UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 001-41168
FTAC EMERALD ACQUISITION CORP.
(Exact Name of Registrant as Specified in Its Charter)
(Address of Principal Executive Offices) (Zip Code)
(215)701-9555
(Registrant’s Telephone Number, Including
Area Code)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A common stock, par value $0.0001 per share EMLD Nasdaq Global Market
Securities registered pursuant to Section 12(g)
of the Act:
None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the
past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See 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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☒ No ☐
As of June 30, 2022, the last business day of
the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s voting securities
held by non-affiliates was approximately $243 million, based on the number of shares held by non-affiliates and the last reported sales
price of the registrant’s Class A common stock as of that date.
As of March 29, 2023, there were 25,845,423 shares of Class A common
stock and 8,615,141 shares of Class B common stock of the registrant issued and outstanding.
Documents Incorporated by Reference: None.
TABLE OF CONTENTS
PART I
Item 1 Business 1
Item 1A. Risk Factors 19
Item 1B. Unresolved Staff Comments 52
Item 2. Properties 52
Item 3. Legal Proceedings 52
Item 4. Mine Safety Disclosure 52
PART II
Item 6. [RESERVED] 54
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 60
Item 9B. Other Information 60
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 60
PART III
Item 10. Directors, Executive Officers and Corporate Governance 61
Item 11. Executive Compensation 66
Item 14. Principal Accountant Fees and Services 74
PART IV
Item 15. Exhibits and Financial Statement Schedules 75
i
GLOSSARY OF TERMS
Unless otherwise provided in this Annual Report
on Form 10-K:
● references to our “management” or our “management team” refer to our officers;
ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained
in this Annual Report, which reflect our current views with respect to future events and financial performance, and any other statements
of a future or forward-looking nature, constitute “forward-looking statements” for the purposes of federal securities laws.
Our forward-looking statements include, but are not limited to, statements regarding our or our management’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,” “intends,”
“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 Annual Report may include, for example, statements
about:
● our ability to complete our initial business combination;
● our pool of prospective target businesses;
● our public securities’ potential liquidity and trading;
● the lack of a market for our securities;
● our financial performance.
The forward-looking statements
contained in this Annual Report are based on our current expectations and beliefs concerning future developments and their potential effects
on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or
performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties
include, but are not limited to, those factors described under the heading “Risk Factors”. Should one or more of these risks
or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those
projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
iii
Summary of Risk Factors
Our business is subject to
numerous risks and uncertainties, including those highlighted in the section title “Risk Factors,” that represent challenges
that we face in connection with the successful implementation of our strategy. The occurrence of one or more of the events or circumstances
described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may adversely
affect our ability to effect a business combination, and may have an adverse effect on our business, cash flows, financial condition and
results of operations. Such risks include, but are not limited to:
● newly formed company without an operating history;
● delay in receiving distributions from the trust account;
● lack of opportunity to vote on our proposed business combination;
● lack of protections afforded to investors of blank check companies;
● deviation from acquisition criteria;
● issuance of equity and/or debt securities to complete a business combination;
● lack of working capital;
● third-party claims reducing the per-share redemption price;
● our stockholders being held liable for claims by third parties against us;
● failure to enforce our sponsor’s indemnification obligations;
● warrant holders limited to exercising warrants only on a “cashless basis;”
● dependence on key personnel;
● conflicts of interest of our sponsor, officers and directors;
● the delisting of our securities by NASDAQ;
● shares being redeemed and warrants becoming worthless;
● our competitors with advantages over us in seeking business combinations;
● ability to obtain additional financing;
● our initial stockholders controlling a substantial interest in us;
iv
● warrants adverse effect on the market price of our common stock;
● disadvantageous timing for redeeming warrants;
● registration rights’ adverse effect on the market price of our common stock;
● impact of COVID-19 and related risks;
● business combination with a company located in a foreign jurisdiction;
● changes in laws or regulations;
● tax consequences to business combinations; and
v
PART I
Item 1. BUSINESS
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 or assets, which we refer to as our initial business
combination. We have generated no operating revenues to date, and we do not expect that we will generate operating revenues until we consummate
our initial business combination.
We have concentrated our efforts
on identifying companies in the Target Sectors that power transformation and innovation. Our expertise lends itself well to pursuing platforms
related to the Target Sectors, but we are not required to complete our initial business combination with a business in these industries
and, as a result, we may pursue a business combination outside of these industries. We expect to pursue global businesses but may also
acquire a domestic company. We do not intend to acquire companies that have speculative business plans or are excessively leveraged.
We believe our management
team has the skills and experience to identify, evaluate and consummate a business combination and is positioned to assist businesses
we acquire. However, our management team’s network and investing and operating experience do not guarantee a successful initial
business combination. The members of our management team are not required to devote any significant amount of time to our business and
are concurrently involved with other businesses. There is no guarantee that our current officers and directors will continue in their
respective roles, or in any other role, after our initial business combination, and their expertise may only be of benefit to us until
our initial business combination is completed. Past performance by our management team is not a guarantee of success with respect to any
business combination we may consummate.
At December 31, 2022, we had
not yet commenced operations. All activity through December 31, 2022 relates to the Company’s formation, its initial public offering,
and identifying a target company for our initial business combination. On March 16, 2023, the Company entered into a non-binding letter
of intent with respect to a business combination. As a result, pursuant to the Company’s second amended and restated certificate
of incorporation, the date by which the Company must cease operations and liquidate if it has not completed a business combination has
been automatically extended to September 20, 2023.
The registration statement
for our initial public offering was declared effective on December 15, 2021. On December 20, 2021, we consummated the initial public offering
of 22,000,000 units generating gross proceeds of $220,000,000. On January 11, 2022, the underwriter partially exercised its over-allotment
option, resulting in the sale on January 14, 2022 of an additional 2,869,342 units for total gross proceeds of $28,693,420, bringing the
aggregate gross proceeds of the initial public offering to $248,693,420.
Simultaneously with the closing
of the initial public offering, we consummated the sale of 890,000 placement units at a price of $10.00 per unit in a private placement
to our sponsor. On January 11, 2022, the underwriter partially exercised its over-allotment option, resulting in the sale on January 14,
2022 of an additional 86,081 private placement units, generating total gross proceeds of $9,760,810.
Following the closing of the
initial public offering on December 20, 2021, and the closing of the partial over-allotment option on January 14, 2022, an amount of $251,180,354
($10.10 per unit) from the net proceeds of the sale of the units in the initial public offering and the placement units was placed in
a trust account and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 of the Investment Company Act, which invest only in direct U.S. government treasury obligations, until
the earlier of: (i) the consummation of a business combination, (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 our obligation
to redeem 100% of our public shares if we do not complete a business combination during the completion window or (B) with respect to any
other material provision relating to stockholders’ rights or pre-initial business combination activity; or (iii) the redemption
of 100% of the public shares if the Company has not completed an initial business combination within the completion window or upon any
earlier liquidation of us.
1
Business Strategy
We will seek to capitalize
on the significant ESG experience and contacts of Betsy Z. Cohen, our Chairman of the Board, Mark Tercek, our Vice Chairman of the Board,
Bracebridge H. Young, Jr., our President and CEO, Douglas Listman, our Chief Financial Officer, and our board of directors, to identify,
evaluate and acquire a business with a core commitment to providing social, financial, and environmental value operating in sectors such
as: clean/renewable energy; water sustainability; agricultural technology; shared economy software; and next generation mobility (the
“Target Sectors”), although we may pursue a business combination outside of those sectors. We believe that challenges in climate,
biodiversity, water and energy pose pervasive risks to society and addressing these challenges are significant and attractive business
opportunities for which comprehensive solutions can be used to effectuate climate change and reduce carbon emissions. If we elect to pursue
an investment outside of those sectors, our management’s expertise related to those sectors may not be directly applicable to its
evaluation or operation, and the information contained in this Annual Report regarding that sector might not be relevant to an understanding
of the business that we elect to acquire.
Our Chairman of the Board
Betsy Z. Cohen, Chairman.
Betsy Z. Cohen has served as our Chairman since April 2021. She previously served as a director of Metromile, Inc. from February 2021
to July 2021. Ms. Cohen served as Chairman of FTAC Olympus’ board of directors from November 2020 until June 2021, as Chairman of
FinTech IV’s board of directors from May 2019 until June 2021, as Chairman of FinTech III’s board of directors from March
2017 until October 2020, and as Chairman of FinTech II’s board of directors from August 2016 until July 2018. She served as a director
of FinTech I and its successor, Card Connect Corp., a provider of payment processing solutions to merchants, from November 2013 until
May 2017, and previously served as Chairman of the board of directors of FinTech I from July 2014 through July 2016 and as FinTech I’s
Chief Executive Officer from July 2014 through August 2014. She served as Chief Executive Officer of Bancorp and its wholly-owned subsidiary,
Bancorp Bank, from September 2000 and Chairman of Bancorp Bank from November 2003, and resigned from these positions upon her retirement
in December 2014. She served as the Chairman of the Board of Trustees and as a trustee of RAIT Financial Trust, a real estate investment
trust, from its founding in August 1997, through her resignation as of December 31, 2010 and served as RAIT’s Chief Executive Officer
from 1997 to 2006. Ms. Cohen served as a director of Hudson United Bancorp (a bank holding company), the successor to JeffBanks, Inc.,
from December 1999 until July 2000 and as the Chairman of the Jefferson Bank Division of Hudson United Bank (Hudson United Bancorp’s
banking subsidiary) from December 1999 through March 2000. Before the merger of JeffBanks, Inc. with Hudson United Bancorp in December
1999, Ms. Cohen was Chairman and Chief Executive Officer of JeffBanks, Inc. from its inception in 1981 and also served as Chairman and
Chief Executive Officer of each of its subsidiaries, Jefferson Bank, which she founded in 1974, and Jefferson Bank New Jersey, which she
founded in 1987. From 1985 until 1993, Ms. Cohen was a director of First Union Corp. of Virginia (a bank holding company) and its predecessor,
Dominion Bancshares, Inc. Ms. Cohen also served as a director of Aetna, Inc. (NYSE: AET), an insurance company, from 1994 until May 2018.
Our Chairman’s Experience and Positions
with Other SPACs
Ms. Cohen has previously
served as Chairman of the board of directors for other SPACs, including, FinTech I, FinTech II, FinTech III, FinTech IV and FTAC
Olympus. Additionally, Ms. Cohen currently serves as Chairman of the board of directors for Cohen Circle, LLC (formerly Fintech Masala,
LLC). We believe that potential sellers of target businesses will view this experience as a positive factor in considering whether or
not to enter into a business combination with us and we believe the Ms. Cohen’s connections and experience will provide a strong
pipeline of potential acquisitions to our Company.
FinTech I
Ms. Cohen served as Chairman
of the board of directors of FinTech I, a former blank check company that raised $100.0 million in its initial public offering in
February 2015 at an initial public offering price of $10.00 per share. In July 2016, FinTech I completed its initial business
combination when it acquired FTS Holding Corporation, or FTS, a provider of payment processing solutions to merchants throughout the United
States.
2
Upon the closing of the acquisition,
the pre-acquisition executive officers of FinTech I resigned and were replaced by the executive officers of FTS and, the pre-acquisition
directors of FinTech I resigned, except for Ms. Cohen who continued as a director of the combined company, and were succeeded by
directors designated pursuant to the terms of the acquisition. FinTech I changed its name to CardConnect Corp. at closing.
The common stock of CardConnect
Corp. was traded on the NASDAQ Global Market under the symbol “CCN” until CardConnect Corp. was acquired by First Data Corporation
in July 2017 for $15.00 per share in cash.
FinTech II
Ms. Cohen served as Chairman
of the board of directors of FinTech II, a blank check company that raised $175.0 million in its initial public offering in January 2017
at an initial public offering price of $10.00 per share. In July 2018, FinTech II completed its initial business combination when
it acquired Intermex Holdings II, Inc. (“Intermex”). FinTech II changed its name to International Money Express, Inc. at closing.
The common stock of International
Money Express, Inc. is currently traded on the NASDAQ Global Market under the symbol “IMXI.”
FinTech III
Ms. Cohen served as Chairman
of the board of directors of FinTech III, a blank check company that raised $345.0 million in its initial public offering in November 2018
at an initial public offering price of $10.00 per share. In October 2020, FinTech III completed its initial business combination
with Paya, Inc. The name of the public entity was changed to Paya Holdings Inc. at closing.
The shares of common stock
and warrants of Paya Holdings Inc. are currently traded on the NASDAQ Global Market under the symbols “PAYA” and “PAYAW,”
respectively.
FinTech IV
Ms. Cohen served as Chairman
of the board of directors of FinTech IV, a blank check company that raised $230 million in its initial public offering in September 2020
at an initial public offering price of $10.00 per share. FinTech IV completed its initial business combination with PWP Holdings LP in
June 2021. The name of the public entity was changed to Perella Weinberg Partners at closing.
The shares of common stock
and warrants of Perella Weinberg Partners are currently traded on the NASDAQ Global Select Market under the symbols “PWP”
and “PWPPW,” respectively.
3
FTAC Olympus
Ms. Cohen served as Chairman
of the board of directors of FTAC Olympus, a blank check company, that raised approximately $754.7 million in its initial public
offering in August 2020 at an initial public offering price of $10.00 per share. FTAC Olympus completed its initial business combination
with Payoneer Inc. in June 2021. The name of the public entity was changed to Payoneer Global Inc. at closing.
The shares of common stock
and warrants of Payoneer Global Inc. are currently traded on the NASDAQ Global Market under the symbols “PAYO” and “PAYOW,”
respectively.
Our Vice Chairman and President and CEO
Mark Tercek is Vice Chairman
of our board of directors and Bracebridge H. Young, Jr. is our President and CEO, and between the two of them they have substantial experience
as investors and operators in the ESG sector, as well as a broad array of experience in mergers and acquisitions and capital markets.
We believe that potential sellers of target businesses will view this experience as a positive factor in considering whether or not to
enter into a business combination with us and we believe that Mr. Tercek’s and Mr. Young’s connections in the ESG
sector will provide a strong pipeline of potential acquisitions to our Company.
Sponsor Partnership with Fintech Masala
Emerald ESG Sponsor, LLC is
a partnership between Fintech Masala, LLC (“Fintech Masala”) and our Vice Chairman of the Board, Mark Tercek, and Bracebridge
Young Jr., our President and CEO. Additionally, our Chairman of the Board, Betsy Cohen, is also the Chairman of the board of directors
of Fintech Masala. Emerald ESG Sponsor, LLC unites the knowledge and experience of Fintech Masala as a technology investor and SPAC sponsor
with the entrepreneurial and ESG experience of our Vice Chairman and President and CEO.
4
Fintech Masala
FinTech Masala specializes
in providing growth capital to technology and financial services technology companies via special purpose acquisition vehicles and venture
investments. The FinTech Masala team is comprised of principals and advisers with extensive experience in operating public and private
companies in the technology and financial services sectors, mergers and acquisitions and venture investors. As of the date of this Annual
Report, the Managing Members of FinTech Masala have been affiliated with the sponsor for FinTech I, FinTech II, FinTech III, FinTech IV,
FTAC Olympus and FTAC Zeus Acquisition Corp. (together the “FinTech Masala SPACs”).
Of the FinTech Masala SPACs,
five have consummated initial business combinations (FinTech I, FinTech II, FinTech III, FinTech IV and FTAC Olympus).
Several members of Fintech
Masala’s management team, including our Chairman, have served or are serving as executive officers and/or directors for the Fintech
Masala SPACs. We believe that potential sellers of target businesses will view the fact that members of our board of directors and management
team have successfully closed multiple business combinations with vehicles similar to our company as a positive factor in considering
whether or not to enter into a business combination with us. However, past performance is not a guarantee of success with respect to any
business combination we may consummate.
Mark Tercek, Director
(Vice Chairman). Mr. Tercek has served as Vice Chairman of our board of directors since December 2021. He is a global conservation
leader and financial professional with expertise in conservation finance, corporate sustainability, and cross-sector collaboration. From
2008 to 2019, Mark served as CEO of The Nature Conservancy, the largest private conservation organization in the United States. Under
Mr. Tercek’s leadership, The Nature Conservancy launched NatureVest, the impact capital initiative, ran a $7 billion capital
fundraising campaign, and established a permanent department focused on gender, diversity, equity and inclusion (GDEI). Prior to serving
as CEO of The Nature Conservancy, Mr. Tercek served as Managing Director and Partner at Goldman Sachs, where over time he had responsibility
for managing several of the firm’s key units, including Corporate Finance, Real Estate Investment Banking, Equity Capital Markets,
and Pine Street, the firm’s leadership development program. In 2005, he was tapped to develop Goldman Sachs’s environmental
strategy and to lead its Environmental Markets Group. In addition, Mr. Tercek has advised on boards and councils for a number of
global organizations, including the Nicholas Institute for Environmental Policy Solutions at Duke University, the Social Enterprise Initiative
at Harvard Business School, the China Council for International Cooperation on Environment and Development, the Rockefeller Foundation
Economic Council on Planetary Health, Acumen, the AXA Stakeholders Advisory Panel, and Resources for the Future. From 2003 until 2008,
Mr. Tercek was on the finance faculty of New York University’s Stern School of Business. Since 2016, he has served on the Board
of Trustees of Williams College. He is the co-author of the Washington Post and Publisher’s Weekly bestselling book Nature’s
Fortune: How Business and Society Thrive by Investing in Nature. Mr. Tercek earned an M.B.A. from Harvard in 1984 and a B.A.
from Williams College in 1979.
Bracebridge H. Young,
Jr., President and CEO. Mr. Young is our President and Chief Executive Officer and also serves as Executive Chairman of Arabesque
USA, a global asset management firm that specializes in integrating artificial intelligence and sustainability research into its investment
approach. In addition, Mr. Young serves as a member of the board of advisors of Newmarket Investment Management. Prior to joining
Arabesque USA in 2017, Mr. Young served as Chief Executive Officer at Eclat Impact in 2016. From 2000 through 2015, Mr. Young
served as Chief Executive Officer and Partner at Mariner Investment Group. He joined Mariner directly from Goldman Sachs, where he began
on the Commercial Paper trading desk in 1980 and subsequently served as Head Trader for institutional money market funds, Co-Head of the
Money Market Sales and Trading Department in New York, Head of Fixed-Income activity in Tokyo, Head of Fixed-Income and foreign exchange
sales in London, and, finally, Partner and Head of European Debt Capital Markets in New York. Mr. Young serves as Chairman of the
board of directors of Social Finance, Inc., a Boston-based nonprofit organization dedicated to mobilizing investment capital to drive
social change, serves on the boards of directors for Social Progress Imperative, a non-profit best known for measuring countries’
social and environmental performance, Cultivo, the developer of an investment platform focused on environmental ventures, and TerViva,
an agricultural technology company. Additionally, he is an advisor to Upwell, technology-enabled water asset company. Mr. Young received
a B.A from Bowdoin College in 1977 and an M.B.A. from New York University’s Stern School of Business in 1983.
5
Douglas Listman, CFO.
Douglas Listman is our Chief Financial Officer. He has served as the Chief Accounting Officer of Cohen & Company, Inc. since December 2009
and Chief Accounting Officer of Cohen & Company, LLC since 2006. From 2004 to 2006, Mr. Listman served as an associate for Resources
Global Professionals (a worldwide accounting services consulting firm). From 1992 to 2003, Mr. Listman served in various accounting
and finance positions including: senior accountant with KPMG; Assistant Corporate Controller of Integrated Health Services (a publicly
traded provider of skilled nursing services; NYSE: IHS); Controller of Integrated Living Communities (a publicly traded provider of assisted
living services; NASDAQ: ILCC); Chief Financial Officer of Senior Lifestyles Corporation (a private owned provider of assisted living
services); and Chief Financial Officer of Monarch Properties (a privately owned health care facility real estate investment company).
Mr. Listman is a Certified Public Accountant and graduated from the University of Delaware with a B.S. in accounting.
We believe that potential
sellers of target businesses will view the fact that Ms. Cohen, Mr. Young, Mr. Tercek, and Mr. Listman have successfully
closed multiple business combinations with vehicles similar to our company as a positive factor in considering whether or not to enter
into a business combination with us. However, past performance is not a guarantee of success with respect to any business combination
we may consummate.
NASDAQ rules require that
we must complete one or more business combinations having 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. If the initial business combination
involves more than one target business, the 80% fair market value 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 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 or another independent entity that commonly renders valuation opinions 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. Notwithstanding the foregoing, if we are not then listed on NASDAQ for whatever reason, we would no longer be required to
meet the foregoing 80% fair market value test.
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 NASDAQ’s 80% fair market value test.
In addition to any potential
business candidates we may identify on our own, we anticipate that other target business candidates will be brought to our attention from
various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to
divest non-core assets or divisions.
In evaluating a prospective
target business, we conduct an extensive due diligence review which encompasses, as applicable and among other things, meetings with incumbent
management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, and a review of financial
and other information about the target and its industry.
6
We are not prohibited from
pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors, nor are we prohibited
from partnering, submitting joint bids, or entering into any similar transaction with our sponsor, or an affiliate of our sponsor, in
the pursuit of an initial business combination. If we seek to complete an initial business combination with such a company or we partner
with our sponsor, or any of its affiliates in our pursuit of an initial business combination, we, or a committee of independent directors,
will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm with respect
to fair market value that the business combination is fair to our stockholders from a financial point of view.
As more fully discussed in
“Certain Relationships and Related Transactions; and Director Independence — Conflicts of Interest,” if any of
our officers or directors becomes aware of a 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. Certain of our directors currently have relevant
fiduciary duties or contractual obligations that may take priority over their duties to us. However, our sponsor, officers and directors
may participate in the formation of, or become an officer or director of, any other blank check company prior to completion of our initial
business combination. As a result, our sponsor, officers or directors could have conflicts of interest in determining whether to present
business combination opportunities to us or to any other blank check company with which they may become involved. We do not believe that
any potential conflicts would materially affect our ability to complete our initial business combination.
Effecting Our Initial Business Combination
General
We are not presently engaged
in, and we will not engage in, any operations until our initial business combination. We intend to effectuate our initial business combination
using cash from the proceeds of the initial public offering and the private placement, our capital stock, debt or a combination of these
as the consideration to be paid in our initial business combination.
If we pay for our initial
business combination using stock or debt securities, or we do not use all of the funds released from the trust account for payment of
the purchase price in connection with our business combination or 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 acquired businesses, the payment of principal or interest due on indebtedness incurred in consummating our initial business combination,
to fund the purchase of other companies or for working capital.
There is no current basis
for stockholders to evaluate the possible merits or risks of the target business with which we may ultimately complete our initial business
combination. Although our management will assess the risks inherent in a particular target business with which we may combine, we cannot
assure you that this assessment will result in our identifying all risks that a target business may encounter. Furthermore, some of those
risks may be outside of our control, meaning that we can do nothing to control or reduce the chances that those risks will adversely impact
a target business.
NASDAQ rules require that
our initial business combination be with one or more target businesses that together have a fair market value equal to at least 80% of
the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our
signing a definitive agreement in connection with our initial business combination. However, if our securities are not listed on NASDAQ
or another securities exchange, we will no longer be subject to that requirement.
We may seek to raise additional
funds through a private offering of debt or equity securities to finance our initial business combination, and we may effectuate an initial
business combination using the proceeds of such offering rather than using the amounts held in the trust account. Subject to compliance
with applicable securities laws, we would consummate such financing only simultaneously with the consummation of our initial business
combination. In the case of an initial business combination funded with assets other than the trust account assets, our tender offer documents
or proxy materials disclosing the initial business combination would disclose the terms of the financing and, only if required by law
or NASDAQ, 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, 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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Our sponsor paid a nominal
purchase price for the founder shares and, as a result, is likely to earn a substantial profit on its investment in us upon disposition
of its Class A common stock even if the trading price of our Class A common stock declines after we complete our initial business
combination. Our sponsor may therefore be economically incentivized to complete an initial business combination with a riskier, weaker-performing
or less-established target business than would be the case if our sponsor had paid the same per share price for the founder shares as
our public stockholders paid for their public shares. See “Risk Factors — The nominal purchase price paid by
our sponsor for the founder shares may significantly dilute the implied value of your public shares in the event we complete an initial
business combination. In addition, the value of the sponsor’s founder shares will be significantly greater than the amount our sponsor
paid to purchase such shares in the event we complete an initial business combination, even if the business combination causes the trading
price of our Class A common stock to materially decline.”
Sources of Acquisition Candidates
Target business candidates
are brought to our attention from various unaffiliated sources, including investment bankers, attorneys, accountants, venture capital
funds, private equity funds, leveraged buyout funds, management buyout funds, brokers and other members of the financial community and
corporate executives. These target candidates may present solicited or unsolicited proposals. Such sources became aware that we were seeking
a business combination candidate by a variety of means, including publicly available information relating to the initial public offering,
public relations and marketing efforts or direct contact by management following the completion of the initial public offering.
Our officers and directors,
as well as their affiliates, may also bring to our attention target business candidates of which they become aware through their contacts.
We may engage the services of professional firms or other individuals that specialize in business acquisitions, in which event we may
pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms
of the transaction. We will engage a finder only if 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 officers
or directors, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation prior
to, or for any services they render in order to effectuate, the consummation of our initial business combination (regardless of the type
of transaction that it is), other than (i) repayment of loans made to us prior to the date of the initial public offering by an affiliate
of our sponsor to cover offering-relating and organization expenses, (ii) repayment of loans that our sponsor or one of its affiliates
make to finance transaction costs in connection with an intended initial business combination (provided that if we do not consummate an
initial business combination, we may use 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), (iii) payments to our sponsor or its designee of a total of $30,000 per month
for office space, administrative and shared personnel support services, (iv) payment of certain consulting fees to persons engaged by
an entity affiliated with certain of our directors and officers, (v) at the closing of our initial business combination, a customary advisory
fee to affiliates of our sponsor, in an amount that constitutes a market standard advisory fee for comparable transactions and services
provided; (vi) payment of customary fees for financial advisory services (including to CCM); and (vii) to reimburse our sponsor, officers
or directors for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination. Any
advisory fee payable to an affiliate of our sponsor will be negotiated on an arms-length basis and will require approval of our audit
committee. None of the initial holders, our officers, our directors or any entity with which they are affiliated will be allowed to receive
any compensation, finder’s fees or consulting fees from a prospective acquisition target in connection with a contemplated acquisition
of such target by us. Although some of our officers and directors may enter into employment or consulting agreements with the acquired
business following our initial business combination, the presence or absence of any such arrangements will not be used as a criterion
in our selection process of an acquisition candidate.
We are not prohibited from
pursuing an initial business combination with a company that is affiliated with our sponsor, officers, directors or their affiliates.
Additionally, we are not prohibited from partnering, submitting joint bids, or entering into any similar transaction with such persons
in the pursuit of an initial business combination. If we seek to complete an initial business combination with such a company or we partner
with such persons in our pursuit of an initial business combination, we, or a committee of independent directors, would obtain an opinion
from an independent investment banking firm that is a member of FINRA or an independent accounting firm, that such an initial business
combination is fair to our stockholders from a financial point of view. Generally, such opinion is rendered to a company’s board
of directors and investment banking firms may take the view that stockholders may not rely on the opinion. Such view will not impact our
decision on which investment banking firm to hire.
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Unless we consummate our initial
business combination with an affiliated entity, we are not required to obtain a financial fairness opinion from an independent investment
banking firm. If we do not obtain such an opinion, our stockholders will be relying on the judgment of our board of directors, who will
determine fair market value and fairness based on standards generally accepted by the financial community. The application of such standards
would involve a comparison, from a valuation standpoint, of our business combination target to comparable public companies, as applicable,
and a comparison of our contemplated transaction with such business combination target to other then-recently announced comparable private
and public company transactions, as applicable. The application of such standards and the basis of our board of directors’ determination
will be discussed and disclosed in our tender offer or proxy solicitation materials, as applicable, related to our initial business combination.
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
NASDAQ rules require that
we must complete one or more business combinations having 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. We refer to this as the 80% of fair
market value test. 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.
Even though our board of directors will rely on generally accepted standards, our board of directors will have discretion to select the
standards employed. In addition, the application of the standards generally involves a substantial degree of judgment. Accordingly, investors
will be relying on the business judgment of the board of directors in evaluating the fair market value of the target or targets. The proxy
solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide public stockholders
with our analysis of our satisfaction of the 80% of fair market value test, as well as the basis for our determinations. 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 or another independent entity that commonly renders valuation opinions 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. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses,
the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken into account
for purposes of NASDAQ’s 80% fair market value test. There is no basis for stockholders 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.
In evaluating a prospective
business target, we conduct a thorough due diligence review, which encompasses, 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.
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Lack of business diversification
For an indefinite period of
time after consummation 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 consummating
a business combination with only a single entity, our lack of diversification may:
Limited ability to evaluate the target’s
management team
Although we closely scrutinize
the management of a prospective target business when evaluating a target 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. The future role of members of our management team, if any, in the target business cannot presently be stated with any
certainty. While it is possible that one or more of our directors will remain associated in some capacity with us following a business
combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to a business combination. Moreover,
we cannot assure you that members of our management team will have experience or knowledge relating to the operations of the particular
target business.
We cannot assure you that
any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether
any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following a business combination,
we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we
will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management.
Stockholders may not have the ability to approve
a business combination
We may not seek stockholder
approval before we effect our initial business combination as not all business combinations require stockholder approval under applicable
state law. However, we will seek stockholder approval if it is required by law or NASDAQ, or we may decide to seek stockholder approval
for business or other reasons. Presented in the table below is a table 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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So long as we obtain and maintain
a listing for our securities on NASDAQ, stockholder approval would be required for our initial business combination if, for example:
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 business combination pursuant to the tender
offer rules, our sponsor, directors, officers or their respective affiliates may purchase public securities in the open market or in privately
negotiated transactions either prior to or following the consummation of our initial business combination, although as of the date of
this Annual Report they have no commitments, plans or intentions to engage in such transactions. If they do effect such purchases, we
anticipate that they would approach a limited number of large holders of our securities that have voted against the business combination