Item 1A. Risk Factors
An investment in our securities involves a high
degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this
Report and our final prospectus associated with our IPO, before making a decision to invest in our securities. If any of the following
events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading
price of our securities could decline, and you could lose all or part of your investment.
Risks Relating to our Search for, Consummation of, or Inability
to Consummate, an Initial Business Combination and Post-Business Combination Risks
We are a recently incorporated company with no operating history
and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a recently incorporated company incorporated
under the laws of the State of Delaware with no operating results, and we did not commence operations until obtaining funding through
our IPO. 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 a business combination and may be unable to complete our initial business combination. If we
do not 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 before
we complete our initial business combination if the business combination would not require stockholder approval under applicable law or
stock exchange listing requirement. For instance, if we were seeking to acquire a target business where the consideration we were paying
in the transaction was all cash, we would not be required to seek stockholder approval to complete such a transaction. Except as required
by law or stock exchange, the decision as to whether we will seek stockholder approval of a proposed business combination or will allow
stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety
of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder
approval. Accordingly, we may complete our initial business combination even if a majority of our public stockholders do not approve of
the business combination we complete.
Please see the section of this Report entitled
“Item 1-Stockholders May Not Have the Ability to Approve our Initial Business Combination” for additional information.
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If we seek stockholder approval of our initial business combination,
our sponsor, directors and each member of our management team have agreed to vote in favor of such initial business combination, regardless
of how our public stockholders vote.
Our initial stockholders (including our sponsor)
own, on an as-converted basis, 20% of our outstanding shares of common stock immediately following the completion of our IPO Our initial
stockholders, directors and members of our management team also may from time to time purchase Class A common stock prior to our initial
business combination. Our amended and restated certificate of incorporation provides that, if we seek stockholder approval of an initial
business combination, such initial business combination will be approved if we receive the affirmative vote of a majority of the shares
voted at such meeting, including the founder shares. If we submit our initial business combination to our public stockholders for a vote,
pursuant to the terms of a letter agreement entered into with us, our sponsor, directors and each member of our management team have agreed
to vote their founder shares and any shares purchased during or after the offering, in favor of our initial business combination. As a
result, in addition to our initial stockholders’ and anchor investors’ founder shares, we would need 10,781,251, or 37.5%,
of the 28,750,000 public shares sold in our IPO to be voted in favor of an initial business combination in order to have our initial business
combination approved (assuming all issued and outstanding shares are voted). In addition, in the event the anchor investors acquire and
own an aggregate of 2,300,000 public shares, and vote such public shares in favor of our initial business combination, then we would need
only 8,481,251, or 29.5%, of the 28,750,000 public shares sold in our IPO, to be voted in favor of our initial business combination in
order to have our initial business combination approved (assuming all outstanding shares are voted). Accordingly, if we seek stockholder
approval of our initial business combination, the agreement by our sponsor and each member of our management team to vote in favor of
our initial business combination will increase the likelihood that we will receive the requisite stockholder approval for such initial
business combination.
Your only opportunity to affect the investment decision regarding
a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash.
At the time of your investment in us, you will
not be provided with an opportunity to evaluate the specific merits or risks of one or more target businesses. Since our board of directors
may complete a business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to
vote on the business combination, unless we seek such stockholder vote. Accordingly, your only opportunity to affect the investment decision
regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be
at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial
business combination.
The ability of our public stockholders to redeem their shares
for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to
enter into a business combination with a target.
We may seek to enter into a business combination
transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount
of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as
a result, would not be able to proceed with the business combination. Furthermore, in no event will we redeem our public shares in an
amount that would cause our net tangible assets to be less than $5,000,001 upon the consummation of a business combination (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 upon the consummation of a business combination or such greater
amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business
combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus,
may be reluctant to enter into a business combination transaction with us.
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The ability of our public stockholders to exercise redemption
rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our
capital structure.
At the time we enter into an agreement for our
initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to
structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our business
combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have
a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements, or
arrange for third party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected,
we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for additional third
party financing. Raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher
than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to
us or optimize our capital structure. The amount of the deferred underwriting commissions payable to the underwriters will not be adjusted
for any shares that are redeemed in connection with an initial business combination. The per-share amount we will distribute to stockholders
who properly exercise their redemption rights will not be reduced by the deferred underwriting commission and after such redemptions,
the amount held in trust will continue to reflect our obligation to pay the entire deferred underwriting commissions.
The ability of our public 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 shares.
If our initial business combination agreement requires
us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing,
the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful,
you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate
liquidity, you could attempt to sell your shares in the open market; however, at such time our shares may trade at a discount to
the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the
benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your shares in the open market.
The requirement that we complete an initial business combination
within 18 months (or 21 months or 24 months, as applicable) after the closing of our IPO may give potential target businesses leverage
over us in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business combination
targets as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms
that would produce value for our stockholders.
Any potential target business with which we enter
into negotiations concerning a business combination will be aware that we must complete an initial business combination within 18 months
(or 21 months or 24 months, as applicable) from the closing of our IPO. Consequently, such target business may obtain leverage over us
in negotiating a business combination, knowing that if we do not complete our initial business combination with that particular target
business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer
to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business
combination on terms that we would have rejected upon a more comprehensive investigation.
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The coronavirus (COVID-19) pandemic and the impact on business
and debt and equity markets could have a material adverse effect on our search for a business combination, and any target business with
which we ultimately complete a business combination.
The coronavirus (COVID-19) pandemic has adversely
affected, and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) could
adversely affect, the economies and financial markets worldwide, and the business of any potential target business with which we consummate
a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if
continued concerns relating to the coronavirus restrict travel, limit the ability to have meetings with potential investors or the target
company’s personnel, vendors and services providers are unavailable to negotiate and complete a transaction in a timely manner.
The extent to which the coronavirus 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 the coronavirus pandemic, the
continued use of vaccines against the coronavirus and other actions to contain the coronavirus or treat its impact, among others. If the
disruptions posed by the coronavirus or other matters of global concern continue for an extensive period of time, it could have a material
adverse effect on our ability to complete a business combination, or the operations of a target business with which we ultimately complete
a business combination. In addition, our ability to complete a transaction may be dependent on the ability to raise equity and debt financing
and the coronavirus pandemic and other related events could have a material adverse effect on our ability to raise adequate financing.
We may not be able to complete an initial business combination
within 18 months (or 21 months or 24 months, as applicable) after the closing of the offering or such later date as approved by our stockholders,
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 $10.10 per public share, or $10.20 or $10.30 per public share, as applicable, if
we extend the period of time we will have to complete an initial business combination, or less than such amount in certain circumstances,
and our warrants will expire worthless.
Our sponsor, officers and directors have agreed
that we must complete our initial business combination within 18 months (or 21 months or 24 months, as applicable) from the closing of
our IPO. We may not be able to find a suitable target business and complete an initial business combination within 18 months (or 21 months
or 24 months, as applicable) after the closing of our IPO. Our ability to complete our initial business combination may be negatively
impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. If we have not
completed an initial business combination within such applicable time period or such later date as approved by our stockholders, 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 taxes, if
any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption
will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of
our remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable law.
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If we seek stockholder approval of our initial business combination,
our sponsor, directors, officers, advisors and their affiliates may elect to purchase shares or public warrants from public stockholders,
which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock.
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, executive officers, advisors or their affiliates may purchase shares or public warrants in privately negotiated
transactions or in the open market prior to the completion of our initial business combination, where otherwise permissible under applicable
laws, rules and regulations, although they are under no obligation to do so. However, other than as expressly stated herein, 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 acknowledgment that such stockholder, although still the record holder of our shares is no longer the beneficial
owner thereof and therefore agrees to vote in favor of the initial business combination or abstain and in any event not to exercise its
redemption rights. In the event that our sponsor, directors, executive 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 any such purchases of shares could be to vote
such shares in favor of the business combination, or abstain, and thereby increase the likelihood of obtaining stockholder approval of
the business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth
or a certain amount of cash at the closing of our 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 public 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. See “Item 1-Permitted Purchases of Our Securities” for a description of how our
sponsor, directors, executive officers, advisors or any of their affiliates will select which stockholders to purchase securities from
in any private transaction.
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 maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem
our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares,
such shares may not be redeemed.
We will comply with the proxy rules or tender offer
rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance with these
rules, if a stockholder fails to receive our proxy solicitation or tender offer materials, as applicable, such stockholder may not become
aware of the opportunity to redeem its shares. In addition, the proxy solicitation or tender offer materials, as applicable, that we will
furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that
must be complied with in order to validly redeem or tender public shares. 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 or proxy materials mailed to such holders,
or up to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials,
or to deliver their shares to the transfer agent electronically. 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 Report entitled “Item 1-Tendering Share Certificates in Connection
with a Tender Offer or Redemption Rights.”
27
You will not have any rights or interests in funds from the trust
account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your public shares
or public warrants, potentially at a loss.
Our public stockholders will be entitled to receive
funds from the trust account only upon the earlier to occur of: (i) our completion of an initial business combination, and then only in
connection with those shares of our Class A common stock that such stockholder properly elected to redeem, subject to the limitations
described herein, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended
and restated certificate of incorporation (A) to modify the substance or timing of the company’s obligation to allow redemption
in connection with its initial business combination or to redeem 100% of the Class A common stock if the company has not consummated an
initial business combination within 18 months (or 21 months or 24 months, as applicable) from the closing of the initial public offering
or (B) with respect to any other provisions of the amended and restated certificate of incorporation relating to stockholders’ rights
or pre-initial business combination activity, and (iii) the redemption of our public shares if we have not completed an initial business
within 18 months (or 21 months or 24 months, as applicable) from the closing of our IPO, subject to applicable law and as further described
herein. Public stockholders who redeem their Class A common stock in connection with a stockholder vote described in clause (ii) in the
preceding sentence shall not be entitled to funds from the trust account upon the subsequent completion of an initial business combination
or liquidation if we have not completed an initial business combination within 18 months (or 21 months or 24 months, as applicable) from
the closing of our IPO, with respect to such Class A common stock so redeemed. In addition, if we do not complete an initial business
combination within 18 months (or 21 months or 24 months, as applicable) from the closing of our IPO is not completed for any reason, compliance
with Delaware law may require that we submit a plan of dissolution to our then-existing stockholders for approval prior to the distribution
of the proceeds held in our trust account. In that case, public stockholders may be forced to wait beyond 18 months (or 21 months or 24
months, as applicable) from the closing of our IPO before they receive funds from our trust account. In no other circumstances will a
public stockholder have any right or interest of any kind in the trust account. Holders of public 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 public warrants, potentially at a loss.
You will not be entitled to protections normally afforded to
investors of many other blank check companies.
Since the net proceeds of our IPO and the sale
of the private placement warrants are intended to be used to complete an initial business combination with a target business that has
not been selected, we may be deemed to be a “blank check” company under the United States securities laws. However, because
we have net tangible assets in excess of $5,000,000 from the successful completion of our IPO and the sale of the private placement warrants
and have filed a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated
by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or
protections of those rules. Among other things, this means our units will be immediately tradable and we will have a longer period of
time to complete our initial business combination than do companies subject to Rule 419. Moreover, if our IPO were subject to Rule 419,
that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the
trust account were released to us in connection with our completion of an initial business combination.
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Because of our limited resources, the increased number of special
purpose acquisition companies evaluating targets and the significant competition for business combination opportunities, it may be more
difficult for us to complete our initial business combination. If we do not complete our initial business combination, our public stockholders
may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders,
and our warrants will expire worthless.
In recent years, the number of special purpose
acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition companies
have already entered into an initial business combination, and there are still many special purpose acquisition companies preparing for
an initial public offering, as well as many such companies currently in registration. As a result, we expect to encounter intense competition
from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships),
other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire.
Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly,
acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical,
human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted
with those of many of these competitors.
Furthermore, this competition for available targets
with attractive fundamentals or business models could cause target companies to demand improved financial terms. While we believe there
are numerous target businesses we could potentially acquire with the net proceeds of our IPO and the sale of the private placement warrants,
our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available
financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.
Furthermore, we are obligated to offer holders of our public shares the right to redeem their shares for cash at the time of our initial
business combination in conjunction with a stockholder vote or via a tender offer. Target companies will be aware that this may reduce
the resources available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage
in successfully negotiating a business combination. If we do not complete our initial business combination our public stockholders may
receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and
our warrants will expire worthless.
If the net proceeds of our IPO and the sale of the private placement
warrants not being held in the trust account are insufficient to allow us to operate for at least the next 18 months (or 21 months or
24 months, as applicable), 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 and to complete our initial
business combination.
The funds available to us outside of the trust
account to fund our working capital requirements may not be sufficient to allow us to operate for at least the next 18 months (or 21 months
or 24 months, as applicable), assuming that our initial business combination is not completed during that time. We believe that the funds
available to us outside of the trust account, together with funds available from loans from our sponsor will be sufficient to allow us
to operate for at least the next 18 months (or 21 months or 24 months, as applicable); however, we cannot assure you that our estimate
is accurate. Of the funds available to us, we expect to use a portion of the funds available to us to pay fees to consultants to assist
us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop”
provision (a provision in letters of intent designed to keep target businesses from “shopping” around for transactions with
other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination,
although we do not have any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity
from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might
not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we do not complete
our initial business combination, our public stockholders may receive only approximately $10.10 per public share, or $10.20 or $10.30
per public share, as applicable, if we extend the period of time we will have to complete an initial business combination, on the liquidation
of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10
per public share, or $10.20 or $10.30 per public share, as applicable, if we extend the period of time we will have to complete an initial
business combination, 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 $10.10 per share, or $10.20 or $10.30 per
public share, as applicable, if we extend the period of time we will have to complete an initial business combination” and other
risk factors below.
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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. Neither
our sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances.
Any such advances would be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial
business combination. Up to $1,500,000 of such loans may be convertible into warrants of the post-business combination entity at a price
of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. Prior to the completion
of our initial business combination, we do not expect to seek loans from parties other than our sponsor 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 do not 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 an estimated $10.10 per public share,
or $10.20 or $10.30 per public share, as applicable, if we extend the period of time we will have to complete an initial business combination,
or possibly less, on our redemption of our public shares, and our warrants will expire worthless. In certain circumstances, our public
stockholders may receive less than $10.10 per public share, or $10.20 or $10.30 per public share, as applicable, if we extend the period
of time we will have to complete an initial business combination, 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 $10.10 per public share, or $10.20 or $10.30 per public share, as applicable, if we extend the period of time we will
have to complete an initial business combination” and other risk factors below.
We have the right to extend the term we have to complete our
initial business combination to up to 24 months from the closing of our IPO without providing our stockholders with a corresponding vote
or redemption right.
We will initially have until 18 months from the
closing of our IPO to complete an initial business combination. However, if we anticipate that we may not be able to complete our initial
business combination within 18 months, we may, but are not obligated to, extend the period of time to complete a business combination
by two additional three-month periods (for a total of up to 24 months from the closing of our IPO to complete a business combination).
Our public stockholders will not be entitled to vote on, or redeem their shares in connection with, any such extension. This feature is
different from some other special purpose acquisition companies, in which any extension of the company’s period to complete an initial
business combination would require a vote of our stockholders and in connection with such vote stockholders would have the right to redeem
their public shares.
Pursuant to the terms of our amended and restated
certificate of incorporation and the trust agreement entered into between us and Continental Stock Transfer & Trust Company, in order
to extend the time available for us to complete our initial business combination, our sponsor or its affiliates or designees, upon five
business days’ advance notice prior to each deadline, must deposit into the trust account an additional $0.10 per share of Class
A common stock then outstanding (in each case, $2,875,000) on or prior to the date of such deadline. In connection with each such additional
deposit, our sponsor or its affiliates or designees will receive an additional 2,875,000 private placement warrants, with the same terms
as the original private placement warrants. In the event that we receive notice from our sponsor five business days prior to a deadline
of its intent to effect an extension, we intend to issue a press release announcing such intention at least three days prior to such deadline.
In addition, we intend to issue a press release the day after a deadline announcing whether or not the funds had been timely deposited.
Our sponsor and its affiliates or designees are not obligated to fund the trust account to extend the time for us to complete our initial
business combination.
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Subsequent to our completion of our initial business combination,
we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative
effect on our financial condition, results of operations and our share price, which could cause you to lose some or all of your investment.
Even if we conduct due diligence on a target business
with which we combine, we cannot assure you that this diligence will surface all material issues with a particular target business, that
it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target
business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off
assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence
successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent
with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity,
the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition,
charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing
debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any stockholders who choose
to remain stockholders following the 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 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 $10.10 per public share,
or $10.20 or $10.30 per public share, as applicable, if we extend the period of time we will have to complete an initial business combination.
Our placing of funds in the trust account may not
protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent
auditors), 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. Making such a request of potential target businesses may make our acquisition proposal less
attractive to them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential
target businesses that we might pursue.
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Examples of possible instances where we may engage
a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills
are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases
where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities
will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements
with us and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we have not completed
an initial business combination within 18 months (or 21 months or 24 months, as applicable) from the closing of our IPO, or upon the exercise
of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors
that were not waived that may be brought against us within the ten years following redemption. Accordingly, the per-share redemption amount
received by public stockholders could be less than the $10.10 per public share initially held in the trust account, due to claims of such
creditors. Pursuant to the letter agreement entered into in connection with our IPO, our sponsor has agreed that it will be liable to
us if and to the extent any claims by a third party (other than our independent auditors) for services rendered or products sold to us,
or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account
to below the lesser of (i) $10.10 per public share, or $10.20 or $10.30 per public share, as applicable, if we extend the period of time
we will have to complete an initial business combination, 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 $10.10 per public share, or $10.20 or $10.30 per public share, as applicable, if
we extend the period of time we will have to complete an initial business combination, due to reductions in the value of the trust assets,
in each case net of the interest that may be withdrawn to pay our taxes, if any, provided that such liability will not apply to any claims
by a third party or prospective target business that executed a waiver of any and all rights to seek access to the trust account nor will
it apply to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the
Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not
be responsible to the extent of any liability for such third party claims. 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. As a result, if any such claims were successfully made against the trust account, the funds available
for our initial business combination and redemptions could be reduced to less than $10.10 per public share, or $10.20 or $10.30 per public
share, as applicable, if we extend the period of time we will have to complete an initial business combination. In such event, we may
not be able to complete our initial business combination, and you would receive such lesser amount per share in connection with any redemption
of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation,
claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations
of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.
In the event that the proceeds in the trust account
are reduced below the lesser of (i) $10.10 per public share, or $10.20 or $10.30 per public share, as applicable, if we extend the period
of time we will have to complete an initial business combination, 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 $10.10 per public share, or $10.20 or $10.30 per public share, as applicable,
if we extend the period of time we will have to complete an initial business combination, due to reductions in the value of the trust
assets, in each case net of the interest that may be withdrawn to pay our taxes, if any, and our sponsor assert that it is unable to satisfy
its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine
whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent
directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that
our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular
instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account
available for distribution to our public stockholders may be reduced below $10.10 per public share, or $10.20 or $10.30 per public share,
as applicable, if we extend the period of time we will have to complete an initial business combination.
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We may not have sufficient funds to satisfy indemnification claims
of our directors and executive officers.
We have agreed to indemnify our officers and directors
to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of
any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever (except
to the extent they are entitled to funds from the trust account due to their ownership of public shares). Accordingly, any indemnification
provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account or (ii) we complete 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 or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against
us that is not dismissed, a bankruptcy or insolvency court may seek to recover such proceeds, and the members of our board of directors
may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us
to claims of punitive damages.
If, after we distribute the proceeds in the trust
account to our public stockholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is
filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or
bankruptcy or insolvency laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy or insolvency court could seek to recover some or all amounts received by our 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 or winding-up petition or an involuntary bankruptcy or winding-up 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 or winding-up petition or an involuntary bankruptcy or winding-up petition is
filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy or insolvency
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.
33
Our stockholders may be held liable for claims by third
parties against us to the extent of distributions received by them upon redemption of their shares.
Under the Delaware General Corporation Law (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 (or 21 months or 24 months, as
applicable) from the closing of our IPO may be considered a liquidating distribution under Delaware law. If a corporation complies with
certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it,
including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which
the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made
to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s
pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the
third anniversary of the dissolution.
However, it is our intention to redeem our public
shares as soon as reasonably possible following the 18th month from the closing of our IPO in the event we do not complete
our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with Section 280,
Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all
existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However,
because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective
target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or
prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with
respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed
to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot
assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially
be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend
beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders
upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months (or 21 months
or 24 months, as applicable) from the closing of our IPO 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.
We may not hold an annual meeting of stockholders until
after the completion of our initial business combination.
In accordance with the Nasdaq 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
listing on the Nasdaq. Under Section 211(b) of the DGCL, we will, however, be required to hold an annual meeting of stockholders for the
purposes of electing directors in accordance with our amended and restated 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 completion 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 completion 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.
34
Because we are neither limited to evaluating a target business
in a particular industry sector nor have we selected any specific target businesses with which to pursue our initial business combination,
you will be unable to ascertain the merits or risks of any particular target business’s operations.
We may pursue business combination opportunities
in any sector, except that we will not, under our amended and restated 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 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 securities 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.
We may seek acquisition opportunities in industries or
sectors which may be outside of our management’s area of expertise.
We will consider a business combination outside
of our management’s area of expertise if a business combination candidate is presented to us and we determine that such candidate
offers an attractive acquisition opportunity for our company. Although our management will endeavor to evaluate the risks inherent in
any particular business combination 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 securities will not ultimately prove to be less favorable to investors
in our IPO than a direct investment, if an opportunity were available, in a business combination candidate. In the event we elect to pursue
an acquisition outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable
to its evaluation or operation, and the information contained in this Report regarding the areas of our management’s expertise would
not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately
ascertain or assess all of the significant risk factors. Accordingly, any stockholder who choose to remain stockholders following our
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 and our strategy is to identify, acquire and build a company
in our target investment area, 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 and our strategy is to identify, acquire and build a company in our target investment
area, it is possible that a target business with which we enter into our initial business combination will not have attributes consistent
with our general criteria and guidelines. 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 do not complete our initial business combination, our public stockholders may only receive their pro rata
portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
35
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 an early stage company, 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 investing in
a business without a proven business model or with limited historic financial data, volatile revenues or earnings, intense competition
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 relevant 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 accounting or investment banking firm, and consequently, you may have no assurance from an independent source that the price
we are paying for the business is fair to our stockholders from a financial point of view. Unless we complete our initial business combination
with an affiliated entity, we are not required to obtain an opinion from an independent accounting firm or independent investment banking
firm that the price we are paying is fair to our stockholders 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 solicitation or tender offer materials, as applicable,
related to our initial business combination.
Past performance by our sponsor and its affiliates, Power
& Digital Infrastructure Acquisition Corp. (“XPDI I”), XMS, TEP or our management team, including the businesses referred
to herein, may not be indicative of future performance of an investment in us or in the future performance of any business that we may
acquire.
Information regarding past performance of our sponsor
and its affiliates, XPDI I, XMS, TEP and our management team is presented for informational purposes only. Any past experience and performance
of our sponsor and its affiliates, XPDI I, XMS, TEP, our management team or the other companies referred to herein is not a guarantee
either: (1) that we will be able to successfully identify a suitable candidate for our initial business combination or (2) of any results
with respect to any initial business combination we may complete. You should not rely on the historical record of our sponsor and its
affiliates, XPDI I, XMS, TEP, our management team’s performance or the performance of the other companies referred to herein as
indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward. An investment
in us is not an investment in our sponsor or its affiliates, XPDI I, XMS, TEP nor the other companies referred to in this Report.
Because we must furnish our stockholders with target business
financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective
target businesses.
The federal proxy rules require that a proxy statement
with respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro forma financial
statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer
documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in
accordance with, or be reconciled to, accounting principles generally accepted in the United States of America (“GAAP”), or
international financial reporting standards as issued by the International Accounting Standards Board (“IFRS”), depending
on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (“PCAOB”). These financial statement requirements may limit the pool of
potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such
statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.
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Compliance obligations under the Sarbanes-Oxley Act may
make it more difficult for us to effectuate a business combination, require substantial financial and management resources, and increase
the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act requires
that we evaluate and report on our system of internal controls beginning with 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 business with which we seek to complete our initial business combination may not be in compliance
with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of
any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Effective internal controls are necessary for us to provide reliable financial
reports and prevent fraud. As described in Part II, Item 9A, management has concluded that, due to the material weakness we have identified
in our internal control over financial reporting, our disclosure controls and procedures were not effective. If we identify any new material
weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our
accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may