warrants is not effective by the 52nd day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Second, if our Class A Common Stock is at any time of any exercise of a warrant not quoted or listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. Third, if we call the public warrants for redemption, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering the warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (as defined in the next sentence) by (y) the fair market value. The “fair market value” is the average reported last sale price of the Class A Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable. As a result, you would receive fewer shares of Class A Common Stock from such exercise than if you were to exercise such warrants for cash.

 

 
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The grant of registration rights to our initial stockholders and the representative of the underwriters may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A Common Stock.

 

Pursuant to an agreement to be entered into concurrently with the issuance and sale of the securities in this offering, our initial stockholders and their permitted transferees can demand that we register the Private Placement Warrants, the Forward Purchase Warrants, the shares of Class A Common Stock issuable upon exercise of the Private Placement Warrants and the Forward Purchase Warrants and upon conversion of the sponsor shares held, or to be held, by them and the representative of the underwriters may demand that we register the Underwriter Warrants or the Class A Common Stock issuable upon conversion or exercise of such warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A Common Stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to conclude. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A Common Stock that is expected when the securities owned by our initial stockholders, the representative of the underwriters or their respective permitted transferees are registered.

 

Because we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.

 

We are not limited to evaluating a target business in a particular industry sector, except that we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations. Because we have not yet selected or approached any specific target business with respect to a business combination, there is no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their securities. 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 proxy solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement or material omission.

 

If we determine to change our acquisition criteria or guidelines, many of the disclosures contained in this prospectus would not be applicable and you would be investing in our company without any basis on which to evaluate the potential target business we may acquire.

 

We could seek to deviate from the acquisition criteria or guidelines disclosed in this prospectus although we have no current intention to do so. For instance, we currently anticipate acquiring a target business in the cannabis industry. However, we are not obligated to do so and may determine to merge with or acquire a company which is not in the cannabis industry if the terms of the transaction are determined by us to be favorable to our public stockholders. In such event, many of the acquisition criteria and guidelines set forth in this prospectus would not be applicable. Accordingly, investors may be making an investment in our company without any basis on which to evaluate the potential target business we may acquire. Regardless of whether or not we deviate from the acquisition criteria or guidelines in connection with any proposed business combination, investors will always be given the opportunity to convert their shares in connection with any proposed business combination as described in this prospectus.

 

 
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Because we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’ operations.

 

We will seek to complete an initial business combination with companies in the cannabis industry but may also pursue other business combination opportunities, except that we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations. We intend to focus our search for businesses in the cannabis industry. Potential areas of interest in the cannabis industry include but are not limited to domestic and international businesses that are ancillary to the production, distribution and sale of cannabis as well as businesses that legally cultivate, process and/or aid in the retail distribution of cannabis. Because we have not yet selected or approached any specific target business with respect to a business combination, there is no basis to evaluate the possible merits or risks of any particular target business’ operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their securities. 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 proxy solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement or material omission.

 

Risks Relating to our Management and Directors or Conflicts of Interest.

 

Past performance by our management team may not be indicative of future performance of an investment in the Company.

 

Past performance by our management team is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to locate a suitable candidate for our initial business combination. You should not rely on the historical record of our management team’s performance as indicative of our future performance of an investment in the company or the returns the company will, or is likely to, generate going forward.

 

We may seek business combination opportunities in industries or sectors which may or may not be outside of our management’s area of expertise.

 

We may consummate a business combination with a company in any industry we choose and are not limited to any particular industry or type of business, although we intend to focus our search for businesses in the cannabis industry including but not limited to domestic and international businesses that are ancillary to the production, distribution and sale of cannabis as well as businesses that legally cultivate, process and/or aid in the retail distribution of cannabis. Although we intend to focus on identifying such cannabis companies, we will consider an initial business combination outside of our management’s area of expertise if an initial business combination candidate is presented to us and we determine that such candidate offers an attractive business combination opportunity for our company or we are unable to identify a suitable candidate in this sector after having expanded 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 this offering than a direct investment, if an opportunity were available, in an initial business combination candidate. In the event we elect to pursue a business combination outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or operation, and the information contained in this prospectus regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly, any stockholders who choose to remain stockholders following our initial 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.

 

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. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.

 

 
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We may seek business combination opportunities with a financially unstable business or an entity lacking an established record of revenue, cash flow or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.

 

To the extent we complete our initial business combination with a financially unstable business or an entity lacking an established record of revenues or earnings, 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 firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.

 

Unless we complete our initial business combination with an affiliated entity or our board cannot independently determine the fair market value of the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy materials or tender offer documents, as applicable, related to our initial business combination.

 

We may issue additional common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. 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 50,000,000 shares of Class A Common Stock, par value $0.0001 per share, 5,000,000 shares of Class B Common Stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. Immediately after this offering, there will be 47,500,000 and 4,999,975 (assuming, in each case, that the underwriters have not exercised their over-allotment option) authorized but unissued shares of Class A Common Stock and Class B Common Stock, respectively, available for issuance, which amount takes into account the shares of Class A Common Stock reserved for issuance upon exercise of outstanding warrants and the shares of Class A Common Stock issuable upon conversion of Class B Common Stock. Immediately after the consummation of this offering, there will be no shares of preferred stock issued and outstanding. Shares of Class B Common Stock are convertible into shares of our 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. Shares of Class B Common Stock are also convertible at the option of the holder at any time.

 

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 (although our amended and restated certificate of incorporation will provide that we may not issue securities that can vote with common stockholders on matters related to our pre-initial business combination activity). However, our amended and restated certificate of incorporation will provide, 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 the approval of our stockholders. However, our executive officers, directors and director nominees have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (B) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of 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 (which interest shall be net of taxes payable), divided by the number of then outstanding public shares.

 

The issuance of additional shares of common or preferred stock:

 

 

·

may significantly dilute the equity interest of investors in this offering;

 

 

 

 

·

may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;

 

 

 

 

·

could cause a change of control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and

 

 

 

 

·

may adversely affect prevailing market prices for our units, Class A Common Stock and/or warrants.

  

 
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Resources could be wasted in researching business combinations 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, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.

 

We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, consultants 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. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors below.

 

Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.

 

Our ability to successfully effect our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we employ after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements. There are a limited number of management teams in the cannabis industry that have U.S. public company experience. As a result, management of a target cannabis business, including any key personnel that it hires in the future, may not be familiar with U.S. securities laws. In addition, the officers and directors of an initial business combination candidate may resign upon completion of our initial business combination. Experienced talent, including senior management, with public company background in the areas of cannabis research and development, growing cannabis and extraction are difficult to source, and there can be no assurance that the appropriate individuals will be available or affordable. The departure of an initial business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an initial business combination 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 initial business combination candidate’s management team will remain associated with the initial business combination candidate following our initial business combination, it is possible that members of the management of an initial business combination candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.

 

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 initial business combination. 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.

 

We do not have an independent board of directors which could create a conflict of interests and pose a risk from a corporate governance perspective.

 

Our board of directors consists solely of current executive officers, who do not qualify as independent directors in accordance with the published listing requirements of the OTCQX market. The lack of independent directors:

 

 

·

May prevent the board of directors from being independent from management in its judgments and decisions and its ability to pursue the board of directors responsibilities without undue influence;

 

 

 

 

·

May present us from providing a check on management, which can limit management taking unnecessary risks;

 

 

 

 

·

Create potential for conflicts between management and the diligent independent decision-making process of the board of directors;

 

 

 

 

·

Present the risk that our executive officers on the board of directors may have influence over their personal compensation and benefits levels that may not be commensurate with our financial performance; and

 

 

 

 

·

Deprive us of the benefits of various viewpoints and experience when confronting challenges that we face.

 

Because only our officer serves on our board of directors, it will be difficult for the board of directors to fulfill its traditional role as overseeing management.

 

Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.

 

Our key personnel may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the initial business combination. Such negotiations would take place simultaneously with the negotiation of the initial 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 initial 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 initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our initial business combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business combination.

 

 
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We may have a limited ability to assess the management of a prospective target business and, as a result, may effect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company, which could, in turn, negatively impact the value of our stockholder’s investment in us.

 

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 initial 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.

 

Our 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 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 an initial business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our officers is engaged in other business endeavors for which he may be entitled to substantial compensation and our officers are not obligated to contribute any specific number of hours per week to our affairs. Our independent directors may also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination. For a complete discussion of our officers’ and directors’ other business affairs, please see the section of this prospectus entitled “Management — Directors and Officers.”

 

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 allocating their time and determining to which entity a particular business opportunity should be presented.

 

Following the completion of this offering and until we consummate our initial business combination, we intend to engage in the business of identifying and combining with one or more businesses. Our sponsor and officers and directors are, and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business, although they may not participate in the formation of, or become an officer or director of, any other special purpose acquisition companies with a class of securities registered under the Exchange Act until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within  18 months after the closing of this offering.

 

Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties.

 

Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.

 

For a complete discussion of our officers’ and directors’ business affiliations and the potential conflicts of interest that you should be aware of, please see the sections of this prospectus entitled “Management — Directors and Officers,” “Management — Conflicts of Interest” and “Certain Relationships and Related Party Transactions.”

 

Our 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, 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 an initial business combination with a target business that is affiliated with our sponsor, our directors or officers, although we do not intend to do so. We do not 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.

 

 
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We may engage in an initial business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers, directors or existing holders which may raise potential conflicts of interest.

 

In light of the involvement of our sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsor, officers or directors. Our directors also serve as officers and board members for other entities, including, without limitation, those described under the section of this prospectus entitled “Management — Conflicts of Interest.” Such entities may compete with us for business combination opportunities. Our sponsor, officers and directors are not currently aware of any specific opportunities for us to complete our initial business combination with any entities with which they are affiliated, and there have been no preliminary discussions concerning an initial 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 an initial business combination as set forth in the section of this prospectus entitled “Proposed Business — Selection of a Target Business and Structuring of our Initial Business Combination” and such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, regarding the fairness to our stockholders from a financial point of view of an initial business combination with one or more domestic or international businesses affiliated with our officers, directors or existing holders, potential conflicts of interest still may exist and, as a result, the terms of the initial business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.

 

Since our sponsor, officers and directors will lose their entire investment in us if our initial business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.

  

On February 25, 2021, our sponsor purchased an aggregate of 287,500 sponsor shares for an aggregate purchase price of $25,000, or approximately $0.087 per share, of which 287,475 shares were relinquished on September 27, 2021. As of the date of this prospectus, our sponsor owns an aggregate of 25 sponsor shares. In addition, our sponsor has agreed to purchase an aggregate of 846,000 warrants (or 972,900 warrants if the over-allotment option is exercised in full) at a price of $1.56 per warrant, for an aggregate purchase price of $1,319,760, or $1,517,724 if the over-allotment option is exercised in full, that will also be worthless if we do not complete an initial business combination. Further, our sponsor may purchase an aggregate of up to 660,410 warrants at a price of $1.56 per warrant, for an aggregate purchase price of $1,030,240 prior to the consummation of an initial business combination. Holders of sponsor shares and shares issued upon exercise or conversion of warrants held by our sponsor, officers and directors have agreed (A) to vote any shares owned by them in favor of any proposed initial business combination and (B) not to redeem any sponsor shares, warrants, or shares issued or issuable upon exercise of such warrants in connection with a stockholder vote to approve a proposed initial business combination or in connection with a tender offer. In addition, we may obtain loans from our sponsor, affiliates of our sponsor or an officer or director. The personal and financial interests of our officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination.

   

We may issue notes or other debt securities, or otherwise incur substantial debt, to complete an initial business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholder’s investment in us.

 

Although we have no commitments as of the date of this prospectus to issue any notes or other debt securities, or to otherwise incur outstanding debt following this offering, we may choose to incur substantial debt to complete our initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:

 

 

·

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, our ability to pay expenses, make capital expenditures and acquisitions, and fund 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;

 

 

 

 

·

limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and

 

 

 

 

·

other disadvantages compared to our competitors who have less debt.

  

 
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We may only be able to complete one business combination with the proceeds of this 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 services and limited operating activities. This lack of diversification may negatively impact our operating results and profitability.

 

Of the net proceeds from this offering and the sale of the Private Placement Warrants, $25,000,000 (or $28,750,000 if the underwriters’ over-allotment option is exercised in full) will be available to complete our initial business combination and pay related fees and expenses (which includes up to $750,000, or up to $862,500 if the over-allotment option is exercised in full, for the payment of the business combination fee).

 

We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. In addition, we intend to focus our search for an initial business combination in a single industry. Accordingly, the prospects for our success may be:

 

 

·

solely dependent upon the performance of a single business, property or asset, or

 

 

 

 

·

dependent upon the development or market acceptance of a single or limited number of products, processes or services.

 

This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.

 

We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.

 

If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. We do not, however, intend to purchase multiple businesses in unrelated industries in conjunction with 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 an initial business combination with a company that is not as profitable as we suspected, if at all.

 

In pursuing our initial business combination strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in an initial 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 may structure an initial 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 initial business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A Common Stock in exchange for all of the outstanding capital stock of a target.

 

In this case, we would acquire a 100% 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 cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.

 

 
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We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete an initial business combination with which a substantial majority of our stockholders do not agree.

 

Our amended and restated certificate of incorporation will not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. As a result, we may be able to complete our initial business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our 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 initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial 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 an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and other governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated 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 an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds and extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. Amending our amended and restated certificate of incorporation will require the approval of holders of 65% of our common stock, and amending our warrant agreement will require a vote of holders of at least 65% of the public warrants. In addition, our amended and restated certificate of incorporation requires us to provide our public stockholders with the opportunity to redeem their public shares for cash if we propose an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within  18 months from the closing of this offering or (B) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity. To the extent any such amendments would be deemed to fundamentally change the nature of any securities offered through this registration statement, we would register, or seek an exemption from registration for, the affected securities. We cannot assure you that we will not seek to amend our charter or governing instruments or extend the time to consummate an initial business combination 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), including an amendment to permit us to withdraw funds from the trust account such that the per share amount investors will receive upon any redemption or liquidation is substantially reduced or eliminated, may be amended with the approval of holders of 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders may not support.

 

Our amended and restated certificate of incorporation will provide that any of its provisions related to pre-initial business combination activity (including the requirement to deposit proceeds of this 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 and including to permit us to withdraw funds from the trust account such that the per share amount investors will receive upon any redemption or liquidation is substantially reduced or eliminated) may be amended if approved by holders of 65% of our common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules. We may not issue additional securities that can vote on amendments to our amended and restated certificate of incorporation. Our initial stockholders, who will collectively have 20% of the voting power of our issued and outstanding shares of common stock (not including the shares of Class A Common Stock underlying the Private Placement Warrants and assuming it does not purchase any units in this offering), 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-initial business combination behavior more easily than some other blank check companies, and this may increase our ability to complete an initial 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.

 

 
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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 (i) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (ii) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A Common Stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by the number of then outstanding public shares. These agreements are contained in a letter agreement that we have entered into with our sponsor, officers and directors. 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, 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.

 

We have not selected any specific business combination target but intend to target businesses larger than we could acquire with the net proceeds of this offering and the sale of the Private Placement Warrants. As a result, we may be required to seek additional financing to complete such proposed initial business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. Further, the amount of additional financing we may be required to obtain could increase as a result of future growth capital needs for any particular transaction, the depletion of the available net proceeds in search of a target business, the obligation to repurchase for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination and/or the terms of negotiated transactions to purchase shares in connection with 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 plus any pro rata interest earned on the funds held in the trust account and not previously released to us to pay our 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 initial business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination. If we 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. Furthermore, as described in the risk factor entitled “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,” under certain circumstances our public stockholders may receive less than $10.00 per share upon the liquidation of the trust account. At this time, other than the Forward Purchase Agreement, which we intend to enter into prior to the effective date of this offering, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.

  

Our sponsor may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.

 

Upon the closing of this offering, our sponsor, as the holder of 25 shares of our Class B Common Stock, will hold 20% of the voting power of our issued and outstanding shares of common stock (not including the shares of Class A Common Stock underlying the Private Placement Warrants and assuming it does not purchase any units in this offering). Accordingly, our sponsor 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 and approval of major corporate transactions. If our sponsor purchase any units in this offering or if our sponsor purchase any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase its control. 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 is and will be divided into two classes, each of which will generally serve for a term of two 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 initial business combination, in which case all of the current directors will continue in office until at least the completion of the initial business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our sponsor , because of its ownership position, will have considerable influence regarding the outcome. Accordingly, our sponsor will continue to exert control at least until the completion of our initial business combination.

  

 
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We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of shares of our Class A Common Stock purchasable upon exercise of a warrant could be decreased, all without your approval.

 

Our public warrants will be issued in registered form under a warrant agreement between Odyssey Transfer Agent & Trust Company, as warrant agent, and us. The 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 defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 65% 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 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the public warrants, convert the public warrants into cash or stock, shorten the exercise period or decrease the number of shares of our Class A Common Stock purchasable upon exercise of a public warrant.

  

We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.

 

We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the public warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the public warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the public warrants were offered by us in this offering. Redemption of the 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 public warrants. None of the Private Placement Warrants and the Forward Purchase Warrants will be redeemable by us so long as they are held by the sponsor or its permitted transferees.

  

Our warrants and sponsor shares may have an adverse effect on the market price of our Class A Common Stock and make it more difficult to effectuate our initial business combination.

 

We will be issuing Outstanding Redeemable Warrants to purchase 277,777 shares of our Class A Common Stock (or up to 319,443 shares of Class A Common Stock if the underwriters’ over-allotment option is exercised in full) as part of the units offered by this prospectus, and also issuing Distributable Adnant Redeemable Warrants to purchase 555,555 shares of Class A Common Stock in connection with the closing of our initial business combination (or up to 638,888 shares of Class A Common Stock if the underwriters’ over-allotment option is exercised in full). Simultaneously with the closing of this offering, we will be issuing in a private placement, Private Placement Warrants to purchase an aggregate of 846,000 shares of Class A Common Stock (or up to 972,900 shares if the underwriters’ over-allotment option is exercised in full). We intend to enter into a Forward Purchase Agreement with our sponsor pursuant to which it may purchase an aggregate of up to 1,969,542 warrants at a price of $1.56 per warrant, for an aggregate purchase price of up to $3,072,485. Any purchase of Forward Purchase Warrants would take place in one or more private placements in such amounts and at such time or times either prior to or subsequent to our initial business combination. If we do not complete an initial business combination, our sponsor will lose the investment opportunity presented by the Forward Purchase Agreement. Our initial stockholders currently own an aggregate of 25 sponsor shares. The sponsor shares are convertible into shares of Class A Common Stock on a one-for-one basis, subject to adjustment as set forth herein.

   

To the extent we issue shares of Class A Common Stock to effectuate an initial business combination, the potential for the issuance of a substantial number of additional shares of Class A Common Stock upon conversion of these rights or exercise of these warrants could make us a less attractive business combination vehicle to a target business. Any such issuance 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 initial business combination. Therefore, our warrants and sponsor shares may make it more difficult to effectuate an initial business combination or increase the cost of acquiring the target business.

 

The Private Placement Warrants and Forward Purchase Warrants are identical to the Outstanding Redeemable Warrants sold as part of the units in this offering except that, so long as they are held by our sponsor or its permitted transferees, (i) they will not be redeemable by us, (ii) they (including the Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until after the completion of our initial business combination, (iii) they may be exercised by the holders on a cashless basis, and (iv) they will be entitled to registration rights. The holders will be permitted to transfer the Private Placement Warrants and the Forward Purchase Warrants held by them to certain permitted transferees, including our officers and directors and other persons or entities affiliated with or related to them, but the transferees receiving such securities will be subject to the same agreements with respect to such securities as our sponsor.  

   

Because each unit contains one-ninth of one warrant and only a whole warrant may be exercised, the units may be worth less than units of other special purpose acquisition companies.

 

Each unit contains one-ninth of one Outstanding Redeemable Warrant. Pursuant to the warrant agreement, the warrants may only be exercised for a whole number of shares and only a whole warrant may be exercised at any given time. While holders of public shares who elect not to redeem such shares in connection with our initial business combination will also receive the issuance of warrants in the form of Distributable Adnant Redeemable Warrants, it is likely that the number of Distributable Adnant Redeemable Warrants issued to any such holder will not be a whole number. This is different from other offerings similar to ours whose units include one ordinary share and one warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of our initial business combination, since the Outstanding Redeemable Warrants and Distributable Adnant Redeemable Warrants (assuming no redemptions of our shares of Class A Common Stock) will be exercisable in the aggregate for one-third of the number of shares sold in this offering (as compared to units that each contain a warrant to purchase one whole share), and to provide an incentive to our public stockholders to not redeem their shares of Class A Common Stock. Nevertheless, this unit structure may cause our units to be worth less than if each unit included a warrant to purchase one whole share of Class A Common Stock.

 

 
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A provision of our warrant agreement may make it more difficult for us to consummate an initial business combination.

 

Unlike some other blank check companies, if

 

(i) we issue additional shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per share,

  

(ii) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and

 

(iii) the Market Value is below $9.20 per share,

 

then the exercise price of the warrants will be adjusted to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. This provision may make us less attractive to potential target businesses than other SPACs that do not have such provision and may make it more difficult for us to consummate an initial business combination with a target business.

 

The determination of the offering price of our units and the size of this offering is more arbitrary than the pricing of securities and size of an offering of an operating company in a particular industry. You may have less assurance, therefore, that the offering price of our units properly reflects the value of such units than you would have in a typical offering of an operating company.

 

Prior to this offering there has been no public market for any of our securities. The public offering price of the units and the terms of the public warrants were negotiated between us and the underwriters. In determining the size of this offering, management held customary organizational meetings with representatives of the underwriters, both prior to our inception and thereafter, with respect to the state of capital markets, generally, and the amount the underwriters believed they reasonably could raise on our behalf. Factors considered in determining the size of this offering, prices and terms of the units, including the Class A Common Stock and warrants underlying the units, include:

 

 

·

the history and prospects of companies whose principal business is the acquisition of other companies;

 

 

 

 

·

prior offerings of those companies;

 

 

 

 

·

our prospects for acquiring an operating business;

 

 

 

 

·

a review of debt-to-equity ratios in leveraged transactions;

 

 

 

 

·

our capital structure;

 

 

 

 

·

an assessment of our management and their experience in identifying operating companies;

 

 

 

 

·

general conditions of the securities markets at the time of this offering; and

 

 

 

 

·

other factors as were deemed relevant.

 

Although these factors were considered, the determination of our offering price is more arbitrary than the pricing of securities of an operating company in a particular industry since we have no historical operations or financial results.

 

There is currently no market for our securities and a market for our securities may not develop, which would adversely affect the liquidity and price of our securities.

 

There is currently no market for our securities. Stockholders therefore have no access to information about prior market history on which to base their investment decision. Following this offering, the price of our securities may vary significantly due to one or more potential business combinations and general market or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.

 

 
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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 an initial 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 financial reporting standards as issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.

 

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 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 accountant standards used. Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior December 31st. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

 

Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial financial and management resources, and increase the time and costs of completing an initial business combination.

 

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, and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. 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 initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.

 

 
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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 will contain 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 the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

 

We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

 

An investment in this offering may result in uncertain or adverse U.S. federal income tax consequences.

 

An investment in this offering may result in uncertain U.S. federal income tax consequences. For instance, because there are no authorities that directly address instruments similar to the units we are issuing in this offering, the allocation an investor makes with respect to the purchase price of a unit among the share of Class A Common Stock and one warrant to purchase one share of Class A Common Stock included in each unit could be challenged by the IRS or the courts. Furthermore, the U.S. federal income tax consequences of a cashless exercise of warrants included in the units we are issuing in this offering is unclear under current law. It is also unclear whether the redemption rights with respect to our shares of Class A Common Stock suspend the running of a U.S. holder’s holding period for purposes of determining whether any gain or loss realized by such holder on the sale or exchange of Class A Common Stock is long-term capital gain or loss and for determining whether any dividend we pay would be considered “qualified dividends” for federal income tax purposes. See the section titled “Material U.S. Federal Income Tax Considerations” for a summary of certain material U.S. federal income tax consequences of an investment in our securities. Prospective investors are urged to consult their tax advisors with respect to these and other tax consequences when purchasing, holding or disposing of our securities.

 

Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, which may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.

 

Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation. This choice of forum provision may make it more costly for a stockholder to bring a claim, and it may also limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders cannot waive our compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

 

Our amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

 

Cannabis is currently illegal under U.S. federal law and in other jurisdictions

 

If we complete a business combination with a target in the cannabis industry, our ability to achieve our business objectives will be contingent, in part, upon the legality of the cannabis industry, our compliance with regulatory requirements enacted by various governmental authorities, and our obtaining all regulatory approvals, where necessary. The laws and regulations governing cannabis are still developing, including in ways that we may not foresee. Although the Agriculture Improvement Act of 2018 has taken hemp and hemp-derived cannabinoids out of the most restrictive class of controlled substances under U.S. federal law, marijuana is a Schedule-1 controlled substance in the United States and is currently illegal under U.S. federal law. Even in those U.S. states in which the recreational use of marijuana has been legalized, its use remains a violation of U.S. federal law. Additionally, in 2018, a series of memoranda and guidance from 2009 to 2014 that generally directed U.S. Attorneys not to enforce federal marijuana laws against actors who were in compliance with state guidance were formally rescinded. Since U.S. federal laws criminalizing the use of marijuana preempt state laws that legalize its use, continuation of U.S. federal law in its current state regarding marijuana could limit our ability to do business in the United States. Similar issues of illegality apply in other countries. Any amendment to or replacement of existing laws to make them more onerous, or delays in amending or replacing existing laws to liberalize the legal possession and use of cannabis, or delays in obtaining, or the failure to obtain, any necessary regulatory approvals may significantly delay or impact negatively our ability to consummate an initial business combination with a target business in the cannabis industry and could have a material adverse effect on our business, liquidity, financial condition or results of operations thereafter.

 

 
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Change in the laws, regulations and guidelines that impact the cannabis industry may cause adverse effects on our ability to successfully complete our initial business combination with a target business in the cannabis industry.

 

We intend to target companies in the cannabis industry including but not limited to domestic and international businesses that are ancillary to the production, distribution and sale of cannabis as well as businesses that legally cultivate, process and/or aid in the retail distribution of cannabis and that are compliant with all applicable laws and regulations within the jurisdictions in which they are located or operate. Changes to such laws, regulations and guidelines may cause adverse effects on our ability to identify and acquire a target company that meets these legal and regulatory requirements at the time of acquisition.

 

The nascent status of the medical and recreational cannabis industry involves unique circumstances and there can be no assurance that the industry will continue to exist or grow as currently anticipated.

 

Cannabis industry businesses operate under a relatively new medical and adult-use recreational market. In addition to being subject to general business risks, a business involving an agricultural product and a regulated consumer product needs to continue to build brand, product awareness and operations through significant investments in strategy, production capacity, quality assurance and compliance with regulations. Competitive conditions, consumer tastes, patient requirements and spending patterns in this new industry and market are relatively unknown and may have unique circumstances that differ from existing industries and markets. There can be no assurance that this industry and market will continue to exist or grow as currently estimated or anticipated, or function and evolve in a manner consistent with management’s expectations and assumptions. Any event or circumstance that affects the medical or recreational cannabis industry and market could have a material adverse effect on our business, financial condition and results of operations.

 

Any potential growth in the cannabis industry continues to be subject to new and changing state and local laws and regulations.

 

Continued development of the cannabis industry is dependent upon continued legislative legalization of cannabis at the state level, and a number of factors could slow or halt progress in this area, even where there is public support for legislative action. Any delay or halt in the passing or implementation of legislation legalizing cannabis use, or its cultivation, manufacturing, processing, transportation, distribution, storage and/or sale, or the re-criminalization or restriction of cannabis at the state level could negatively impact our business. Additionally, changes in applicable state and local laws or regulations, including zoning restrictions, permitting requirements and fees, could restrict the products and services we may offer or impose additional compliance costs on us or our customers. Violations of applicable laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. We cannot predict the nature of any future laws, regulations, interpretations or applications, and it is possible that regulations may be enacted in the future that will be materially adverse to our business.

 

Operating in a highly regulated business will require significant resources.

 

In the event we acquire a business involved in the production, distribution or sale of cannabis products, we will be operating in a highly regulated business. In such a case, we would expect a significant amount of management’s time and external resources to be used to comply with the laws, regulations and guidelines that impact our business, and changes thereto, and such compliance may place a significant burden on our management and other resources.

 

Differing regulatory environments may cause adverse effects on our operations.

 

A cannabis products business will be subject to a variety of laws, regulations and guidelines in each of the jurisdictions in which it operates. Complying with multiple regulatory regimes will require additional resources and may limit our ability to expand into certain jurisdictions, even where cannabis may be legal. For example, even if cannabis were to become legal under U.S. federal law, companies operating in the cannabis industry would have to comply with applicable state and local laws, which may vary greatly between jurisdictions, increasing costs for companies that operate in multiple jurisdictions.

 

We may operate a highly regulated business and any failure or significant delay in obtaining regulatory approvals could adversely affect our ability to conduct our business.

 

In the event we acquire a business involved in the production, distribution or sale of cannabis products, achievement of our business objectives will be contingent, in part, upon compliance with the regulatory requirements enacted by applicable government authorities and obtaining all regulatory approvals, where necessary, for the sale of our products. We cannot predict the time required to secure all appropriate regulatory approvals for our products, additional restrictions that may be placed on our business or the extent of testing and documentation that may be required by government authorities. Any delays in obtaining, or failure to obtain regulatory approvals would significantly delay the development of markets and products and could have a material adverse effect on our business, results of operation and financial condition.

 

 
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Marketing constraints under regulatory frameworks may limit a potential target cannabis company’s ability to compete for market share in a manner similar to that of companies in other industries.

 

The development of a potential target cannabis company’s business and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by regulations applicable to the cannabis industry. For example, the regulatory environment in Canada would limit a target cannabis company’s ability to compete for market share in a manner similar to that of companies in other industries. Additionally, Canadian regulations impose further packaging, labeling and advertising restrictions on producers in the adult-use recreational cannabis market. If a target cannabis company is unable to effectively market its products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for its products, its sales and operating results could be adversely affected.

 

We may become involved in regulatory or agency proceedings, investigations and audits.

 

Businesses in the cannabis industry, and the business of the suppliers from which we may acquire the products we may sell, require compliance with many laws and regulations. Failure to comply with these laws and regulations could subject us or such suppliers to regulatory or agency proceedings or investigations and could also lead to damage awards, fines and penalties. We or such suppliers may become involved in a number of government or agency proceedings, investigations and audits. The outcome of any regulatory or agency proceedings, investigations, audits, and other contingencies could harm our reputation or the reputations of the brands that we may sell, require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition. There can be no assurance that any pending or future regulatory or agency proceedings, investigations and audits will not result in substantial costs or a diversion of management’s attention and resources or have a material adverse impact on our business, financial condition and results of operations.

 

Research in the United States, Canada and internationally regarding the medical benefits, viability, safety, efficacy and dosing of cannabis or isolated cannabinoids remains in relatively early stages. There have been few clinical trials on the benefits of cannabis or isolated cannabinoids conducted by us or by others.

 

Research in the United States, Canada and internationally regarding the medical benefits, viability, safety, efficacy and dosing of cannabis or isolated cannabinoids (such as CBD and THC) remains in relatively early stages. Historically stringent regulations related to cannabis have made conducting medical and academic studies challenging, and there have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids to date. Many statements concerning the potential medical benefits of cannabinoids are based on published articles and reports, and as a result, such statements are subject to the experimental parameters, qualifications and limitations in the studies that have been completed. Future research and clinical trials may draw different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to medical cannabis, which could adversely affect social acceptance of cannabis and the demand for cannabis products. We may be subject to liability for risks against which we cannot insure or against which we may elect not to insure due to the high cost of insurance premiums or other factors. The payment of any such liabilities would reduce the funds available for our normal business activities. Payment of liabilities for which we do not carry insurance may have a material adverse effect on our financial position and operations.

 

With respect to target businesses operating in the medical and adult-use cannabis markets, the illicit supply of cannabis and cannabis-based products may reduce our sales and impede our ability to succeed in such markets.

 

In the event we acquire a target business operating in the medical and adult-use cannabis markets, we may face competition from unlicensed and unregulated market participants, including illegal dispensaries and black-market suppliers selling cannabis and cannabis-based products.

 

Even with the legalization of medical and adult-use cannabis in certain jurisdictions, black market operations remain abundant and are a substantial competitor to cannabis-related businesses. In addition, illegal dispensaries and black market participants may be able to (i) offer products with higher concentrations of active ingredients that are either expressly prohibited or impracticable to produce under applicable regulations, (ii) use delivery methods, including edibles, concentrates and extract vaporizers, that we may be prohibited from offering to individuals in such jurisdictions, (iii) brand products more explicitly, and (iv) describe/discuss intended effects of products. As these illicit market participants do not comply with the regulations governing the medical and adult-use cannabis industry in such jurisdictions, their operations may also have significantly lower costs.

 

As a result of the competition presented by the black market for cannabis, any unwillingness by consumers currently utilizing these unlicensed distribution channels to begin purchasing from legal producers for any reason or any inability or unwillingness of law enforcement authorities to enforce laws prohibiting the unlicensed cultivation and sale of cannabis and cannabis-based products could (i) result in the perpetuation of the black market for cannabis, (ii) adversely affect our market share and (iii) adversely impact the public perception of cannabis use and licensed cannabis producers and dealers, all of which would have a materially adverse effect on our business, operations and financial condition.

 

If recreational or medical-use consumers elect to produce cannabis for their own purposes, it could reduce the addressable market for a potential target cannabis company’s products.

 

Cannabis regulations may permit the end user to produce cannabis for their own purposes. For example, under cannabis regulations in Canada, three options are available for an individual to obtain cannabis for medical purposes: (i) registering with a holder of a license to sell for medical purposes and purchasing products from that entity; (ii) register with Health Canada to produce a limited amount of cannabis for their own medical purposes; or (iii) designate someone else to produce cannabis for them. It is possible that the ability of an end user to produce cannabis for their own purposes, such as under (ii) and (iii) above, could significantly reduce the addressable market for a potential target cannabis company’s products and could materially and adversely affect the business, financial condition and results of operations of a potential target cannabis company.

 

 
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The cannabis industry faces significant opposition, and any negative trends may adversely affect our business operations.

 

If we complete a business combination with a target in the cannabis industry, we will be substantially dependent on the continued market acceptance, and the proliferation of consumers, of cannabis. We believe that with further legalization, cannabis will become more accepted, resulting in growth in consumer demand. However, we cannot predict the future growth rate or future market potential, and any negative outlook on the cannabis industry may adversely affect our business operations.

 

Large, well-funded industries that perceive cannabis products and services as competitive with their own, including but not limited to the pharmaceutical industry, adult beverage industry and tobacco industry, all of which have powerful lobbying and financial resources, may have strong economic reasons to oppose the development of the cannabis industry. For example, should cannabis displace other drugs or products, the medical cannabis industry could face a material threat from the pharmaceutical industry, which is well-funded and possesses a strong and experienced lobby. Any inroads the pharmaceutical or any other potentially displaced, industry or sector could make in halting or impeding the cannabis industry could have a detrimental impact on our business.

 

If we acquire a target business in the cannabis industry, because cannabis has been commonly associated with various other narcotics, violence and criminal activities, there is a risk that our business might also attract negative publicity. There is also a risk that the actions of other companies, service providers and customers in the cannabis industry may negatively affect the reputation of the industry as a whole and thereby negatively impact our reputation. The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share negative opinions and views in regards to the cannabis industry in general, whether true or not.

 

We do not ultimately have direct control over how we or the cannabis industry is perceived by others. Reputational issues may result in decreased investor confidence, increased challenges in developing and maintaining community relations and present an impediment to our overall ability to advance our business strategy and realize on our growth prospects.

 

Competition from synthetic products may adversely affect the business, financial condition or results of operations of a potential target cannabis company.

 

The pharmaceutical industry may attempt to dominate the cannabis industry, and in particular, legal cannabis, through the development and distribution of synthetic products which emulate the effects of cannabis. If they are successful, the widespread popularity of such synthetic products could change the demand, volume and profitability of the cannabis industry. This could adversely affect the ability of a potential target cannabis company to secure long-term profitability and success through the sustainable and profitable operation of the anticipated businesses and investment targets, and could have a material adverse effect on a potential target cannabis company’s business, financial condition or results of operations.

 

An initial surge in demand for cannabis may result in supply shortages in the short term, while in the longer term, supply of cannabis could exceed demand, which may cause a fluctuation in revenue.

 

Changes in the legal status of cannabis may result in an initial surge in demand. As a result of such initial surge, cannabis companies operating under such changed legal regime may not be able to produce enough cannabis to meet demand of the adult-use recreational and medical markets, as applicable. This may result in lower than expected sales and revenues and increased competition for sales and sources of supply.

 

However, in the future, cannabis producers may produce more cannabis than is needed to satisfy the collective demand of the adult-use recreational and medical markets, as applicable, and they may be unable to export that oversupply into other markets where cannabis use is fully legal under all applicable jurisdictional laws. As a result, the available supply of cannabis could exceed demand, resulting in a significant decline in the market price for cannabis. If such supply or price fluctuations were to occur, companies operating in the cannabis industry may see revenue and profitability fluctuate materially and their business, financial condition, results of operations and prospects may be adversely affected.

 

Consumer preferences may change, and the potential target business may be unsuccessful in acquiring or retaining consumers and keeping pace with changing market developments.

 

As a result of changing consumer preferences, many consumer products attain financial success for a limited period of time. Even if a potential target’s products find success initially, there can be no assurance that such products will continue to be profitable. A potential target’s success will be significantly dependent upon its ability to develop new and improved product lines and adapt to consumer preferences. Even if a potential target business is successful in introducing new products or developing its current products, a failure to gain consumer acceptance or to update products could cause a decline in the products’ popularity and impair the brands. In addition, a potential target business may be required to invest significant capital in the creation of new product lines, strains, brands, marketing campaigns, packaging and other product features-none of which are guaranteed to be successful. Failure to introduce new features and product lines and to achieve and sustain market acceptance could result in the potential target business being unable to satisfy consumer preferences and generate revenue.

 

 
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A potential target’s success depends on its ability to attract and retain consumers. There are many factors which could impact its ability to attract and retain consumers, including its ability to continually produce desirable and effective products, the successful implementation of its consumer acquisition plan and the continued growth in the aggregate number of potential consumers. A potential target business may not be successful in developing effective and safe new products, anticipating shifts in social trends and consumer demands, bringing such products to market in time to be effectively commercialized, or obtaining any required regulatory approvals, which, together with any capital expenditures made in the course of such product development and regulatory approval processes. A potential target’s failure to acquire and retain consumers could have a material adverse effect on the potential target business.

 

In addition, the patterns of cannabis consumption may shift over time due to a variety of factors, including changes in demographics, social trends, public health polices and other leisure or consumption behaviors. If consumer preferences for a potential target’s products or cannabis products in general do not develop, or if once developed, they were to move away from its products or cannabis products in general, or if a potential target business is unable to anticipate and respond effectively to shifts in consumer behaviors, it may be adversely affected.

 

The cannabis industry is highly competitive and evolving.

 

The market for businesses in the cannabis industry is highly competitive and evolving. There may be no material aspect of our business that is protected by patents, copyrights, trademarks or trade names, and we may face strong competition from larger companies, including in our search for an initial business combination and those that may offer similar products and services to ours following our initial business combination. Our potential competitors may have longer operating histories, significantly greater financial, marketing or other resources and larger client bases than we will, and there can be no assurance that we will be able to successfully compete against these or other competitors. Additionally, because the cannabis industry is at an early stage, a potential target cannabis company may face additional competition from new entrants, including as a result of an increased number of licenses granted under any applicable regulatory regime.

 

If the number of users of medical cannabis increases, and/or if the national demand for recreational cannabis increases, the demand for products will increase and we expect that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, a target business may require a continued high level of investment in research and development, marketing, sales and client support. However, a potential target business may not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive basis, which could materially and adversely affect our business, financial condition and results of operations. Additionally, as new technologies related to the cultivation, processing, manufacturing and research and development of cannabis are being explored, there is potential for third party competitors to be in possession of superior technology that would reduce any relative competitiveness a potential business target may have.

 

As the legal landscape for cannabis continues to evolve, it is possible that the cannabis industry will undergo consolidation, creating larger companies with greater financial resources, manufacturing and marketing capabilities and product offerings.

 

Given the rapid changes affecting the global, national, and regional economies generally and the cannabis industry, in particular, we may not be able to create and maintain a competitive advantage in the marketplace.

 

Our success will depend on our ability to keep pace with any changes in our markets, particularly, legal and regulatory changes. For example, it is likely that we, and our competitors, will seek to introduce new products in the future. Our success will also depend on our ability to respond to, among other things, changes in the economy, market conditions, and competitive pressures. Any failure by us to anticipate or respond adequately to such changes could have a material adverse effect on our financial condition and results of operations.

 

The technologies, process and formulations a target company uses may face competition or become obsolete.

 

Many businesses in the cannabis industry face rapidly changing markets, technology, emerging industry standards and frequent introduction of new products. The introduction of new products embodying new technologies, including new manufacturing processes or formulations, and the emergence of new industry standards may render a potential business target’s products obsolete, less competitive or less marketable. The process of developing their products is complex and requires significant continuing costs, development efforts and third-party commitments, including licensees, researchers, collaborators and lenders. A target company’s failure to develop new technologies and products and the obsolescence of existing technologies or processes could adversely affect its business, financial condition and results of operations. A target company may be unable to anticipate changes in its potential customer requirements that could make its existing technology, processes or formulations obsolete. Its success will depend in part on its ability to continue to enhance its existing technologies, develop new technology that addresses the increasing sophistication and varied news of the market, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of its proprietary technology, processes and formulations may entail significant technical and business risks. A potential target company may not be successful in using its new technologies or exploiting its niche markets effectively or adapting its business to evolving customer or medical requirements or preferences or emerging industry standards.

 

There is uncertainty in pricing and demand for cannabis-based products.

 

The anticipated pricing of cannabis products may differ substantially from current levels given changes in the competitive and regulatory landscape. The potential target company’s business model may be susceptible to erosion of profitability should cannabis and cannabis-related products experience secular pricing changes. Potential sources of pricing changes include over-production, regulatory action, increased competition or the emergence of new competitors. Additionally, even if pricing of the broader cannabis and cannabis-related product market is sustained, there is no guarantee that a potential target cannabis company will be successful in creating and maintaining consumer demand and estimated pricing levels. To do this, the potential target company may be dependent upon, among other things, continually producing desirable and effective cannabis and cannabis-related products and the continued growth in the aggregate number of cannabis consumers. Campaigns designed to enhance the potential target company’s brand and attract consumers, subject to restrictions imposed by law, can be expensive and may not result in increased sales. If the potential target company is unable to attract new consumers, it may not be able to increase its sales.

 

 
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A potential target company may have difficulty in forecasting sales and other business metrics.

 

A potential target cannabis business may rely largely on its own market research to forecast sales as detailed forecasts are not generally obtainable from other sources at this early stage of the cannabis industry. If the potential target business underestimates the demand for its products, it may not be able to produce products that meet its stringent requirements, and this could result in delays in the shipment of products and failure to satisfy demand, as well as damage to reputation and partner relationships. If the potential target business overestimates the demand for its products, it could face inventory levels in excess of demand, which could result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would harm the potential target’s gross margins and brand management efforts.

 

Due to the nascent nature of the market, it could be difficult for the potential target to forecast demand. In particular, it could be difficult to forecast the rate of the illicit cannabis market crossing over to the legal market. If the market does not develop as the potential target business expects, it could have a material adverse effect on its business, results of operations and financial condition. In addition to inherent risks and difficulties forecasting sales, anticipated costs and yields are also challenging to predict with certainty as the cannabis industry is in its relative infancy and rapidly evolving. If we make capital investments based on flawed sales, costs and yields forecasts, the potential target business may not achieve its expected, or any, return on invested capital. Failure to realize forecasted sales, costs and yields could have a material adverse effect on the potential target’s business, results of operations and financial condition.

 

We and our customers may have difficulty accessing the service of banks, which may make it difficult to sell products and services.

 

Financial transactions involving proceeds generated by cannabis-related conduct can form the basis for prosecution under the federal money laundering statutes, unlicensed money transmitter statute and the U.S. Bank Secrecy Act. Guidance issued by the Financial Crimes Enforcement Network (“FinCen”), a division of the U.S. Department of the Treasury (the “FinCen Memo”), clarifies how financial institutions can provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act. Despite the rescission of memoranda that had de-prioritized the enforcement of federal law against marijuana users and businesses that comply with state marijuana laws, FinCen has not rescinded the FinCen Memo. While this memo appears to be a standalone document and is presumptively still in effect, FinCen could elect to rescind the FinCen Memo at any time. Banks remain hesitant to offer banking services to cannabis-related businesses. Consequently, those businesses involved in the cannabis industry continue to encounter difficulty establishing banking relationships. Our inability to maintain bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business plan.

 

The development and operation of businesses in the cannabis industry may require additional financing, which may not be available on favorable terms, if at all.

 

Due to the growth in the cannabis industry, the continued development and operation of businesses in the cannabis industry may require additional financing. The failure to raise such capital could result in the delay or indefinite postponement of current business objectives or the cessation of business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable.

 

We may be subject to product liability claims.

 

If we acquire a target business operating as a manufacturer and distributor of products utilizing cannabis for human consumption, we will face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused significant loss or injury. In addition, the manufacture and sale of cannabis products involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur. We may be subject to various product liability claims, including, among others, that the products we produced caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. We may also be subject to risk of exposure as a result of customers not using our products in the manner in which we intend.

 

A product liability claim or regulatory action against us could result in increased costs, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our results of operations and financial condition. There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of products.

 

 
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We may not be able to obtain adequate insurance coverage in respect of the risks our business faces, the premiums for such insurance may not continue to be commercially justifiable or there may be coverage limitations and other exclusions which may result in such insurance not being sufficient to cover potential liabilities that we face.

 

Although we expect to have insurance coverage with respect to the assets and operations of our target business, such insurance coverage will be subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. In addition, no assurance can be given that such insurance will be adequate to cover our liabilities, including potential product liability claims, or will be generally available in the future or, if available, that premiums will be commercially justifiable. If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, we may be exposed to material uninsured liabilities that could impede our liquidity, profitability or solvency.

 

We, or the cannabis industry more generally, may receive unfavorable publicity or become subject to negative consumer or investor perception.

 

We believe that the cannabis industry is highly dependent upon positive consumer and investor perception regarding the benefits, safety, efficacy and quality of the cannabis distributed to consumers. The perception of the cannabis industry and cannabis products, currently and in the future, may be significantly influenced by scientific research or findings, regulatory investigations, litigation, political statements, media attention and other publicity (whether or not accurate or with merit) both in the United States and in other countries, including Canada, relating to the consumption of cannabis products, including unexpected safety or efficacy concerns arising with respect to cannabis products or the activities of industry participants. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the cannabis market or any particular cannabis product or will be consistent with earlier publicity. Adverse future scientific research reports, findings and regulatory proceedings that are, or litigation, media attention or other publicity that is, perceived as less favorable than, or that questions, earlier research reports, findings or publicity (whether or not accurate or with merit) could result in a significant reduction in the demand for the cannabis products of a target business we acquire. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis, or the products of a target business we acquire specifically, or associating the consumption of cannabis with illness or other negative effects or events, could adversely affect us. This adverse publicity could arise even if the adverse effects associated with cannabis products resulted from consumers’ failure to use such products legally, appropriately or as directed.

 

Our reputation and ability to do business may be negatively impacted by the improper conduct of our business partners, employees or agents.

 

We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents or business partners in violation of applicable laws and regulations in the jurisdictions in which we conduct operations, including those applicable to businesses in the cannabis industry. Any improper acts or allegations could damage our reputation and subject us to civil or criminal investigations and related stockholder lawsuits, could lead to substantial civil and criminal monetary and non-monetary penalties, and could cause us to incur significant legal and investigatory fees.

 

A potential target company may not succeed in promoting and sustaining its brands, which could have an adverse effect on its future growth and business.

 

A critical component of a potential target company’s future growth is its ability to promote and sustain its brands, often achieved by providing a high-quality user experience. An important element of a target company’s brand promotion strategy is establishing a relationship of trust with its consumers. In order to provide a high-quality user experience, a potential target company may need to have invested and continue to invest substantial resources in the development of products, infrastructure, fulfilment and customer service operations. Campaigns designed to enhance a potential target company’s brand and attract consumers, subject to restrictions imposed by law, can be expensive and may not result in increased sales. If a potential target company is unable to attract new customers or its consumers are dissatisfied with the quality of the products sold to them or the customer service they receive and their overall customer experience, it could see a decrease in sales, which could have a material adverse effect on the potential target company’s business, financial condition and results of operations.

 

The cannabis industry is subject to the risks inherent in an agricultural business, including the risk of crop failure.

 

The growing of cannabis is an agricultural process. As such, a target business with operations in the cannabis industry is subject to the risks inherent in the agricultural business, including risks of crop failure presented by weather, insects, plant diseases and similar agricultural risks. Although some cannabis production is conducted indoors under climate-controlled conditions, cannabis continues to be grown outdoors and there can be no assurance that artificial or natural elements, such as insects and plant diseases, will not entirely interrupt production activities or have an adverse effect on the production of cannabis and, accordingly, the operations of a potential target business.

 

The cannabis industry is subject to transportation disruptions, including those related to an agricultural product.

 

As a business revolving mainly around the growth of an agricultural product, the ability to obtain speedy, cost-effective and efficient transport services will be essential to the prolonged operations of a potential target cannabis company’s business. Should such transportation become unavailable for prolonged periods of time, it could have a material adverse effect on the potential target company’s business, financial condition and results of operations.

 

Due to the nature of a potential target cannabis company’s products, security of the product during transportation to and from its facilities may be important. A breach of security during transport or delivery could have a material adverse effect on a potential target company’s business, financial condition and results of operations. Any breach of the security measures during transport or delivery, including any failure to comply with recommendations or requirements of regulatory authorities, could also have an impact on the potential target company’s ability to continue operating under its license or the prospect of renewing its licenses.

 

 
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Many cannabis businesses are subject to significant environmental regulations and risks.

 

Participants in the cannabis industry are subject to various environmental regulations in the jurisdictions in which they operate. These regulations may mandate, among other things, the maintenance of air and water quality standards and land reclamation. These regulations may also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect a potential target business.

 

Many cannabis businesses are dependent on key personnel with sufficient experience in the cannabis industry.

 

The success of businesses in the cannabis industry is largely dependent on the performance of their respective management teams and key employees and their continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and significant costs may be incurred to attract and retain them. The loss of the services of any key personnel, or an inability to attract other suitably qualified persons when needed, could prevent a business from executing on its business plan and strategy, and the business may be unable to find adequate replacements on a timely basis, or at all.

 

A potential target company may be dependent on skilled labor and suppliers.

 

The ability of a potential target business to compete and grow will be dependent on it having access, at a reasonable cost and in a timely manner, to skilled labor, equipment, parts and components. No assurances can be given that the potential target business will be successful in maintaining its required supply of skilled labor, equipment, parts and components. Qualified individuals are in high demand, and the potential target business may incur significant costs to attract and retain them. It is also possible that the final costs of the major equipment and materials, including packaging materials, contemplated by the potential target’s capital expenditure program may be significantly greater than anticipated by the potential target’s management, and may be greater than funds available to the potential target business, in which circumstance the potential target business may curtail, or extend the timeframes for completing, its capital expenditure plans. This could have a material adverse effect on the potential target’s business, financial condition and results of operations.

 

Fraudulent or illegal activity by employees, contractors and consultants may adversely affect our business, financial condition or results of operations.

 

A potential target business may be exposed to the risk that any of its employees, independent contractors or consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities that violate (i) government regulations, (ii) manufacturing standards, (iii) federal, state and provincial healthcare fraud and abuse laws and regulations, or (iv) laws that require the true, complete and accurate reporting of financial information or data. It may not always be possible for the potential target business to identify and deter misconduct by its employees and other third parties, and the precautions taken by the potential target business to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting the potential target business from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against the potential target business, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on the business of the potential target business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of the operations of the potential target business, any of which could have a material adverse effect on the potential target’s business, financial condition and results of operations.

 

 
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A potential target cannabis company may be reliant on key inputs and may not be able to realize its cannabis production or capacity targets. The price of production of cannabis will also vary based on a number of factors outside of our control.

 

A potential target cannabis company’s ability to produce and process cannabis, and the price of production, may be affected by a number of factors, including available space, raw materials, plant design errors, non-performance by third party contractors, increases in materials or labor costs, construction performance falling below expected levels of output or efficiency, environmental pollution, contractor or operator errors, breakdowns, processing bottlenecks, aging or failure of equipment or processes, labor disputes, as well as factors specifically related to indoor agricultural practices, such as reliance on provision of energy and utilities to the facility, and potential impacts of major incidents or catastrophic events on the facility, such as fires, explosions, earthquakes or storms. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact the business, financial condition and operating results of a potential target company. Some of these inputs may only be available from a single supplier or a limited group of suppliers, including access to the electricity grid. If a sole source supplier was to go out of business, the target company might be unable to find a replacement for such source in a timely manner or at all. If a sole source supplier were to be acquired by a competitor, that competitor may elect not to sell to the potential target company in the future. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on the business, financial condition, results of operations and prospects of such businesses.

  

In addition, the price of production, sale and distribution of cannabis will fluctuate widely due to, among other factors, how young the cannabis industry is and the impact of numerous factors beyond the control of such businesses, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new production and distribution developments and improved production and distribution methods.

 

A potential target company may be vulnerable to rising energy costs.

 

Cannabis growing operations consume considerable energy, which makes a potential target cannabis company vulnerable to rising energy costs and/or the availability of stable energy sources. Accordingly, rising or volatile energy costs or the inability to access stable energy sources may have a material adverse effect on the potential target company’s business, financial condition and results of operations.

 

To the extent we acquire cannabis businesses or assets, there may be a lack of access to U.S. bankruptcy protections.

 

Because cannabis is illegal under U.S. federal law, many courts have denied cannabis businesses bankruptcy protections, thus making it very difficult for lenders to recoup their investments in the cannabis industry in the event of a bankruptcy. If a company we acquire as part of a qualifying transaction were to experience a bankruptcy, there is no guarantee that U.S. federal bankruptcy protections would be available, which could have a material adverse effect on the financial condition and prospects of such business and on the rights of its lenders and security holders.

 

Any of the foregoing could have an adverse impact on our operations following a business combination. However, our efforts in identifying prospective target businesses are not restricted to the cannabis industry. Accordingly, if we acquire a target business in another industry, these risks will likely not affect us and we will be subject to other risks attendant with the specific industry in which we operate or target business which we acquire, none of which can be presently ascertained.

 

 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements in this prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:

 

 

·

our ability to select an appropriate target business or businesses;

 

 

 

 

·

our ability to complete our initial business combination;

 

 

 

 

·

our expectations around the performance of the prospective target business or businesses;

 

 

 

 

·

our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;

 

 

 

 

·

our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;

 

 

 

 

·

our potential ability to obtain additional financing to complete our initial business combination;

 

 

 

 

·

our pool of prospective target businesses;

 

 

 

 

·

the ability of our officers and directors to generate a number of potential acquisition opportunities;

 

 

 

 

·

our public securities’ potential liquidity and trading;

 

 

 

 

·

the lack of a market for our securities;

 

 

 

 

·

the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;

 

 

 

 

·

the trust account not being subject to claims of third parties; or

 

 

 

 

·

our financial performance following this offering.

 

The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the section of this prospectus entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

 
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USE OF PROCEEDS

 

We are offering 2,500,000 units at an offering price of $10.00 per unit. We estimate that the net proceeds of this offering together with the funds we will receive from the sale of the Private Placement Warrants will be used as set forth in the following table.

 

 

 

Without

Over-allotment Option

 

 

Over-allotment Option

Fully Exercised

 

Gross proceeds

 

 

 

 

 

 

Gross proceeds from units offered to public (1)

 

$ 25,000,000

 

 

$ 28,750,000

 

Gross proceeds from Private Placement Warrants offered in the private placement

 

 

1,319,760

 

 

 

1,517,724

 

Total gross proceeds

 

$ 26,319,760

 

 

$ 30,267,724

 

 

 

 

 

 

 

 

 

 

Estimated offering expenses (2)

 

 

 

 

 

 

 

 

Underwriting commissions (5.0% of gross proceeds from units offered to public, excluding the business combination fee) (3)

 

$ 1,250,000

 

 

$ 1,437,500

 

Legal fees and expenses

 

 

275,000

 

 

 

275,000

 

Printing and engraving expenses

 

 

10,000

 

 

 

10,000

 

Accounting fees and expenses

 

 

90,000

 

 

 

90,000

 

SEC/FINRA Expenses

 

 

35,000

 

 

 

35,000

 

OTC quotation and filing fees

 

 

30,000

 

 

 

30,000

 

Miscellaneous

 

 

60,000

 

 

 

60,000

 

Total offering expenses

 

$ 1,750,000

 

 

$ 1,937,500

 

 

 

 

 

 

 

 

 

 

Proceeds after estimated offering expenses

 

$ 24,569,760

 

 

$ 28,330,224

 

 

 

 

 

 

 

 

 

 

Held in trust account (3)

 

$ 25,000,000

 

 

$ 28,750,000

 

% of public offering size

 

 

100 %

 

 

100 %

Not held in trust account

 

$ 840,000

 

 

$ 840,000

 

 

The following table shows the use of the approximately $840,000 of net proceeds not held in the trust account. (4)

 

 

 

Amount

 

 

% of Total

 

Legal, accounting, due diligence, travel, and other expenses in connection with any business combination (5)

 

$ 250,000

 

 

 

29.8 %

Legal and accounting fees related to regulatory reporting obligations

 

 

120,000

 

 

 

14.3 %

Payment for office space, administrative and support services

 

 

180,000

 

 

 

21.4 %

Director & officer liability insurance premiums

 

 

150,000

 

 

 

17.9 %

Due diligence of prospective target businesses by officers, directors and insiders

 

 

20,000

 

 

 

2.4 %

Working capital to cover miscellaneous expenses

 

 

120,000

 

 

 

14.3 %

Total

 

$ 840,000

 

 

 

100.0 %

 _________ 

(1)

Includes gross proceeds from this offering of $25,000,000 (or $28,750,000 if the underwriters’ overallotment option is exercised in full) as well as amounts payable to public stockholders who properly redeem their shares in connection with our successful completion of our initial business combination.

 

 

(2)

A portion of the offering expenses have been paid from the proceeds of loans from our sponsor of up to $300,000 as described in this prospectus. These loans will be repaid upon completion of this offering out of the $840,000 of offering proceeds that has been allocated for the payment of offering expenses other than underwriting commissions. In the event that offering expenses are less than set forth in this table, any such amounts will be used for post-closing working capital expenses.

 

  

(3)

Includes up to $1,250,000 in underwriting commissions to be paid in cash at the closing of this offering. Specifically, the underwriters will be entitled to commissions ranging between $500,000 and $1,250,000 (or between $575,000 and $1,437,500 if the underwriters’ over-allotment option is exercised in full) at the closing of this offering, based on commissions equal to 5.0% (or 2.0% if such funds are introduced by our Sponsor) of the gross proceeds of this offering.  Such amount does not include the compensation of $750,000 (or $862,500 if the underwriters’ over-allotment option is exercised in full) representing the business combination agreement fee as described under the section “Underwriting” equal to 3.0% of the proceeds from this offering will be placed in a trust account located in the United States. The underwriters will not be entitled to any interest accrued on such amount. In addition, we will issue to WestPark Capital, Inc. warrants (a) at the closing of this offering in an amount equal to 2.0% of all securities sold in this offering and (b) at the closing of an initial business combination in an amount equal to 8.0% of all securities sold in this offering.

 

  

(4)

These expenses are estimates only. Our actual expenditures for some or all of these items may differ from the estimates set forth herein. For example, we may incur greater legal and accounting expenses than our current estimates in connection with negotiating and structuring our initial business combination based upon the level of complexity of such business combination. In the event we identify a business combination target in a specific industry subject to specific regulations, we may incur additional expenses associated with legal due diligence and the engagement of special legal counsel. In addition, our staffing needs may vary and as a result, we may engage a number of consultants to assist with legal and financial due diligence. We do not anticipate any change in our intended use of proceeds, other than fluctuations among the current categories of allocated expenses, which fluctuations, to the extent they exceed current estimates for any specific category of expenses, would not be available for our expenses. The amount in the table above does not include interest available to us from the trust account. 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. We estimate the interest earned on the trust account will be approximately $87,500 per year, assuming an interest rate of 0.35% per year; however, we can provide no assurances regarding this amount.”

 

  

(5)

Includes estimated amounts that may also be used in connection with our initial business combination to fund a “no shop” provision and commitment fees for financing.

    

 
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Of the net proceeds of this offering and the sale of the Private Placement Warrants, $25,000,000 (or $28,750,000 if the underwriters’ over-allotment option is exercised in full), including $750,000 (or $862,500 if the underwriters’ over-allotment option is exercised in full) in respect of a business combination fee payable to WestPark Capital, Inc., will be placed in a U.S.-based trust account , with Odyssey Transfer Agent & Trust Company acting as trustee, and will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.

  

We will have until 18 months from the closing of this offering to consummate an initial business combination. We estimate that the interest earned on the trust account will be approximately $87,500 per year, assuming an interest rate of 0.35% per year; however, we can provide no assurance regarding this amount. Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our franchise and income tax obligations (less up to $100,000 of interest to pay dissolution expenses), the proceeds from this offering and the sale of the Private Placement Warrants will not be released from the trust account until the earliest to occur of: (a) the completion of our initial business combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (B) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity, and (c) the redemption of our public shares if we are unable to complete our initial business combination within 18 months from the closing of this offering, subject to applicable law.

    

The net proceeds held in the trust account may be used as consideration to pay the sellers of a target business with which we ultimately complete our initial business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply the balance of the cash released from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital. There is no limitation on our ability to raise funds privately or through loans in connection with our initial business combination.

 

We believe that amounts not held in trust will be sufficient to pay the costs and expenses to which such proceeds are allocated. This belief is based on the fact that while we may begin preliminary due diligence of a target business in connection with an indication of interest, we intend to undertake in-depth due diligence, depending on the circumstances of the relevant prospective business combination, only after we have negotiated and signed a letter of intent or other preliminary agreement that addresses the terms of an initial business combination. However, if our estimate of the costs of undertaking in-depth due diligence and negotiating an initial business combination is less than the actual amount necessary to do so, we may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable. If we are required to seek additional capital, we could seek such additional capital through loans or additional investments from our sponsor, members of our management team or their affiliates, but such persons are not under any obligation to advance funds to, or invest in, us.

 

Commencing on the date of this prospectus, we have agreed to pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.

    

Our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of this offering further to unsecured promissory notes. As of September 30, 2021, we had drawn down $209,282 under the promissory notes with our sponsor to be used for a portion of the expenses of this offering. The loans are non-interest bearing and unsecured of which $150,000 is due at the earlier of December 31, 2021 or the closing of this offering and $150,000 is due at the earlier of March 31, 2022 or the closing of this offering. The loans will be repaid upon the closing of this offering out of the offering proceeds not held in the trust account.

 

In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such loans would be repaid only out of funds held outside the trust account. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used to repay such loaned amounts. The terms of such working capital loans by our sponsor or its affiliates, or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. At this time, other than the Forward Purchase Agreement, which we intend to enter into prior to the effective date of this offering, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.

  

 
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We intend to enter into a Forward Purchase Agreement with our sponsor, pursuant to which our sponsor may purchase an aggregate of up to 660,410 Pre-Business Combination Warrants at a price of $1.56 per warrant, for an aggregate purchase price of up to $1,030,240. Any purchase of the Pre-Business Combination Warrants would take place in one or more private placements in such amounts and at such time or times as the sponsor determines, with the full amount to have been purchased no later than immediately prior to the closing of our initial business combination.

 

The Forward Purchase Agreement will also provide that our sponsor may elect to purchase up to an aggregate of 1,309,131 Post-Business Combination Warrants, which will also have a purchase price of $1.56 per warrant. Any elections to purchase the up to 1,309,131 Post-Business Combination Warrants will take place in one or more private placements after the closing of our initial business combination, in such amounts and at such time or times as our sponsor determines.

 

The proceeds from purchases of Forward Purchase Warrants will not be deposited in the trust account. The Forward Purchase Warrants will have no right to vote on amendments to the warrant agreement prior to our initial business combination, except with respect to certain provisions relating solely to the transfer of Forward Purchase Securities. In all other respects, the terms of the Forward Purchase Warrants will be identical to the terms of the Private Placement Warrants. The Forward Purchase Securities, as long as they are held by our sponsor or its permitted transferees, will be subject to certain transfer restrictions and have certain registration rights. The sponsor’s right to purchase the Forward Purchase Warrants may not be transferred to any other parties.

  

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and the OTC rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination. See “Proposed Business — Permitted purchases of our securities” for a description of how our sponsor, initial stockholders, directors, officers, advisors or any of their affiliates will select which stockholders to purchase securities from in any private transaction.

 

The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A Common Stock or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

 

We may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) and the agreement for our initial business combination may require 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 so that we cannot satisfy the net tangible asset requirement or any net worth or cash requirements, we would not proceed with the redemption of our public shares or the initial business combination, and instead may search for an alternate business combination.

 

A public stockholder will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) our completion of an initial business combination, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (B) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity, and (iii) the redemption of our public shares if we are unable to complete our initial business combination within 18 months following the closing of this offering, subject to applicable law and as further described herein and any limitations (including but not limited to cash requirements) created by the terms of the proposed initial business combination. In no other circumstances will a public stockholder have any right or interest of any kind to or in the trust account.

   

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 sponsor shares, warrants, shares issued or issuable upon exercise of such warrants and any public shares held by them in connection with the completion of our initial business combination. In addition, our initial stockholders have agreed to waive their rights to liquidating distributions from the trust account with respect to any sponsor shares, warrants, shares issued or issuable upon exercise of such warrants held by them if we fail to complete our initial business combination within the prescribed time frame. However, if our sponsor or any of our officers, directors or affiliates acquires public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the prescribed time frame.

 

 
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DIVIDEND POLICY

 

We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

  

 
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DILUTION

 

The difference between the public offering price per share of Class A Common Stock, assuming no value is attributed to the warrants included in the units we are offering pursuant to this prospectus or the Private Placement Warrants, and the pro forma net tangible book value per share of our Class A Common Stock after this offering constitutes the dilution to investors in this offering. Such calculation does not reflect any dilution associated with the sale and exercise of warrants, including the Private Placement Warrants, which would cause the actual dilution to the public stockholders to be higher, particularly where a cashless exercise is utilized. Net tangible book value per share is determined by dividing our net tangible book value, which is our total tangible assets less total liabilities (including the value of Class A Common Stock which may be redeemed for cash), by the number of outstanding shares of our Class A Common Stock.

  

At September 30, 2021, our net tangible book deficit was $(350,650), or approximately $(14,026.00) per share of common stock. After giving effect to the sale of 2,500,000 shares of Class A Common Stock included in the units we are offering by this prospectus (or 2,875,000 shares of Class A Common Stock if the underwriters’ over-allotment option is exercised in full), the sale of the Private Placement Warrants and the deduction of underwriting commissions and estimated expenses of this offering, our pro forma net tangible book value at September 30, 2021 would have been $(1,187,588) or $(47,503.52) per share (or $(1,364,624) or $(54,584.96) per share if the underwriters’ over-allotment option is exercised in full), representing an immediate decrease in net tangible book value (as decreased by the value of the 2,500,000 shares of Class A Common Stock that may be redeemed for cash, or 2,875,000 shares of Class A Common Stock if the underwriters’ over-allotment option is exercised in full) of $33,477.52 per share (or $40,558.96 if the underwriters’ over-allotment option is exercised in full) to our initial stockholders as of the date of this prospectus and an immediate dilution to public stockholders from this offering of $10.00 per share. Total dilution to public stockholders from this offering will be $(47,493.52) per share (or $(54,574.96) if the underwriters’ over-allotment option is exercised in full).

   

Unlike other blank check companies, our sponsor is not being afforded the opportunity to purchase 20% of our stock at a nominal price; our sponsor will, instead, purchase Private Placement Warrants and Forward Purchase Warrants as described above, with an exercise price of $11.50 per share. Thus, unlike other situations in which the sponsor is entitled to a portion of the value of the company regardless as to whether the company increases or decreases in value, our sponsor will only participate in the value of our company if our stock price is at least 15% higher than the initial offering price in this offering (if such warrants are then-exercisable). We have formed this incentive structure to remove friction, align stockholder interests, and reward sustained, long-term performance. Accordingly, the minimal amount of Class B Common Stock held by our sponsor results in a considerable amount of accretive value as it pertains to the discussion of dilution detailed in this section. Refer to the calculation below of the pro forma net tangible book value per share after the offering. For the avoidance of doubt, such calculation does not reflect any dilution associated with the sale and exercise of warrants, including the Private Placement Warrants, which would cause the actual dilution to the public stockholders to be higher.

   

The following table illustrates the dilution to the public stockholders on a per-share basis, assuming no value is attributed to the warrants included in the units or the Private Placement Warrants:

   

 

 

NO EXERCISE

OF

OVER-ALLOTMENT OPTION

 

 

EXERCISE

OF

OVER-ALLOTMENT OPTION IN FULL

 

Public offering price

 

$ 10.00

 

 

$ 10.00

 

Net tangible book value before this offering

 

$ (14,026.00 )

 

$ (14,026.00 )

Decrease attributable to public stockholders and sale of the Private Placement Warrants

 

$ (33,477.52 )

 

$ (40,558.96 )

Pro forma net tangible book value after this offering

 

$ (47,503.52 )

 

$ (54,584.96 )

Dilution to public stockholders

 

$ (47,493.52 )

 

$ (54,574.96 )

Percentage of dilution to public stockholders

 

 

(474,935.2 )%

 

 

(545,749.6 )%

           

For purposes of presentation, we have reduced our pro forma net tangible book value after this offering (assuming no exercise of the underwriters’ over-allotment option) by $25,000,000 because holders of up to approximately 100.0% of our public shares may redeem their shares for a pro rata share of the aggregate amount then on deposit in the trust account at a per share redemption price equal to the amount in the trust account as set forth in our tender offer or proxy materials (initially anticipated to be the aggregate amount held in trust 2 business days prior to the commencement of our tender offer or stockholders meeting, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes), divided by the number of shares of Class A Common Stock sold in this offering.

   

 
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The following table sets forth information with respect to our initial stockholders and the public stockholders:

 

 

 

SHARES

PURCHASED

 

 

TOTAL

CONSIDERATION

 

 

AVERAGE PRICE PER SHARE

 

 

 

NUMBER

 

 

PERCENTAGE

 

 

AMOUNT

 

 

PERCENTAGE

 

 

 

 

Initial Stockholders (1)

 

 

25

 

 

 

0.00

%

 

$

25,000

 

 

 

0.10

%

 

$

1,000.00

 

Public Stockholders

 

 

2,500,000

 

 

 

100.00

%

 

$

25,000,000

 

 

 

99.90

%

 

$

10.00

 

 

 

 

2,500,025

 

 

 

100.00

%

 

$

25,025,000

 

 

 

100.00

%

 

 

 

 

_________ 

(1)

Assumes no exercise of the underwriters’ over-allotment option.

  

The pro forma net tangible book value per share after the offering is calculated as follows:

  

 

 

WITHOUT

OVER-ALLOTMENT

 

 

WITH

OVER-ALLOTMENT

 

Numerator:

 

 

 

 

 

 

Net tangible book value before this offering

 

$ (350,650 )

 

$ (350,650 )

Proceeds from this offering and sale of the Private Placement Warrants, net of expenses (1)

 

 

24,569,760

 

 

 

28,255,224

 

Plus: Offering costs accrued for and paid in advance, excluded from net tangible book value before this offering

 

 

343,302

 

 

 

343,302

 

Less: Business Combination Fee

 

 

(750,000 )

 

 

(862,500 )

Less: Proceeds held in trust subject to redemption (2)

 

 

(25,000,000 )

 

 

(28,750,000 )

 

 

$ (1,187,588 )

 

$ (1,364,624 )

   

 

 

WITHOUT

OVER-ALLOTMENT

 

 

WITH

OVER-ALLOTMENT

 

Denominator:

 

 

 

 

 

 

Shares of Class B Common Stock outstanding prior to this offering

 

 

25

 

 

 

25

 

Shares of Class A Common Stock included in the units offered

 

 

2,500,000

 

 

 

2,875,000

 

Less: Shares subject to redemption (2)

 

 

(2,500,000 )

 

 

(2,875,000 )

 

 

 

25

 

 

 

25

 

__________ 

(1)

Expenses applied against gross proceeds include offering expenses of $343,302 and underwriting commissions of $1,250,000 (or $1,437,500 if the underwriters’ over-allotment option is exercised in full) (excluding the business combination fee), based on commissions equal to 5.0% assuming such funds are introduced by the underwriters. The underwriting commissions, excluding the business combination fee, could be equal to 2.0%, or $500,000 (or $575,000 if the underwriters’ over-allotment option is exercised in full) if such funds are introduced by our Sponsor. See “Use of Proceeds”. 

 

 

(2)

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, executive officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. In the event of any such purchases of our shares prior to the completion of our initial business combination, the number of Class A Common Stock subject to redemption will be reduced by the amount of any such purchases, increasing the pro forma net tangible book value per share. See “Proposed Business — Effecting Our Initial Business Combination — Permitted Purchases of Our Securities.”

 

 
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CAPITALIZATION

 

The following table sets forth our capitalization at September 30, 2021 and as adjusted to give effect to the sale of our units and the Private Placement Warrants and the application of the estimated net proceeds derived from the sale of such securities: 

  

 

 

September 30, 2021

 

 

 

Actual

 

 

As Adjusted

 

Promissory notes – related party (1)

 

$ 209,282

 

 

$ -

 

Business combination fee

 

 

-

 

 

 

750,000

 

Class A Common Stock subject to possible redemption; - 0- shares actual and 2,500,000 shares as adjusted (2)

 

 

-

 

 

 

25,000,000

 

Stockholder’s equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 1,000,000 shares authorized; none issued and outstanding, actual and as adjusted

 

 

-

 

 

 

-

 

Class B Common Stock, $0.0001 par value, 5,000,000 shares authorized; 25 shares issued and outstanding, actual and as adjusted(3)

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

25,000

 

 

 

-

 

Accumulated deficit

 

 

(32,348 )

 

 

(1,187,588 )

Total stockholder’s equity

 

 

(7,348 )

 

 

(1,187,588 )

Total capitalization

 

$ 201,934

 

 

$ 24,562,412

 

     

(1)

Our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of this offering. The “as adjusted” information gives effect to the repayment of any loans made under such notes out of the proceeds from this offering and the sale of the Private Placement Warrants. As of September 30, 2021, we had drawn down $209,282 under the promissory notes with our sponsor to be used for a portion of the expenses of this offering.

 

 

(2)

Upon the completion of our initial business combination, we will provide our stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of 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 earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, subject to the limitations described herein whereby our net tangible assets will be maintained at a minimum of $5,000,001 and any limitations (including, but not limited to, cash requirements) created by the terms of the proposed initial business combination.

 

 

(3)

The as adjusted amount assumes no exercise of the underwriters’ over-allotment option.

 

 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the private placement of the Forward Purchase Warrants and the Private Placement Warrants, the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of this offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.

 

The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:

 

 

·

may significantly dilute the equity interest of investors in this offering;

 

 

 

 

·

may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;

 

 

 

 

·

could cause a change in control if a substantial number of shares of our 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;

 

 

 

 

·

may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and

 

 

 

 

·

may adversely affect prevailing market prices for our Class A Common Stock and/or warrants.

 

 

 

Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:

 

 

 

 

·

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, our ability to pay expenses, make capital expenditures and acquisitions, and fund 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;

 

 

 

 

·

limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and

 

 

 

 

·

other purposes and other disadvantages compared to our competitors who have less debt.

  

As indicated in the accompanying financial statements, at September 30, 2021, we had $2,000 in cash and $343,302 deferred offering costs. Further, we expect to continue to incur significant costs in the pursuit of our initial business combination plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.

   

 
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Results of Operations and Known Trends or Future Events

 

We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for this offering. Following this offering, we will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents after this offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. After this offering, we expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective business combination candidates. We expect our expenses to increase substantially after the closing of this offering.

 

Liquidity and Capital Resources

 

As indicated in the accompanying financial statements, at September 30, 2021, we had $2,000 in cash and a working capital deficit of $350,650.

  

Our liquidity needs have been satisfied prior to the completion of this offering through a capital contribution from our sponsor of $25,000 for the sponsor shares and up to $300,000 in loans available from our sponsor under unsecured promissory notes. We estimate that the net proceeds from (i) the sale of the units in this offering, after deducting offering expenses of approximately $500,000 and underwriting commissions of $1,250,000 ($1,437,500 if the underwriters’ over-allotment option is exercised in full) (excluding the business combination fee of $750,000 (or $862,500 if the underwriters’ over-allotment option is exercised in full) based on commissions equal to 5.0% assuming such funds are introduced by the underwriters, noting the underwriting commissions of 2.0% or $500,000 if such funds are introduced by our sponsor, and (ii) the sale of the Private Placement Warrants for a purchase price of $1,319,760 (or $1,517,724 if the over-allotment option is exercised in full), will be $24,569,760 (or $28,330,224 if the underwriters’ over-allotment option is exercised in full). Of this amount, $25,000,000 (or $28,750,000 if the underwriters’ over-allotment option is exercised in full) will be held in the trust account, which includes $750,000 (or $862,500 if the underwriters’ over-allotment option is exercised in full) of the business combination fee. 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. The remaining approximately $840,000 will not be held in the trust account. In the event that our offering expenses exceed our estimate of $840,000, we may fund such excess with funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our estimate of $840,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount.

  

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less the business combination fee) to complete our initial business combination. We may withdraw interest to pay franchise and income taxes. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

  

Prior to the completion of our initial business combination, we will have available to us the approximately $840,000 of proceeds held outside the trust account. We will use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.

 

In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. The terms of such working capital loans by our sponsor or its affiliates, or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

 

We expect our primary liquidity requirements during that period to include approximately $250,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; $120,000 for legal and accounting fees related to regulatory reporting requirements; $20,000 for due diligence of prospective target businesses; $180,000 for office space, utilities and secretarial and administrative support; $150,000 for director and officer liability insurance premiums, and approximately $120,000 for working capital that will be used for miscellaneous expenses and reserves (including taxes net of anticipated interest income).

  

These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.

 

 
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We do not believe we will need to raise additional funds following this offering in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of this offering and the sale of the Private Placement Warrants, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. 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. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

  

Controls and Procedures

 

We are not currently required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act. We will be required to comply with the internal control requirements of the Sarbanes-Oxley Act for the fiscal year ending December 31, 2022. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer would we be required to comply with the independent registered public accounting firm attestation requirement. Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend 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 independent registered public accounting firm attestation requirement.

 

Prior to the closing of this offering, we have not completed an assessment, nor has our independent registered public accounting firm tested our systems, of internal controls. We expect to assess the internal controls of our target business or businesses prior to the completion of our initial business combination and, if necessary, to implement and test additional controls as we may determine are necessary in order to state that we maintain an effective system of internal controls. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls. Many small and mid-sized target businesses we may consider for our initial business combination may have internal controls that need improvement in areas such as:

 

 

·

staffing for financial, accounting and external reporting areas, including segregation of duties;

 

 

 

 

·

reconciliation of accounts;

 

 

 

 

·

proper recording of expenses and liabilities in the period to which they relate;

 

 

 

 

·

evidence of internal review and approval of accounting transactions;

 

 

 

 

·

documentation of processes, assumptions and conclusions underlying significant estimates; and

 

 

 

 

·

documentation of accounting policies and procedures.

 

Because it will take time, management involvement and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and market expectations for our operation of a target business, we may incur significant expense in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing reporting.

 

Once our management’s report on internal controls is complete, we will retain our independent registered public accounting firm to audit and render an opinion on such report when required by Section 404 of the Sarbanes-Oxley Act. The independent registered public accounting firm may identify additional issues concerning a target business’s internal controls while performing their audit of internal control over financial reporting.

 

Quantitative and Qualitative Disclosures about Market Risk

 

The net proceeds of this offering and the sale of the Private Placement Warrants held in the trust account will be invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

 

 
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Related Party Transactions

 

On February 25, 2021, our sponsor purchased 287,500 sponsor shares for an aggregate purchase price of $25,000, or approximately $0.087 per share, of which 287,475 shares were relinquished on September 27, 2021. As of the date of this prospectus, our sponsor owns an aggregate of 25 sponsor shares. The per share purchase price of the sponsor shares was determined by dividing the amount of cash contributed to the company by the aggregate number of sponsor shares issued. Our charter will be amended such that the 25 sponsor shares will represent 20.0% of the voting power of our issued and outstanding shares of common stock immediately following this offering.

 

Commencing on the date of this prospectus, we have agreed to pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.

 

Our sponsor, 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. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.

 

Prior to the consummation of this offering, our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of this offering. These loans are non-interest bearing and unsecured of which $150,000 is due at the earlier of December 31, 2021 or the closing of this offering and $150,000 is due at the earlier of March 31, 2022 or the closing of this offering. The loan will be repaid upon the closing of this offering out of the $840,000 of offering proceeds that has been allocated to the payment of offering expenses (other than underwriting commissions).

  

In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. The terms of such working capital loans by our sponsor or its affiliates, or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

  

Our sponsor has agreed to purchase an aggregate of 846,000 warrants (or 972,900 warrants if the over-allotment option is exercised in full) at a price of $1.56 per warrant, for an aggregate purchase price of $1,319,760 , or $1,517,724 if the over-allotment option is exercised in full. The Private Placement Warrants will be identical to the units sold in this offering except that the Private Placement Warrants, so long as they are held by our sponsor or its permitted transferees, (i) will not be redeemable by us, (ii) may not (including the Class A Common Stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until after the completion of our initial business combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights. The holders will be permitted to transfer the Private Placement Warrants held by them to certain permitted transferees, including our officers and directors and other persons or entities affiliated with or related to them, but the transferees receiving such securities will be subject to the same agreements with respect to such securities as our sponsor. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in this offering, including as to exercise price, exercisability and exercise period.

 

We intend to enter into a Forward Purchase Agreement with our sponsor, pursuant to which our sponsor may purchase an aggregate of up to 660,410 Pre-Business Combination Warrants at a price of $1.56 per warrant, for an aggregate purchase price of up to $1,030,240. Any purchase of the Pre-Business Combination Warrants would take place in one or more private placements in such amounts and at such time or times as the sponsor determines, with the full amount to have been purchased no later than immediately prior to the closing of our initial business combination.

 

The Forward Purchase Agreement will also provide that our sponsor may elect to purchase up to an aggregate of 1,309,131 Post-Business Combination Warrants, which will also have a purchase price of $1.56 per warrant. Any elections to purchase the up to 1,309,131 Post-Business Combination Warrants will take place in one or more private placements after the closing of our initial business combination, in such amounts and at such time or times as our sponsor determines.

 

The proceeds from purchases of Forward Purchase Warrants will not be deposited in the trust account. The Forward Purchase Warrants will have no right to vote on amendments to the warrant agreement prior to our initial business combination, except with respect to certain provisions relating solely to the transfer of Forward Purchase Securities. In all other respects, the terms of the Forward Purchase Warrants will be identical to the terms of the Private Placement Warrants. The Forward Purchase Securities, as long as they are held by our sponsor or its permitted transferees, will be subject to certain transfer restrictions and have certain registration rights. The sponsor’s right to purchase the Forward Purchase Warrants may not be transferred to any other parties.

 

Pursuant to a registration rights agreement we will enter into with our initial stockholders and the representative of the underwriters on or prior to the closing of this offering, we may be required to register certain securities for sale under the Securities Act. These holders are entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by us. We will bear the costs and expenses of filing any such registration statements. See the section of this prospectus entitled “Certain Relationships and Related Party Transactions.”

 

Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results

 

As of the date of this prospectus, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations. No unaudited quarterly operating data is included in this prospectus, as we have conducted no operations to date.

 

 
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JOBS Act

 

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

  

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the report of independent registered public accounting firm providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of this offering or until we are no longer an “emerging growth company,” whichever is earlier.

 

 
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PROPOSED BUSINESS

 

Our Company

 

We are a blank check company formed under the laws of the State of Delaware on February 24, 2021. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.”

 

While our efforts to identify a target business may span many industries and regions worldwide, we intend to focus our search on companies in the cannabis industry with enterprise values that are greater than the net proceeds of this offering and the sale of the Private Placement Warrants. Potential areas of interest in the cannabis industry include but are not limited to domestic and international businesses that are ancillary to the production, distribution and sale of cannabis as well as businesses that legally cultivate, process, and/or retail cannabis. Our ability to locate a potential target is subject to the uncertainties discussed elsewhere in this prospectus.

  

Although the cannabis industry has evolved significantly and continues to mature, we believe the industry is still undercapitalized and companies operating across multiple verticals consistently have trouble accessing capital from traditional sources. Historically, businesses that operate within the legal cannabis industry in the U.S. have relied largely on private money — friends and family, high net-worth individuals and small-to-medium-sized private investment firms, as institutional investors have shied away from companies in the cannabis industry, especially those that are directly involved in the production, distribution , and retail sale of cannabis. Even businesses that do not touch the plant and instead provide ancillary services to the industry have found it extremely difficult to access large pools of institutional capital. As a result, we believe we have the opportunity to create a compelling structure that will enable a target company to go public, thereby accessing significant capital for both organic growth and for acquisitions of synergistic and often undercapitalized assets. Given the rapid growth of the legal cannabis market, management believes that the ability to move quickly to capitalize on new opportunities will be critical to success in creating stakeholder value.

  

None of our officers, directors, promoters and other affiliates has engaged in any substantive discussions on our behalf with representatives of other companies regarding the possibility of a potential business combination with us.

 

Our Management Team

 

Sabas Carrillo, our Director, Chairman and Chief Executive Officer, is the Founder and CEO of Adnant, LLC, an accounting and consulting firm focused on the cannabis industry with an expertise in advising companies on the go-public process. Mr. Carrillo has over 18 years of experience in accounting and over 12 years of experience working exclusively with start-ups, having helped found, grow, and lead companies through successful exits. He focuses on creating and taking public innovative companies with high growth potential. Mr. Carrillo is an SEC financial reporting expert with extensive experience in M&A work. He serves as Interim CFO for Cookies Creative Consulting & Promotions Inc. and was on the go-public team for Weedmaps and General Cannabis, Inc., a publicly traded company (OTC: CANN) from 2010 to 2012. In 2014, Mr. Carrillo led the team that took the first cannabis dispensary public, Blüm Oakland, on behalf of Terra Tech Corp. (OTC: TRTC). Mr. Carrillo is co-founder and CFO of two cannabis-focused funds: Mesh Ventures and 1212 Ventures. Among his advisory roles to companies and brands in the industry, Mr. Carrillo’s client list includes MedMen, GlassHouse Group, Loudpack, GTI, NorCal Cannabis Company, Beboe, Acreage Holdings, Verano Holdings and Grass Lands (first cannabis licensed concessions at a venue). Passionate about working with non-profits such as Las Fotos Project, Downtown Women’s Center, The Good Shepherd Center, and Brilliant Corners, Mr. Carrillo is also the founder of Alta Loma Group, LLC, a real estate holding company on a mission to provide quality affordable housing in South Central Los Angeles. Mr. Carrillo received his B.A. in Economics with a minor in computer programming from the University of California, Los Angeles.

 

We believe the expertise and experience of Mr. Carrillo in sourcing and creating unique opportunities as well as structuring complex transactions involving creative capital deployment, will make us a partner of choice for potential business combination targets. We intend to focus our efforts on evaluating business combination targets by leveraging the management team and board of directors’ deep network of public and private enterprises, experienced operators, restructuring advisors, attorneys, accountants, family offices, hedge funds, and private equity firms.

 

Cathy Ong, our Director and Chief Financial Officer, has over five years of accounting experience, providing financial statement audit services to private and public companies in the manufacturing, distribution, technology, and automotive industries and advisory and consulting services in the cannabis industry. She currently serves as an Accounting Manager at Adnant LLC. Since joining Adnant in 2018, Ms. Ong has worked with cannabis businesses from start-ups to multi-state operators, primarily focusing on accounting for complex transactions and financial reporting, including those subject to CSE and SEC filing requirements. Ms. Ong serves as an advisor to financial executives within the industry and an active liaison with stakeholders, executives, attorneys, auditors, and other parties involved in the public filing process. Her focus is on helping clients navigate through unique accounting scenarios in the cannabis industry and setting the precedent in accounting interpretation for industry participants. She is an advocate of challenging industry norms, having left public accounting to join Adnant and trailblazing a career in the cannabis industry. Ms. Ong holds a Bachelor of Science degree in Business Administration with an option in Accounting from California State University, Long Beach and is a licensed CPA in the state of California.

 

 
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Robert Baca, our Director, Vice President and Secretary has over a decade of experience as a corporate attorney and consultant navigating Private Equity M&A and Leveraged Finance transactions for clients while at institutions including Kirkland & Ellis LLP, Paul Hastings LLP, and Goldman Sachs. He has represented U.S. and foreign financial institutions including JP Morgan Chase, Bank of America, Morgan Stanley, Barclays, UBS, and RBC, private equity sponsors including KKR, Warburg Pincus, Blackstone, and Saw Mill Capital, and public and private companies in connection with mergers and acquisitions, securities offerings, and commercial financings including secured and unsecured credit facilities and acquisition financings. Before joining Adnant LLC in 2020 he spent three years overseeing the licensing and compliance efforts of cannabis operations in Northern California including retail, manufacturing, distribution, and cultivation companies during the turn of adult-use legalization in the state. He also served as Executive Director of the Sacramento Cannabis Industry Association working closely with state and local regulators, stakeholders, and key community constituencies including neighborhood and business associations, business owners, and residents. He now serves as General Counsel to Adnant LLC and participates in the leadership of their Strategic Initiatives department. Mr. Baca graduated with a BA from Dartmouth College with honors, a JD from the University of Chicago Law School, and a Master of Science in Finance from Indiana University’s Kelley School of Business. He is a licensed member of the State Bars of New York and California and is an adjunct professor of law at the University of the Pacific’s McGeorge School of Law teaching Marijuana Law.

  

Jaime Nava, our Vice President and Treasurer has over five years of operational accounting and management experience in the cannabis industry having built the accounting and finance infrastructure for over 50 dispensaries and cultivations in California and advised on the same for public cannabis multi-state operators. He is a pioneer in cannabis banking and compliance having guided key constituencies in the development and launch of cannabis related business account and compliance pilot programs for both national financial institutions and local federal credit unions. Mr. Nava has also provided extensive support for cannabis focused investment fund development, strategy, capital deployment, and investor relations. At Adnant, LLC he provides advisory and consulting services for cannabis companies and investment funds particularly related to their accounting, banking, and management policies and operating procedures. Prior and current clients include Cookies, AmericannMade, 1212 Ventures, and Mesh Ventures. He has focused principally on helping industry clients navigate and execute early stage and enterprise hypergrowth strategies. Mr. Nava holds a Bachelor of Science degree in Biology from California State University, San Bernardino.

  

Past performance of our management team or Adnant Concepcion Sponsor LLC is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to identify a suitable candidate for our initial business combination. You should not rely on the historical performance record of our management team or Adnant Concepcion Sponsor LLC as indicative of our future performance. Additionally, in the course of their respective careers, members of our management team have been involved in businesses and deals that were unsuccessful. Our officers and directors have no experience with blank check companies or special purpose acquisition companies. In addition, our executive officers and directors may have conflicts of interest with other entities to which they owe fiduciary or contractual obligations with respect to initial business combination opportunities. For a list of our executive officers, directors and entities for which a conflict of interest may or does exist between such persons and the company, as well as the priority and preference that such entity has with respect to performance of obligations and presentation of business opportunities to us, please refer to the table and subsequent explanatory paragraph under “Management — Conflicts of Interest”.

 

Our Forward Purchase Agreement

 

We believe our ability to complete our initial business combination will be enhanced by our having entered into the Forward Purchase Agreement and the sale of the Private Placement Warrants. These purchases are intended to provide us with appropriate funding for our initial business combination.

 

Under the Forward Purchase Agreement, which we intend to enter into prior to the effective date of this offering, our sponsor may purchase an aggregate of up to 660,410 Pre-Business Combination Warrants at a price of $1.56 per Pre-Business Combination Warrant. Any purchase of the up to 660,410 Pre-Business Combination Warrants would take place in one or more private placements in such amounts and at such time or times as our sponsor determines, with the full amount to have been purchased no later than immediately prior to the closing of our initial business combination.

 

The Forward Purchase Agreement will also provide that our sponsor may elect to purchase up to an aggregate of 1,309,131 Post-Business Combination Warrants, which will also have a purchase price of $1.56 per warrant. Any elections to purchase the up to 1,309,131 Post-Business Combination Warrants will take place in one or more private placements after the closing of our initial business combination, in such amounts and at such time or times as our sponsor determines.

 

The terms of the Forward Purchase Warrants will be identical to the terms of the Outstanding Redeemable Warrants included in the units being issued in this offering, except that, among other things, the Forward Purchase Warrants will have no right to vote on amendments to the warrant agreement prior to our initial business combination (with limited exceptions) and, as long as the Forward Purchase Securities are held by our sponsor or its permitted transferee, they will be subject to certain transfer restrictions and have certain registration rights.

 

Our Business Strategy & Competitive Strengths

 

Our strategy is to pursue one or more business combinations with companies servicing and operating adjacent, or ancillary, to the cannabis sector as well as businesses that legally cultivate, process , and/or retail cannabis.

 

We intend to focus our search for an initial business combination on private companies that have either positive operating cash flow or compelling unit economics combined with a clear path to positive operating cash flow, tangible or intangible assets with significant barriers to entry, and experienced incentivized management teams. Our selection process is expected to leverage a unique set of relationships with proven deal-sourcing capabilities to provide us with a strong pipeline of potential targets.

 

We expect to distinguish ourselves with our ability to:

 

 

·

Leverage our Extensive Network of Relationships to Create a Unique Pipeline of Acquisition Opportunities. We believe the combination of Mr. Carrillo’s broad investment and advisory experience in addition to our ability to access a deep network of public and private enterprises, experienced operators, restructuring advisors, attorneys, accountants, family offices, hedge funds, and private equity firms will enable us to identify and evaluate compelling target businesses.

 

 

 

 

·

Employ a Rigorous Systematic Process of Identifying Target Companies and Acquiring a Business that will be Well-Received by the Public Markets. We believe that our management’s strong M&A and investment track record in both private and public markets will provide a distinct advantage for identifying, valuing and completing a business combination that will meet our investors’ expectations.

 

 

 

 

·

Providing an Alternative Path to Becoming Public. We believe our structure will make us an attractive business combination partner to prospective target businesses that desire to become a publicly quoted company. A merger with us will offer a target business an alternative process to a public quotation rather than the traditional initial public offering process. We believe that target businesses may favor this alternative, which we believe is less expensive, while offering greater certainty of execution than the traditional initial public offering. Furthermore, once a proposed business combination is approved by our stockholders and the transaction is consummated, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions that could prevent the offering from occurring. Once public, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholder’s interests than it would as a private company. A public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented management. With public company corporate governance standards, a target business may become attractive to public investors. 

 

 

 

 

·

Strong and Stable Financial Position with Flexibility. With funds in the trust account of $25,000,000 (or approximately $28,750,000 if the over-allotment option is exercised in full), which is the amount we would have available to use for a business combination, we offer a target business a variety of options such as providing the owners of a target business with shares in a public company and a public means to sell such shares, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to consummate 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, since we have no specific business combination under consideration, we have not taken any steps to secure third party financing and there can be no assurance that it will be available to us.

    

 
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We intend to pursue opportunities across a number of verticals providing support to the cannabis industry with a particular focus on companies within the following sectors:

 

 

·

Hardware. Vaporization products, cannabis accessories and other products featuring a recurring revenue model

 

 

 

 

·

Software. Seed to sale tracking, dispensary business software, point of sale solutions and compliance-related software

 

 

 

 

·

Labs. Cannabis testing across flower, concentrates and infused products

 

 

 

 

·

Distribution. Supply chain partners, inventory management, shipping and logistics

 

 

 

 

·

Real Estate. Retail and industrial properties for recreational and medical cannabis facilities

 

 

 

 

·

Brands and Retail. Focus on unique business models such as licensing and direct to consumer distribution and sale of cannabis and cannabis products

 

 

 

 

·

Packaging and Manufacturing. Premier cannabis compliant packaging across all product types; extraction, infusion, and other manufacturing services for cannabis products

 

 

 

 

·

Cultivation. Cultivation facilities and operations with proven management teams and supply contracts

 

 

 

In pursuit of our business strategy, we intend to:

 

 

 

 

·

Opportunity Identification. Utilize the extensive network of our management team to identify candidates for a possible business combination including cannabis industry investors, business owners, industry thought leaders, advisors, members of our sponsor, financial intermediaries, managers and others;

 

 

 

 

·

Target and Industry Evaluation. Conduct a thorough assessment of the growth potential for possible targets including research and analysis of current and future market opportunities;

 

 

 

 

·

Transaction Assessment. Conduct rigorous due diligence on one or more targets, including a review of company-specific information as well as an analysis of the overall industry and competitive landscape;

 

 

 

 

·

Financing. Arrange appropriate financing to provide the target company with adequate capital to execute its business plan;

 

 

 

 

·

Transaction Pricing. Structure the transaction at a price that management deems attractive relative to its view of intrinsic value and future potential;

 

 

 

 

·

Operational Optimization. Implementation of operational and financial business planning which we believe can accelerate the growth of the target while providing it with appropriate financial and operational flexibility; and

 

 

 

 

·

Follow-on Acquisition Opportunities. Seek further strategic acquisitions, divestitures or other transactions following a business combination with the goal of further enhancing stockholder value.

 

Acquisition Criteria

 

Consistent with our strategy, we have identified the following general criteria and guidelines which we believe are important in evaluating prospective target businesses with enterprise values that are greater than the net proceeds of this offering and the sale of the Private Placement Warrants, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines. We intend to acquire one or more businesses that we believe has the following characteristics:

  

 

·

Benefits from a access to public equity markets. Access to the public equity markets could allow the target company to utilize additional forms of capital, enhancing its ability to pursue acquisitions and capital projects, and/or strengthen its balance sheet and recruit and retain key employees through the use of publicly-traded equity compensation.

 

 

 

 

·

Has a strong competitive position and growing platform. We will seek to invest in companies that we believe possess not only established business models and sustainable competitive advantages, but also a growing platform for equity investors.

 

 

 

 

·

Has a strong professional management team with deep networks within the cannabis sector and the ability to adapt to a quickly changing business environment.

 

 

 

 

·

Operated by a talented and incentivized management team. We will focus on companies with strong and experienced management teams that desire a significant equity stake in the post-business combination company. We will seek to partner with a management team and/or seller who is well-incentivized and aligned in an effort to create stockholder value.

 

 

 

 

·

Benefits from our ability to uniquely structure transaction to unlock and maximize value. We will look for situations where our extensive experience and creativity can architect a win-win solution for both sides of the transaction.

 

These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to our initial business combination, which, as discussed in this prospectus, would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC.

 

 
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Initial Business Combination

 

Our initial business combination will be with a target business or businesses with an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects.

  

We will have until  18 months from the closing of this offering to consummate an initial business combination. We anticipate structuring our initial business combination either (i) in such a way 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, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other reasons. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the “Investment Company Act”. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of the 80% of net assets test. If the initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the transactions and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.

 

Our Business Combination Process

 

We believe our management team’s operational and investment track record in the cannabis industry and related sectors will provide us with a deep understanding of challenges faced by business operators and owners of cannabis-related assets. We expect to conduct robust due diligence as we evaluate a prospective target business to assess attributes that differentiate sustainable cannabis-servicing businesses from unattractive assets. We expect that our diligence will include an assessment of the company’s competitive advantage through meetings with management and key employees, key customers, interactions with consultants and experts within our network, visits of key operating facilities and a review of financial, legal and operational documents. We intend to utilize our ability to bring creative solutions from a capital structure, growth, vision and operational standpoint to unlock stockholder value. In addition, we expect to retain and work with financial advisors and legal counsel as well as industry consultants to conduct due diligence, develop strategic plans, and implement operational strategies.

 

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 or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view.

 

Certain of our officers and directors presently have fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations to present the opportunity to such entity, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We believe, however, that the fiduciary duties or contractual obligations of our officers or directors will not materially affect our ability to complete our initial business combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.

 

Each of our officers has agreed not to become an officer of any other special purpose acquisition company that has publicly filed a registration statement for its initial public offering until we have entered into a definitive agreement regarding our initial business combination or we have liquidated the trust account.

 

 
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Status as a Public Company

 

We believe our structure will make us an attractive business combination partner to target businesses. As a public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination with us. Following an initial business combination, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholder’s interests than it would as a private company. A target business can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our shares of Class A Common Stock (or shares of a new holding company) or for a combination of our shares of Class A Common Stock and cash, allowing us to tailor the consideration to the specific needs of the sellers.

   

Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more expeditious and cost-effective method to becoming a public company than the typical initial public offering. The typical initial public offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road show efforts that may not be present to the same extent in connection with an initial business combination with us.

 

Furthermore, once a proposed initial business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business combination, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholder’s interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.

   

While we believe that our structure and our management team’s backgrounds will make us an attractive business partner, some potential target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed initial business combination, negatively.

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

 

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

 

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this 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 30th , and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior December 31st.

    

 
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Our Management Team

 

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, in the exercise of their respective business judgement, deem necessary to our affairs until we have completed our initial business combination. The amount of time that any member of our management team will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process. We do not have an employment agreement with any member of our management team.

 

We believe our management team’s operating and transaction experience and relationships with companies will provide us with a substantial number of potential business combination targets. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships in various industries. This network has grown through the activities of our management team sourcing, acquiring and financing businesses, our management team’s relationships with sellers, financing sources and target management teams and the experience of our management team in executing transactions under varying economic and financial market conditions. See the section of this prospectus entitled “Management” for a more complete description of our management team’s experience.

 

Financial Position

 

With funds available for an initial business combination initially in the amount of $25,000,000 (or $28,750,000 if the underwriters’ over-allotment option is exercised in full), in each case before fees and expenses associated with our initial business combination, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.

 

Effecting Our Initial Business Combination

 

We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following this offering. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the private placement of the Forward Purchase Warrants and the Private Placement Warrants, the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of this offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.

 

If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A Common Stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.

 

We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. In addition, we intend to target businesses larger than we could acquire with the net proceeds of this offering and the sale of the Private Placement Warrants, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously with the completion of our initial business combination. In the case of an initial business combination funded with assets other than the trust account assets, our proxy materials or tender offer documents disclosing the initial business combination would disclose the terms of the financing and, only if required by law, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately, or through loans in connection with our initial business combination. At this time, other than the Forward Purchase Agreement, which we intend to enter into prior to the effective date of this offering, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.

  

 
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Sources of Target Businesses

 

We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers and investment professionals. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us by calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read this prospectus and know what types of businesses we are targeting. Our officers and directors, as well as our sponsor and their affiliates, may also bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors and our sponsor and their affiliates. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee, advisory fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors, or any entity with which our sponsor or officers are affiliated, be paid any finder’s fee, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation by the company prior to, or in connection with any services rendered for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). None of our sponsor, executive officers or directors, or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated initial business combination. We have agreed to pay an affiliate of our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support and to reimburse our sponsor for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination. Some of our officers and directors may enter into employment or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an initial business combination candidate.

 

We are not prohibited from pursuing an initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors or making the initial business combination through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek to complete our initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.

 

As more fully discussed in the section of this prospectus entitled “Management — Conflicts of Interest,” if any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.

 

Selection of a Target Business and Structuring of our Initial Business Combination

 

The fair market value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.

 

In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no basis for investors in this offering to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.

 

To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.

 

 
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In evaluating a prospective business target, we expect to conduct a thorough due diligence review, which may encompass, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as well as a review of financial and other information that will be made available to us.

 

The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.

 

Lack of Business Diversification

 

For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, we intend to focus our search for an initial business combination in a single industry. By completing our initial business combination with only a single entity, our lack of diversification may:

 

 

·

subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and

 

 

 

 

·

cause us to depend on the marketing and sale of a single product or limited number of products or services.

  

Limited Ability to Evaluate the Target’s Management Team

 

Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’ management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.

 

We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.

 

Following an initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.

 

Stockholders May Not Have the Ability to Approve Our Initial Business Combination

 

We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.

 

TYPE OF TRANSACTION

 

WHETHER STOCKHOLDER APPROVAL IS REQUIRED

 

Purchase of assets

 

No

 

Purchase of stock of target not involving a merger with the company

 

No

 

Merger of target into a subsidiary of the company

 

No

 

Merger of the company with a target

 

Yes

 

 

 
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Permitted Purchases of our Securities

 

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and the OTC rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination.

 

The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A Common Stock or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

 

Our sponsor, officers, directors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such stockholder has already submitted a proxy with respect to our initial business combination. Our sponsor, officers, directors, advisors or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.

 

Any purchases by our sponsor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchases are subject to such reporting requirements.

 

Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination

 

We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A Common Stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be approximately $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 business combination fee we will pay to the underwriters. 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 sponsor shares, warrants, shares issued or issuable upon exercise of such warrants and any public shares held by them in connection with the completion of our initial business combination.

 

Issuance of Distributable Adnant Redeemable Warrants to Holders of Shares of Class A Common Stock Not Electing Redemption

 

An aggregate of 555,555 Distributable Adnant Redeemable Warrants will be issued on a pro-rata basis only to holders of record of our shares of Class A Common Stock issued in this offering that are outstanding after the Initial Business Combination Redemption Time. The Adnant Distribution Time will be immediately after the Initial Business Combination Redemption Time and immediately prior to the closing of our initial business combination.

 

Each such remaining share of Class A Common Stock issued in this offering will be issued that number of Distributable Adnant Redeemable Warrants calculated as the aggregate number of Distributable Adnant Redeemable Warrants (555,555 such warrants) divided by the aggregate number of then-outstanding shares of Class A Common Stock (after we have redeemed shares of Class A Common Stock that the holders thereof have elected to redeem in connection with our initial business combination). The minimum number of Distributable Adnant Redeemable Warrants that with respect to each share of Class A Common Stock that is not redeemed is two-ninths of a warrant, assuming no holders of Class A Common Stock elect to redeem any of their shares. Public stockholders who elect to redeem their shares of Class A Common Stock will not receive any Distributable Adnant Redeemable Warrants in respect of such redeemed shares of Class A Common Stock. The contingent right to receive the Distributable Adnant Redeemable Warrants will remain attached to our shares of Class A Common Stock, will not be separately transferable, assignable or salable, and will not be evidenced by any form of certificate or instrument.

 

Our Distributable Adnant Redeemable Warrants are otherwise identical to our Outstanding Redeemable Warrants, including with respect to exercise price, exercisability and exercise period. No fractional Distributable Adnant Redeemable Warrants will be issued other than as part of the units, no cash will be paid in lieu of fractional Distributable Adnant Redeemable Warrants and only whole Distributable Adnant Redeemable Warrants will trade. The Distributable Adnant Redeemable Warrants will be fungible with our Outstanding Redeemable Warrants and we expect that they will become tradable on the first trading day following their distribution, under the same stock symbol as the Outstanding Redeemable Warrants.

 

Manner of Conducting Redemptions

 

We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A Common Stock upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed initial 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 the law or stock exchange requirement.

 

If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:

 

 

·

conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and

 

 

 

 

·

file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.

  

 
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Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase 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 are not purchased by our sponsor, 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 to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.

 

If, however, stockholder approval of the transaction is required by law or stock exchange requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:

 

 

·

conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and

 

 

 

 

·

file proxy materials with the SEC.

  

In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.

 

If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the 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 will count toward this quorum and pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote their sponsor shares, shares issued upon exercise or conversion of warrants and any public shares purchased during or after this offering (including in open market and privately negotiated transactions) in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial stockholder’s sponsor shares, we would need only 1,275,013, or 51.0%, of the 2,500,000 public shares sold in this offering to be voted in favor of an initial business combination (assuming all outstanding shares are voted and or 637,481, or 25.5%, assuming only the minimum number of shares representing a quorum are voted and assuming our sponsor, officers, directors and their affiliates do not purchase any units in or after this offering) in order to have our initial business combination approved (assuming the over-allotment option is not exercised). We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, 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.

 

Our amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial 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 initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of Class A Common Stock submitted for redemption will be returned to the holders thereof.

 

 
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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 will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in this offering, which we refer to as the “Excess Shares.” Such restriction shall also be applicable to our affiliates. 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 initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in this offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholder’s ability to redeem no more than 15% of the shares sold in this offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with an initial 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 stockholder’s 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 initial 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, 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. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two days prior to the vote on the initial business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.

 

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker 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 stockholder’s vote on an initial business combination, and a holder could simply vote against a proposed initial business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the initial business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the initial business combination during which he or she could monitor the price of the company’s 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 initial business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the initial business combination is approved.

   

Any request to redeem such shares, once made, may be withdrawn at any time up to 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 initial business combination is not completed, we may continue to try to complete an initial business combination with a different target until  18 months from the closing of this offering.

 

Redemption of Public Shares and Liquidation if no Initial Business Combination

 

Our amended and restated certificate of incorporation provides that we will have only 18 months from the closing of this offering to complete our initial business combination. If we are unable to complete our initial business combination within such 18-month period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, 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 franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 18-month time period.

   

 
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Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any sponsor shares, warrants, shares issued or issuable upon exercise of such warrants held by them if we fail to complete our initial business combination within 18 months from the closing of this offering. However, if our sponsor, officers or directors acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 18-month time period.

 

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 (i) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (ii) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A Common Stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 both immediately prior to and upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.

   

We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $840,000 of proceeds held outside the trust account, although we cannot assure you that there will be sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any franchise and income tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay franchise and income taxes on interest income earned on the trust account balance, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.

 

If we were to expend all of the net proceeds of this offering and the sale of the Private Placement Warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.00. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.00. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.

 

Although we 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, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. Marcum LLP, our independent registered public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in the trust account.

 

In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

 

 
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In the event that the proceeds in the trust account are reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot assure you that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.00 per public share.

 

We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, 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 this offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately $840,000 from the proceeds of this offering with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors. In the event that our offering expenses exceed our estimate of $840,000, we may fund such excess with funds from the funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our estimate of $840,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount.

  

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months from the closing of this offering 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 18 months from the closing of this offering, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our initial business combination within 18 months from the closing of this offering, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 24th month and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

   

 
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Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.

 

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 of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.

 

Our public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend any provisions of our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of this offering or (B) with respect to any other provision relating to stockholder’s rights or pre-initial business combination activity, and (iii) the redemption of all of our public shares if we are unable to complete our business combination within 18 months from the closing of this offering, subject to applicable law. In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the initial business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights as described above. 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.

    

Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419

 

The following table compares the terms of this offering to the terms of an offering by a blank check company subject to the provisions of Rule 419. This comparison assumes that the gross proceeds, underwriting commissions and underwriting expenses of our offering would be identical to those of an offering undertaken by a company subject to Rule 419, and that the underwriters will not exercise their over-allotment option. None of the provisions of Rule 419 apply to our offering.

 

 

 

TERMS OF OUR OFFERING

 

TERMS UNDER A RULE 419 OFFERING

Escrow of offering proceeds

 

 

 

 

$25,000,000 of the net proceeds of this offering and the sale of the Private Placement Warrants will be deposited into a U.S.-based trust account, with Odyssey Transfer Agent & Trust Company acting as trustee.

 

 

 

 

Approximately $20,700,000 of the offering proceeds would be deposited into either an escrow account with an insured depositary institution or in a separate bank account established by a broker-dealer in which the broker-dealer acts as trustee for persons having the beneficial interests in the account.

  

Investment of net proceeds

 

 

 

$25,000,000 of the net offering proceeds and the sale of the Private Placement Warrants held in trust will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.

 

 

Proceeds could be invested only in specified securities such as a money market fund meeting conditions of the Investment Company Act or in securities that are direct obligations of, or obligations guaranteed as to principal or interest by, the United States.

 

 

 
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TERMS UNDER A RULE 419 OFFERING

Receipt of interest on escrowed funds

 

 

 

Interest on proceeds from the trust account to be paid to stockholders is reduced by (i) any income or franchise taxes paid or payable, and (ii) in the event of our liquidation for failure to complete our initial business combination within the allotted time, up to $100,000 of net interest that may be released to us should we have no or insufficient working capital to fund the costs and expenses of our dissolution and liquidation.

 

 

 

Interest on funds in escrow account would be held for the sole benefit of investors, unless and only after the funds held in escrow were released to us in connection with our completion of a business combination.

 

Limitation on fair value or net assets of target business

 

Our initial business combination will be with a target business or businesses with an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination.

 

The fair value or net assets of a target business must represent at least 80% of the maximum offering proceeds.

 

 

  

 

 

Trading of securities issued

 

 

 

We expect the units will begin trading on or promptly after the date of this prospectus. The Class A Common Stock and Outstanding Redeemable Warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless WestPark Capital informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date of this prospectus. If the over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, an additional Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the over-allotment option. We expect that the Distributable Adnant Redeemable Warrants will become tradable on the first trading day following the distribution thereof. The Distributable Adnant Redeemable Warrants will be fully fungible with our Outstanding Redeemable Warrants and will trade under the same stock symbol.

   

 

 

No trading of the units or the underlying Class A Common Stock and warrants would be permitted until the completion of a business combination. During this period, the securities would be held in the escrow or trust account.

 

Exercise of the warrants

 

 

 

The warrants cannot be exercised until the later of 30 days after the completion of our initial business combination or 12 months from the closing of this offering.

 

 

 

The warrants could be exercised prior to the completion of a business combination, but securities received and cash paid in connection with the exercise would be deposited in the escrow or trust account.

     

Election to remain an investor

 

 

 

We will provide our public stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, upon the completion of our initial business combination, subject to the limitations described herein. We may not be required by law to hold a stockholder vote. We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. If we are not required by law and do not otherwise decide to hold a stockholder vote, we will, pursuant to our amended and restated certificate of incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under the SEC’s proxy rules. 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. If, however, we hold a stockholder vote, we will, like many blank check companies, offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules. If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. Additionally, each public stockholder may elect to redeem their public shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction. 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.

 

 

A prospectus containing information pertaining to the business combination required by the SEC would be sent to each investor. Each investor would be given the opportunity to notify the company in writing, within a period of no less than 20 business days and no more than 45 business days from the effective date of a post-effective amendment to the company’s registration statement, to decide if it elects to remain a stockholder of the company or require the return of its investment. If the company has not received the notification by the end of the 45th business day, funds and interest or dividends, if any, held in the trust or escrow account are automatically returned to the stockholder. Unless a sufficient number of investors elect to remain investors, all funds on deposit in the escrow account must be returned to all of the investors and none of the securities are issued.

 

  

 
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TERMS OF OUR OFFERING

 

TERMS UNDER A RULE 419 OFFERING

Business combination deadline

 

 

 

If we are unable to complete an initial business combination within  18 months from the closing of this offering, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

  

 

 

If a business combination has not been completed within 18 months after the effective date of the company’s registration statement, funds held in the trust or escrow account are returned to investors.

 

Limitation on redemption rights of stockholders holding more than 15% of the shares sold in this offering if we hold a stockholder vote

 

 

 

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 will provide that a public stockholder (including our affiliates), 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 Excess Shares (more than an aggregate of 15% of the shares sold in this offering). Our public stockholder’s inability to redeem Excess Shares will reduce their influence over our ability to complete our initial business combination and they could suffer a material loss on their investment in us if they sell any Excess Shares in open market transactions.

 

 

Many blank check companies provide no restrictions on the ability of stockholders to redeem shares based on the number of shares held by such stockholders in connection with an initial business combination.

 

 

 
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TERMS OF OUR OFFERING

 

TERMS UNDER A RULE 419 OFFERING

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 mailed to such holders or up to two business days prior to the vote on the proposal to approve the initial 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 System, 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. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two days prior to the vote on the initial business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights.

 

 

 

In order to perfect redemption rights in connection with their business combinations, holders could vote against a proposed initial business combination and check a box on the proxy card indicating such holders were seeking to exercise their redemption rights. After the business combination was approved, the company would contact such stockholders to arrange for them to deliver their certificate to verify ownership.

 

Release of funds

 

 

 

Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our franchise and income tax obligations, the proceeds from this offering and the sale of the Private Placement Warrants held in the trust account will not be released from the trust account until the earliest to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within  18 months from the closing of this offering or (B) with respect to any other provision relating to stockholder’s rights or pre-business combination activity and (iii) the redemption of 100% of our public shares if we are unable to complete an initial business combination within the required time frame (subject to the requirements of applicable law). On the completion of our initial business combination, all amounts held in the trust account will be released to us, less amounts released to a separate account controlled by the trustee for disbursal to redeeming stockholders. We will use these funds to pay amounts due to any public stockholders who exercise their redemption rights as described above under “Redemption rights for public stockholders upon completion of our initial business combination,” to pay the underwriters their business combination fee, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial business combination.

 

 

The proceeds held in the escrow account are not released until the earlier of the completion of a business combination or the failure to effect a business combination within the allotted time.

 

 

 
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Competition

 

In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic business combinations. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.

 

Facilities

 

Our executive offices are located at The Maria Nava Building, 11516 Downey Ave., Downey, CA 90241, and our telephone number is (323) 841-0046. Our executive offices are provided to us by our sponsor. Commencing on the date of this prospectus, we have agreed to pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. We consider our current office space adequate for our current operations.

 

Employees

 

We currently have four officers. These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the initial business combination process we are in. We do not intend to have any full-time employees prior to the completion of our initial business combination.

 

Periodic Reporting and Financial Information

 

We will register our units, Class A Common Stock and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports will contain financial statements audited and reported on by our independent registered public accountants.

 

We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential targets we may conduct an initial business combination with because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential business combination candidate will have financial statements prepared in accordance with 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.

 

We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2022 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination. Prior to the date of this prospectus, we will file a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we will be subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.

   

We 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 this 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 shares of Class A Common Stock that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

 

Legal Proceedings

 

There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.

 

 
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MANAGEMENT

 

Officers, Directors and Director Nominees

 

Our officers, directors and director nominees are as follows:

 

Name

 

Age

 

Position

Sabas Carrillo

 

44

 

Director, Chief Executive Officer and Chairman

Cathy Ong

 

28

 

Director and Chief Financial Officer

Robert Baca

 

39

 

Director, Vice President and Secretary

Jaime Nava

 

30

 

Director, Vice President and Treasurer

[          ]*

 

[●]

 

Director Nominee

[          ]*

 

[●]

 

Director Nominee

[          ]*

 

[●]

 

Director Nominee

_________ 

* This individual has indicated his assent to occupy such position on the effective date of the registration statement of which this prospectus is a part.

  

Sabas Carrillo, our Director, Chairman and Chief Executive Officer, is the Founder and CEO of Adnant, LLC, an accounting and consulting firm focused on the cannabis industry with an expertise in advising companies on the go-public process. Mr. Carrillo has over 18 years of experience in accounting and over 12 years of experience working exclusively with start-ups, having helped found, grow, and lead companies through successful exits. He focuses on creating and taking public innovative companies with high growth potential. Mr. Carrillo is an SEC financial reporting expert with extensive experience in M&A work. He serves as Interim CFO for Cookies Creative Consulting & Promotions Inc. and was on the go-public team for Weedmaps and General Cannabis, Inc., a publicly traded company (OTC: CANN) from 2010 to 2012. In 2014, Mr. Carrillo led the team that took the first cannabis dispensary public, Blüm Oakland, on behalf of Terra Tech Corp. (OTC: TRTC). Mr. Carrillo is co-founder and CFO of two cannabis-focused funds: Mesh Ventures and 1212 Ventures. Among his advisory roles to companies and brands in the industry, Mr. Carrillo’s client list includes MedMen, GlassHouse Group, Loudpack, GTI, NorCal Cannabis Company, Beboe, Acreage Holdings, Verano Holdings and Grass Lands (first cannabis licensed concessions at a venue). Passionate about working with non-profits such as Las Fotos Project, Downtown Women’s Center, The Good Shepherd Center, and Brilliant Corners, Mr. Carrillo is also the founder of Alta Loma Group, LLC, a real estate holding company on a mission to provide quality affordable housing in South Central Los Angeles. Mr. Carrillo received his B.A. in Economics with a minor in computer programming from the University of California, Los Angeles.

  

Cathy Ong, our Director and Chief Financial Officer has over five years of accounting experience, providing financial statement audit services to private and public companies in the manufacturing, distribution, technology, and automotive industries and advisory and consulting services in the cannabis industry. She currently serves as an Accounting Manager at Adnant LLC. Since joining Adnant in 2018, Ms. Ong has worked with cannabis businesses from start-ups to multi-state operators, primarily focusing on accounting for complex transactions and financial reporting, including those subject to CSE and SEC filing requirements. Ms. Ong serves as an advisor to financial executives within the industry and an active liaison with stakeholders, executives, attorneys, auditors, and other parties involved in the public filing process. Her focus is on helping clients navigate through unique accounting scenarios in the cannabis industry and setting the precedent in accounting interpretation for industry participants. She is an advocate of challenging industry norms, having left public accounting to join Adnant and trailblazing a career in the cannabis industry. Ms. Ong holds a Bachelor of Science degree in Business Administration with an option in Accounting from California State University, Long Beach and is a licensed CPA in the state of California.

 

Robert Baca, our Director, Vice President and Secretary has over a decade of experience as a corporate attorney and consultant navigating Private Equity M&A and Leveraged Finance transactions for clients while at institutions including Kirkland & Ellis LLP, Paul Hastings LLP, and Goldman Sachs. He has represented U.S. and foreign financial institutions including JP Morgan Chase, Bank of America, Morgan Stanley, Barclays, UBS, and RBC, private equity sponsors including KKR, Warburg Pincus, Blackstone, and Saw Mill Capital, and public and private companies in connection with mergers and acquisitions, securities offerings, and commercial financings including secured and unsecured credit facilities and acquisition financings. Before joining Adnant LLC in 2020 he spent three years overseeing the licensing and compliance efforts of cannabis operations in Northern California including retail, manufacturing, distribution, and cultivation companies during the turn of adult-use legalization in the state. He also served as Executive Director of the Sacramento Cannabis Industry Association working closely with state and local regulators, stakeholders, and key community constituencies including neighborhood and business associations, business owners, and residents. He now serves as General Counsel to Adnant LLC and participates in the leadership of their Strategic Initiatives department. Mr. Baca graduated with a BA from Dartmouth College with honors, a JD from the University of Chicago Law School, and a Master of Science in Finance from Indiana University’s Kelley School of Business. He is a licensed member of the State Bars of New York and California and is an adjunct professor of law at the University of the Pacific’s McGeorge School of Law teaching Marijuana Law.

    

Jaime Nava, our Vice President and Treasurer has over five years of operational accounting and management experience in the cannabis industry having built the accounting and finance infrastructure for over 50 dispensaries and cultivations in California and advised on the same for public cannabis multi-state operators.  He is a pioneer in cannabis banking and compliance having guided key constituencies in the development and launch of cannabis related business account and compliance pilot programs for both national financial institutions and local federal credit unions.  Mr. Nava has also provided extensive support for cannabis focused investment fund development, strategy, capital deployment, and investor relations.  At Adnant, LLC he provides advisory and consulting services for cannabis companies and investment funds particularly related to their accounting, banking, and management policies and operating procedures.  Prior and current clients include Cookies, AmericannMade, 1212 Ventures, and Mesh Ventures.  He has focused principally on helping industry clients navigate and execute early stage and enterprise hypergrowth strategies.  Mr. Nava holds a Bachelor of Science degree in Biology from California State University, San Bernardino. 

  

[Directors]

 

Number and Terms of Office of Officers and Directors

 

[To Come]

 

 
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Officer and Director Compensation

 

None of our officers has received any cash compensation for services rendered to us. Commencing on the date of this prospectus, we have agreed to pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. No compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.

 

After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.

 

We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.

 

Director Independence

 

Because we plan to have our securities quoted on the OTCQX, our board of directors is currently composed of four members who do not qualify as independent directors in accordance with the published listing requirements of a national securities exchange, such as the Nasdaq or NYSE (the Company has no plans to list on the Nasdaq or NYSE). The Nasdaq or NYSE independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of her family members, has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exists which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the Nasdaq or NYSE rules.

    

Committees of the Board of Directors

 

Our board of directors will have two standing committees: an audit committee and a compensation committee.

 

Audit Committee

 

Prior to the consummation of this offering, we will establish an audit committee of the board of directors. [ ] will serve as members of our audit committee, and [ ] will chair the audit committee.

 

Each member of the audit committee is financially literate and our board of directors has determined that [ ] qualifies as an “audit committee financial expert” as defined in applicable SEC rules.

 

We will adopt an audit committee charter, which will detail the principal functions of the audit committee, including:

 

 

·

the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us;

 

 

 

 

·

pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

 

 

 

 

·

setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations;

 

 

 

 

·

setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

 

 

 

 

·

obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence;

 

 

 

 

·

reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

 

 

 

 

·

reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

  

 
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Compensation Committee

 

Prior to the consummation of this offering, we will establish a compensation committee of the board of directors. [ ] will serve as members of our compensation committee.

 

We will adopt a compensation committee charter, which will detail the principal functions of the compensation committee, including:

 

 

·

reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officers’ compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;

 

 

 

 

·

reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers;

 

 

 

 

·

reviewing on an annual basis our executive compensation policies and plans;

 

 

 

 

·

implementing and administering our incentive compensation equity-based remuneration plans;

 

 

 

 

·

assisting management in complying with our proxy statement and annual report disclosure requirements;

 

 

 

 

·

approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;

 

 

 

 

·

if required, producing a report on executive compensation to be included in our annual proxy statement; and

 

 

 

 

·

reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

  

Notwithstanding the foregoing, as indicated above, other than the payment to our sponsor of $10,000 per month, for up to 18 months, for office space, utilities and secretarial and administrative support and reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.

 

The charter will also provide that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by the OTC and the SEC.

 

Director Nominations

 

We do not have a standing nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by law or applicable stock exchange rules.

 

The board of directors will consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.

 

We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.

 

Compensation Committee Interlocks and Insider Participation

 

None of our officers currently serves, or in the past year has served, as a member of the compensation committee of any entity that has one or more officers serving on our board of directors.

 

 
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Conflicts of Interest

 

Members of our management team do not have any obligation to present us with any opportunity for a potential business combination of which they become aware, unless presented to such member solely in his or her capacity as a director or officer of the company. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.

 

Potential investors should also be aware of the following other potential conflicts of interest:

 

 

·

None of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business activities.

 

 

 

 

·

In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.

 

 

 

 

·

Our initial stockholders have agreed to waive their redemption rights with respect to any sponsor shares and any public shares held by them in connection with the consummation of our initial business combination. Additionally, our initial stockholders have agreed to waive their redemption rights with respect to any sponsor shares held by them if we fail to consummate our initial business combination within 18 months after the closing of this offering. If we do not complete our initial business combination within such applicable time period, the proceeds of the sale of the Private Placement Warrants held in the trust account will be used to fund the redemption of our public shares, and the Private Placement Warrants (and the underlying securities) will expire worthless. Our initial stockholders have agreed not to transfer, assign or sell any of their sponsor shares until the earlier to occur of (i) 180 days after the date of the consummation of our initial business combination or (ii) the date on which we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property (except as described herein under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Sponsor Shares and Warrants”). Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any sponsor shares. Notwithstanding the foregoing, if the closing price of our shares of Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing 150 days after our initial business combination, the sponsor shares will no longer be subject to such transfer restrictions. With certain limited exceptions, the Private Placement Warrants and the Forward Purchase Warrants and the Class A Common Stock underlying such warrants, will not be transferable, assignable or saleable by our sponsor or its permitted transferees until after the completion of our initial business combination. Since our sponsor and officers and directors may directly or indirectly own common stock and warrants following this offering, our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination.

 

 

 

 

·

Our officers and directors may 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.

 

 

 

 

·

Our sponsor, officers or directors may have a conflict of interest with respect to evaluating a business combination and financing arrangements as we may obtain loans from our sponsor or an affiliate of our sponsor or any of our officers or directors to finance transaction costs in connection with an intended initial business combination.

 

The conflicts described above may not be resolved in our favor.

 

In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:

 

 

·

the corporation could financially undertake the opportunity;

 

 

 

 

·

the opportunity is within the corporation’s line of business; and

 

 

 

 

·

it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.

 

Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.

 

 
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Below is a table summarizing the entities to which our executive officers, directors and director nominees currently have fiduciary duties or contractual obligations:

 

NAME OF INDIVIDUAL

 

NAME OF AFFILIATED COMPANY

 

AFFILIATION

Sabas Carrillo

 

Adnant LLC

Cookies Creative Consulting & Promotions Inc.

Mesh Ventures, LLC

1212 Ventures, LLC

 

CEO

Interim CFO

Co-Founder & CFO

Investor

[Directors]

 

[●]

 

[●]

[Directors]

 

[●]

 

[●]

 

Accordingly, if any of the above executive officers, directors or director nominees becomes aware of a business combination opportunity which is suitable for any of the above entities 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 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 such a company, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent accounting firm, that such an initial business combination is fair to our company from a financial point of view.

 

In the event that we submit our initial business combination to our public stockholders for a vote, pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any sponsor shares or shares issued or issuable upon exercise of such warrants held by them and any public shares purchased during or after the offering (including in open market and privately negotiated transactions) in favor of our initial business combination.

 

Limitation on Liability and Indemnification of Officers and Directors

 

Our amended and restated certificate of incorporation will provide that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation will provide that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.

 

We will enter into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also will permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We will purchase a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.

 

These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.

 

We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.

 

 
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PRINCIPAL STOCKHOLDERS

 

The following table sets forth information regarding the beneficial ownership of our common stock as of the date of this prospectus, and as adjusted to reflect the sale of our common stock included in the units offered by this prospectus, and assuming no purchase of units in this offering, by:

 

 

·

each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

 

 

 

 

·

each of our executive officers, directors and director nominees; and

 

 

 

 

·

all our executive officers, directors and director nominees as a group.

  

Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the private placement rights or Private Placement Warrants as these warrants are not exercisable within 60 days of the date of this prospectus.

 

On February 25, 2021, our sponsor purchased 287,500 sponsor shares for an aggregate purchase price of $25,000, or approximately $0.087 per share , of which 287,475 shares were relinquished on September 27, 2021. As of the date of this prospectus, our sponsor owns an aggregate of 25 sponsor shares. Our charter will be amended such that the 25 sponsor shares will represent 20.0% of the voting power of our issued and outstanding shares of common stock immediately following this offering. In addition, our sponsor has committed, pursuant to a written agreement, to purchase an aggregate of 846,000 Private Placement Warrants for a purchase price of $1.56 per warrant in a private placement that will occur simultaneously with the closing of this offering (assuming the underwriters do not exercise their over-allotment option). The following table presents the number of shares and percentage of our common stock owned by our initial stockholders before and after this offering. The post-offering numbers and percentages presented assume that the underwriters do not exercise their over-allotment option, and that there are 2,500,025 shares of our common stock, consisting of (i) 2,500,000 shares of our Class A Common Stock and (ii) 25 shares of our Class B Common Stock, issued and outstanding after this offering.

 

 

 

BEFORE OFFERING

 

 

AFTER OFFERING

 

NAME AND ADDRESS OF

BENEFICIAL OWNER (1)

 

NUMBER OF SHARES BENEFICIALLY OWNED (2)

 

 

APPROXIMATE PERCENTAGE OF OUTSTANDING COMMON STOCK

 

 

NUMBER OF SHARES BENEFICIALLY OWNED (2)

 

 

APPROXIMATE PERCENTAGE OF OUTSTANDING COMMON STOCK

 

 

APPROXIMATE PERCENTAGE OF VOTING POWER

 

Adnant Concepcion Sponsor LLC (3)

 

 

25

 

 

 

100.0 %

 

 

25

 

 

 

0.001 %

 

 

20.0 %

Sabas Carrillo (3)

 

 

25

 

 

 

100.0 %

 

 

25

 

 

 

0.001 %

 

 

20.0 %

Cathy Ong

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

 

 

 

 

Robert Baca

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

 

 

 

 

Jaime Nava

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

 

 

 

 

[ Directors ]

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

 

 

 

 

All executive officers, directors and director nominees as a group ( 4 individuals)

 

 

25

 

 

 

100.0 %

 

 

25

 

 

 

0.001 %

 

 

20.0 %

_________

*

Less than 1%

 

 

(1)

Unless otherwise noted, the business address of each of the following entities or individuals is c/o Adnant Concepcion Acquisition Corp., The Maria Nava Building, 11516 Downey Ave., Downey, CA 90241.

 

 

(2)

Interests shown consist solely of sponsor shares, classified as shares of Class B Common Stock before the offering, and sponsor shares after the offering. Such shares are convertible into shares of Class A Common Stock on a one-for-one basis, subject to adjustment, as described in the section of this prospectus entitled “Description of Securities”.

 

 

(3)

Represents shares held by Adnant Concepcion Sponsor LLC, our sponsor. Sabas Carrillo is the managing member of Adnant Capital, LLC, which is the managing member of our sponsor and may be deemed to have beneficial ownership of the common stock held directly by our sponsor. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly.

  

Immediately after this offering, our sponsor, as holder of our Class B Common Stock will have, in the aggregate, 20.0% of the voting power of the then-issued and outstanding shares of our common stock. The holders of our Class B Common Stock will have the right to elect all of our directors prior to our initial business combination. Neither our sponsor nor any of our officers or directors have expressed an intention to purchase any units in this offering. Because of this voting block, our initial stockholders may be able to effectively influence the outcome of all matters requiring approval by our stockholders, including the election of directors, amendments to our amended and restated certificate of incorporation and approval of significant corporate transactions, including approval of our initial business combination.

 

 
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The holders of the sponsor shares have agreed (A) to vote any shares owned by them in favor of any proposed initial business combination and (B) not to redeem any shares in connection with a stockholder vote to approve a proposed initial business combination or in connection with a tender offer.

 

Our sponsor and our executive officers and directors are deemed to be our “promoters” as such term is defined under the federal securities laws.

 

Restrictions on Transfers of Sponsor Shares and Warrants

 

The sponsor shares, Private Placement Warrants, Forward Purchase Warrants, and any shares of Class A Common Stock issued upon conversion or exercise thereof are each subject to transfer restrictions pursuant to lock-up provisions in a letter agreement with us to be entered into by our sponsor, officers and directors. Our initial stockholders have agreed not to transfer, assign or sell any of their sponsor shares until the earlier to occur of (i) 180 days after the date of the consummation of our initial business combination or (ii) the date on which we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property (except as described herein under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Sponsor Shares and Warrants”). Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any sponsor shares . Notwithstanding the foregoing, if the closing price of our shares of Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing 150 days after our initial business combination, the sponsor shares will no longer be subject to such transfer restrictions. In addition, the lock-up provisions of the insider letter provide that the Private Placement Warrants and the Forward Purchase Warrants and any shares of Class A Common Stock issued upon conversion or exercise thereof are not transferable or salable until after the completion of our initial business combination. However, any such securities , including the sponsor shares, may be transferred or sold (a) to our officers or directors, any affiliates or family members of any of our officers or directors, any members of our sponsor, or any affiliates of our sponsor, (b) in the case of an individual, by gift to a member of one of the members of the individual’s immediate family or to a trust, the beneficiary of which is a member of one of the individual’s immediate family, an affiliate of such person or to a charitable organization; (c) in the case of an individual, by virtue of laws of descent and distribution upon death of the individual; (d) in the case of an individual, pursuant to a qualified domestic relations order; (e) by private sales or transfers made in connection with the consummation of an initial business combination at prices no greater than the price at which the securities were originally purchased; (f) in the event of our liquidation prior to the completion of our initial business combination; (g) by virtue of the laws of Delaware or our sponsor’s limited liability company agreement upon dissolution of our sponsor; or (h) in the event of our liquidation, merger, capital stock exchange, reorganization or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to our completion of our initial business combination; provided, however, that in the case of clauses (a) through (e) or (g), these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions and the other restrictions contained in the letter agreements, and by the same agreements entered into by our sponsor with respect to such securities (including provisions relating to voting, the trust account and liquidation distributions described elsewhere in this prospectus).

  

Registration Rights

 

The holders of the sponsor shares, Private Placement Warrants, Forward Purchase Warrants, Underwriter Warrants, shares of Class A Common Stock underlying the Private Placement Warrants, Forward Purchase Warrants and Underwriter Warrants, and securities that may be issued upon conversion of working capital loans will have registration rights to require us to register a sale of any of our securities held by them pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering. These holders will be entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by us.

  

 
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

On February 25, 2021, we issued an aggregate of 287,500 sponsor shares to our sponsor for an aggregate purchase price of $25,000 in cash, or approximately $0.087 per share , of which 287,475 were relinquished on September 27, 2021. As of the date of this prospectus, our sponsor owns an aggregate of 25 sponsor shares. Our sponsor will hold 20.0% of the voting power of our issued and outstanding common stock immediately following this offering. The Class B Common Stock (including the Class A Common Stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.

  

Our sponsor has agreed to purchase an aggregate of 846,000 warrants (or 972,900 warrants if the over-allotment option is exercised in full) at a price of $1.56 per warrant, for an aggregate purchase price of $1,319,760, or $1,517,724 if the over-allotment option is exercised in full. The Private Placement Warrants will be identical to the warrants underlying the units sold in this offering except that the Private Placement Warrants, so long as they are held by our sponsor, the underwriters or their permitted transferees, (i) will not be redeemable by us, (ii) may not (including the Class A Common Stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until after the completion of our initial business combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights. The Private Placement Warrants (including the shares of Class A Common Stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.   

  

We intend to enter into a Forward Purchase Agreement with our sponsor, pursuant to which our sponsor may purchase an aggregate of up to 660,410 Pre-Business Combination Warrants at a price of $1.56 per warrant, for an aggregate purchase price of up to $1,030,240. Any purchase of the Pre-Business Combination Warrants would take place in one or more private placements in such amounts and at such time or times as the sponsor determines, with the full amount to have been purchased no later than immediately prior to the closing of our initial business combination. The sponsor’s right to purchase the Forward Purchase Warrants may not be transferred to any other parties.

 

The Forward Purchase Agreement will also provide that our sponsor may elect to purchase up to an aggregate of 1,309,131 Post-Business Combination Warrants, which will also have a purchase price of $1.56 per warrant. Any elections to purchase the up to 1,309,131 Post-Business Combination Warrants will take place in one or more private placements after the closing of our initial business combination, in such amounts and at such time or times as our sponsor determines.

 

The proceeds from purchases of Forward Purchase Warrants will not be deposited in the trust account. The Forward Purchase Warrants will have no right to vote on amendments to the warrant agreement prior to our initial business combination, except with respect to certain provisions relating solely to the transfer of Forward Purchase Securities. In all other respects, the terms of the Forward Purchase Warrants will be identical to the terms of the Private Placement Warrants. The Forward Purchase Securities, as long as they are held by our sponsor or its permitted transferees, will be subject to certain transfer restrictions and have certain registration rights. The sponsor’s obligation to purchase the Forward Purchase Warrants may not be transferred to any other parties.

  

As more fully discussed in the section of this prospectus entitled “Management — Conflicts of Interest,” if any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.

 

Commencing on the date of this prospectus, we have agreed to pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.

 

Other than the foregoing, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of an initial business combination (regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.

 

Prior to the closing of this offering, our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of this offering. These loans are non-interest bearing, unsecured of which $150,000 is due at the earlier of December 31, 2021 or the closing of this offering and $150,000 is due at the earlier of March 31, 2022 or the closing of this offering. The loan will be repaid upon the closing of this offering out of the estimated $840,000 of offering proceeds that has been allocated to the payment of offering expenses (other than underwriting commissions). The value of our sponsor’s interest in this transaction corresponds to the principal amount outstanding under any such loan.

  

In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. The terms of such working capital loans by our sponsor or its affiliates, or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

 

After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.

 

 
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We will enter into a registration rights agreement with respect to the sponsor shares, the Private Placement Warrants, the Forward Purchase Warrants, the Underwriter Warrants and the shares of Class A Common Stock issuable upon exercise or conversion of the foregoing, which is described under the section of this prospectus entitled “Description of Securities — Registration Rights.”

  

Related Party Policy

 

We have not yet adopted a formal policy for the review, approval or ratification of related party transactions. Accordingly, the transactions discussed above were not reviewed, approved or ratified in accordance with any such policy.

 

Our audit committee, pursuant to a written charter that we will adopt prior to the consummation of this offering, will be responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction. A majority of the members of the entire audit committee will constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party transaction. A form of the audit committee charter that we plan to adopt prior to the consummation of this offering is filed as an exhibit to the registration statement of which this prospectus is a part. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.

 

These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.

 

To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors unless we, or a committee of independent directors, have obtained an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that our initial business combination is fair to our company from a financial point of view. Furthermore, no finder’s fees, reimbursements, consulting fee, monies in respect of any payment of a loan or other compensation will be paid by us to our sponsor, officers or directors, or any affiliate of our sponsor or officers, for services rendered to us prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, the following payments will be made to our sponsor, officers or directors, or our or their affiliates, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination:

 

 

·

Repayment of up to an aggregate of $300,000 in loans made to us by our sponsor to cover offering-related and organizational expenses;

 

 

 

 

·

Payment to our sponsor of $10,000 per month, for up to 18 months, for office space, utilities and secretarial and administrative support;

 

 

 

 

·

Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; and

 

 

 

 

·

Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which have not been determined nor have any written agreements been executed with respect thereto.

   

Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates.

 

 
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DESCRIPTION OF SECURITIES

 

Pursuant to our amended and restated certificate of incorporation, our authorized capital stock consists of 50,000,000 shares of Class A Common Stock, $0.0001 par value, 5,000,000 shares of Class B Common Stock, $0.0001 par value, and 1,000,000 shares of undesignated preferred stock, $0.0001 par value. The following description summarizes the material terms of our capital stock. Because it is only a summary, it may not contain all the information that is important to you.

 

Units

 

Each unit has an offering price of $10.00 and consists of (i) one share of Class A Common Stock , (ii) one-ninth of one redeemable warrant, which we refer to as the “Outstanding Redeemable Warrants,” and (iii) the contingent right to receive the issuance of two-ninths of one additional redeemable warrant, which we refer to as the “Distributable Adnant Redeemable Warrants” at the Adnant Distribution Time. Each whole warrant entitles the holder thereof to purchase one share of Class A Common Stock at $11.50 per share  (other than the Underwriter Warrants, which have an exercise price of $12.00 per share), subject to adjustment as described in this prospectus. We expect the Class A Common Stock and warrants comprising the units will begin separate trading on the 52nd day following the closing of this offering unless WestPark Capital informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. No fractional warrants will