Item 1A. RISK FACTORS
You should consider carefully
all of the risks described below, which we believe are the principal risks that we face and of which we are currently aware, and all of
the other information contained in this Annual Report. If any of the events or developments described below occur, our business, financial
condition or results of operations could be negatively affected.
Risks Relating to our Search for, Consummation
of, or Inability to Consummate,
a Business Combination and Post-Business Combination Risks
Our public stockholders may not be afforded
an opportunity to vote on our proposed business combination, unless such vote is required by law or Nasdaq, which means we may consummate
our initial business combination even though a majority of our public stockholders do not support such a combination.
We may not hold a stockholder
vote to approve our initial business combination unless the business combination would require stockholder approval under applicable state
law or the rules of NASDAQ or if we decide to hold a stockholder vote for business or other reasons. For example, NASDAQ rules currently
allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we
were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore,
if we structure a business combination that requires us to issue more than 20% of our outstanding shares, we would seek stockholder approval
of such business combination. However, except as required by law, the decision as to whether we will seek stockholder approval of a proposed
business combination will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the
transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may consummate
our initial business combination even if holders of a majority of the outstanding shares of our common stock do not approve of the business
combination we consummate.
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If we seek stockholder approval of our initial
business combination, our sponsor, directors and officers have agreed to vote in favor of such initial business combination, regardless
of how our public stockholders vote.
Our sponsor, officers and
directors have agreed to vote their founder shares and any placement shares and public shares they hold in favor of our initial business
combination. If we seek stockholder approval of our initial business combination, it is more likely that the necessary stockholder approval
will be received than would be the case if holders of founder shares agreed to vote their founder shares, placement shares and public
shares in accordance with the majority of the votes cast by our public stockholders.
Your ability 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, unless
we seek stockholder approval of the business combination.
At the time of your investment
in us, you will not be provided with an opportunity to evaluate the specific merits or risks of any target businesses. Since our board
of directors may consummate a business combination without seeking stockholder approval, public stockholders may not have the right to
vote on the business combination unless we seek such stockholder vote. Accordingly, your ability to affect the investment decision regarding
a potential business combination may be limited to exercising your redemption rights with respect to a proposed business combination.
The ability of our public stockholders to
redeem their shares for cash may make us unattractive to potential business combination targets, which may make it difficult for us to
enter into a business combination with a target.
We may enter into a 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.
Our amended and restated certificate of incorporation requires us to provide all of our stockholders with an opportunity to redeem all
of their shares in connection with the consummation of any initial business combination, although our sponsor, directors and officers
and each holder of placement units has agreed to waive his, her or its respective redemption rights with respect to founder shares and
placement shares, and in the case of the initial holders, public shares held by him, her or it in connection with the consummation of
our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets
to be less than the amount necessary to satisfy a closing condition as described above, or less than the $5,000,001 minimum of net tangible
assets which we are required to maintain, we would not proceed with such redemption and the related business combination. Prospective
targets would be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us.
The ability of our public stockholders to
exercise redemption rights with respect to a large number of our shares may not allow us to consummate the most desirable business combination
or optimize our capital structure.
At the time we enter into
an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore
will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If
our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or
requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such
requirements, or arrange for third party financing. In addition, if a larger number of shares is submitted for redemption than we initially
expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third
party financing. Raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher
than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to
us or optimize our capital structure.
The ability of our public stockholders to
exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination
would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our initial business combination
agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount
of cash at closing, the probability that our initial business combination would be unsuccessful increases. If our initial business combination
is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in
need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount
to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose
the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
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The requirement that we complete a business
combination within the completion window may give potential target businesses leverage over us in negotiating a business combination and
may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which
could undermine our ability to consummate a 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 consummate a business combination within
the completion window. Consequently, such target businesses may obtain leverage over us in negotiating a business combination, knowing
that if we do not complete a business combination with it, we may be unable to identify another target business and complete a business
combination with any target business. This risk will increase as we get closer to the end of the completion window. Depending upon when
we identify a potential target business, we may have only a limited time to conduct due diligence and may enter into a business combination
on terms that we might have rejected upon a more comprehensive investigation.
We may not be able to consummate our initial
business combination within the completion window, 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 share, or less than
such amount in certain circumstances, and our warrants will expire worthless.
We must complete our initial
business combination within the completion window. We may not be able to find a suitable target business and consummate our initial business
combination within that time period. Our ability to complete our initial business combination may be negatively impacted by general market
conditions, volatility in the capital and debt markets and the other risks described herein. For example, the outbreak of COVID-19 continues
to grow both in the United States and globally and, while the extent of the impact of the outbreak on us will depend on future developments,
it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased
market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Additionally, the continued outbreak
of COVID-19 may negatively impact businesses we may seek to acquire. If we have not consummated our initial business combination within
the completion window, or earlier, at the discretion of our board, 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, subject to lawfully available funds therefor,
redeem 100% of the public shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account,
including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to$100,000
of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject
to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable law, in which case our public stockholders may only receive $10.10 per share, or less
than such amount in certain circumstances, and our warrants will expire worthless.
Our search for a business combination, and
any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus
(COVID-19) outbreak and the status of debt and equity markets.
The COVID-19 outbreak
has resulted, and a significant outbreak of other infectious diseases could result, in a widespread health crisis that could adversely
affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business
combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if concerns relating
to COVID-19 continue to 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 consummate a transaction in a timely manner. The extent to
which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot
be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or
treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive
period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate
a business combination, may be materially adversely affected. In addition, our ability to consummate a transaction may be dependent on
the ability to raise equity and debt financing which may be impacted by COVID-19 and other events, including as a result of increased
market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all.
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If we seek stockholder approval of our initial
business combination, our sponsor, directors, officers and their affiliates may elect to purchase shares of common stock from public stockholders,
in which case they may influence a vote in favor of a proposed business combination that you do not support and reduce the public “float”
of our Class A common stock or public warrants.
If we seek stockholder approval
of our 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 shares or warrants in the open market or in privately
negotiated transactions either prior to or following the consummation of our initial business combination. Our sponsor, directors, officers
and their respective affiliates may also enter into transactions with stockholders and others to provide them with incentives to, among
other things, acquire shares of our common stock or vote their shares in favor of an initial business combination. Our directors, officers
or their affiliates will not make any such purchases when they are in possession of any material non-public information not disclosed
to the seller or during a restricted period under Regulation M under the Exchange Act or in a transaction which would violate Section
9(a)(2) or Rule 10(b)-5 under the Exchange Act. Such a purchase would include a contractual acknowledgement that such stockholder, although
still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights.
In the event that our sponsor, directors, officers 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. In addition, if such purchases are made, the public “float” of our Class A common
stock or public warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain
or maintain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice
of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for
tendering its shares, such shares may not be redeemed.
We will comply with the tender
offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our
compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may
not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that
we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures
that must be complied with in order to validly tender or redeem public shares. 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 materials mailed to such holders, or up to two
business days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials,
or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these procedures,
its shares may not be redeemed. Please see “Business — Tendering stock certificates in connection with redemption rights.”
You will not have any rights to or interest
in funds from the trust account, except under limited circumstances. To liquidate your investment, therefore, you may be forced to sell
your shares or 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) the consummation of our initial business combination;
(ii) the redemption of our public shares if we are unable to consummate a business combination within the completion window, subject to
applicable law; (iii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended
and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we
do not complete our initial business combination within the completion window; or (iv) otherwise upon our liquidation or in the event
our board of directors resolves to liquidate the trust account and ceases to pursue the consummation of a business combination prior to
the expiration of the completion window (our board of directors may determine to liquidate the trust account prior to such date if it
determines, in its business judgment, that it is improbable within the remaining time that we will be able to identify an attractive business
combination or satisfy regulatory and other business and legal requirements to consummate a business combination). In addition, if our
plan to redeem our public shares if we are unable to consummate an initial business combination within the completion window is not consummated
for any reason, Delaware law may require that we submit a plan of dissolution to our then-existing stockholders for approval prior to
the distribution of the proceeds held in our trust account. In that case, public stockholders may be forced to wait beyond the end of
the completion window before they receive funds from our trust account. In no other circumstances will a public stockholder have any right
or interest of any kind in the trust account. Holders of warrants will not have any rights to the proceeds from our trust account with
respect to their warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially
at a loss.
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You will not be entitled to protections
normally afforded to investors of many other blank check companies.
Since we intend to use the
net proceeds of the initial public offering and the private placement to complete an initial business combination with a target business
that has not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However,
because we had net tangible assets in excess of $5.0 million upon the completion of the initial public offering and the private placement
and we 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 under the Securities Act. Accordingly, investors will not be
afforded the benefits or protections of those rules. Among other things, this means our units were immediately tradable and we have a
longer period of time to complete a business combination than would companies subject to Rule 419. Moreover, offerings subject to Rule
419 would prohibit the release of any interest earned on funds held in the trust account to us, except in connection with our consummation
of an initial business combination.
Because of our limited resources and the
significant competition for business combination opportunities, it may be more difficult for us to complete a business combination. If
we are unable to complete our initial business combination, you may receive only $10.10 per share from our redemption of your shares,
and our warrants will expire worthless.
We expect to encounter intense
competition from other entities having a business objective similar to ours, including private investors (which may be individuals or
investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses
we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting,
directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors
possess greater technical, human and other resources, or more industry knowledge than we do and our financial resources will be relatively
limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially
acquire, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available
financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.
Furthermore, because we are obligated to pay cash for the shares of Class A common stock which our public stockholders redeem in connection
with our initial business combination, target companies will be aware that this may reduce the resources available to us for our initial
business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business combination.
If we are unable to complete our initial business combination, our public stockholders may receive only $10.10 per share from our redemption
of our public shares, and our warrants will expire worthless.
There may at times be more competition to
find an attractive target for an initial business combination. This could increase the costs associated with completing our initial business
combination and may result in our inability to find a suitable target for our initial business combination.
In recent years, many
companies have entered into business combinations with special purpose acquisition companies, and there are still many special purpose
acquisition companies seeking targets for their initial business combination, as well as many additional special purpose acquisition companies
currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, effort and
resources to identify a suitable target for an initial business combination.
In addition, because of the
number of special purpose acquisition companies seeking to enter into an initial business combination with available targets, the competition
for available targets with attractive fundamentals or business models may increase, which could cause target companies to demand improved
financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical
tensions or increases in the cost of or the inability to obtain additional capital needed to close business combinations or operate targets
post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find a suitable
target for and/or complete our initial business combination.
Changes in the market for directors and
officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination.
The market for directors and
officers liability insurance for special purpose acquisition companies has changed over time. Fewer insurance companies are offering quotes
for directors and officers liability coverage, the premiums charged for such policies have generally increased and the terms of such policies
have generally become less favorable. There can be no assurance that these trends will not continue.
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The increased cost and decreased
availability of directors and officers liability insurance could make it more difficult and more expensive for us to negotiate an initial
business combination. In order to obtain directors and officers liability insurance or modify its coverage as a result of becoming a public
company, the post-business combination entity might need to incur greater expense, accept less favorable terms or both. However, any failure
to obtain adequate directors and officers liability insurance could have an adverse impact on the post-business combination entity’s
ability to attract and retain qualified officers and directors.
In addition, even after we
were to complete an initial business combination, our directors and officers could still be subject to potential liability from claims
arising from conduct alleged to have occurred prior to the initial business combination. As a result, in order to protect our directors
and officers, the post-business combination entity may need to purchase additional insurance with respect to any such claims (“run-off
insurance”). The need for run-off insurance would be an added expense for the post-business combination entity, and could interfere
with or frustrate our ability to consummate an initial business combination on terms favorable to our investors.
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 consummate an initial business
combination, and our sponsor is likely to make a substantial profit on its investment in us in the event we consummate an initial business
combination, even if the business combination causes the trading price of our common shares to materially decline.
While we sold our units
at an offering price of $10.00 per unit in the initial public offering and the amount in our trust account was initially $10.10 per public
share, implying an initial value of $10.10 per public share, our sponsor paid only a nominal aggregate purchase price of $25,000 for the
founder shares, or approximately $0.003 per share. As a result, the value of your public shares may be significantly diluted in the event
we consummate an initial business combination. For example, the following table shows the public stockholders’ and sponsor’s
investment per share and how that compares to the implied value of one of our shares upon the consummation of our initial business combination
if at that time we were valued at $242,476,084, which is the amount we would have for our initial business combination in the trust account
assuming no interest is earned on the funds held in the trust account and no public shares are redeemed in connection with our initial
business combination or any extension of the completion window. At such valuation, each of our common shares would have an implied value
of $7.04 per share, which is a 30.3% decrease as compared to the initial implied value per public share of $10.10.
Initial implied value per public share $ 10.10
Implied value per share upon consummation of initial business combination $ 7.04
Note that redemptions of our
public shares in connection with our initial business combination or any extension of the completion window would further reduce the implied
value of our Class A common stock. For instance, in the example above, if 50% of the public shares were redeemed in connection with
our initial business combination or any extension of the completion window, the implied value per share would be $5.31.
While the implied value of
our public shares may be diluted, the implied value of $7.04 per share in the example above would represent a significant implied profit
for our sponsor relative to the initial purchase price of the founder shares. Our sponsor invested an aggregate of $9,785,810 in us in
connection with the initial public offering, comprised of the $25,000 purchase price for the founder shares and the $9,760,810 purchase
price for the placement units. At $7.04 per share, the 8,615,141 founder shares and 976,081 placement shares would have an aggregate implied
value of $67,522,203. As a result, even if the trading price of our Class A common stock significantly declines (whether because of a
substantial amount of redemptions of our public shares or for any other reason), our sponsor will stand to make significant profit on
its investment in us. In addition, our sponsor could potentially recoup its entire investment in us even if the trading price of our common
stock were as low as $1.02 per share and even if the placement warrants are worthless. As a result, our sponsor is likely to make a substantial
profit on its investment in us even if we select and consummate an initial business combination that causes the trading price of our Class
A common stock to decline, while our public stockholders could lose significant value in their public shares. Our sponsor may therefore
be economically incentivized to consummate 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.
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The value of the founder shares following
completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the
trading price of our common stock at such time is substantially less than $10.10 per share.
Our sponsor invested in us
an aggregate of $9,785,810, comprised of the $25,000 purchase price for the founder shares and the $9,760,810 purchase price for the placement units,
comprised of placement shares and placement warrants. Assuming a trading price of $10.00 per share upon consummation of our initial business
combination, the 8,615,141 founder shares and 976,081 placement shares would have an aggregate implied value of $95,912,220. Even if the
trading price of our common stock was as low as $1.02 per share and the placement warrants were worthless, the value of the founder shares
and placement shares would be equal to the sponsor’s initial investment in us. As a result, our sponsor is likely to be able to
recoup its investment in us and make a substantial profit on that investment, even if our public shares have lost significant value (whether
because of a substantial amount of redemptions of our public shares or any other reason). Accordingly, our management team, which owns
interests in our sponsor, may have an economic incentive that differs from that of the public stockholders to pursue and consummate an
initial business combination rather than to liquidate and to return all of the cash in the trust account to the public stockholders, even
if that business combination were with a riskier or less-established target business. For the foregoing reasons, you should consider our
management team’s financial incentive to complete an initial business combination when evaluating whether to redeem your public
shares prior to or in connection with the initial business combination.
We may issue our shares to investors in
connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time.
In connection with our initial
business combination, we may issue shares to investors in private placement transactions (so-called PIPE transactions) at a price of $10.00
per share. The purpose of such issuances will be to enable us to provide sufficient liquidity to the post-business combination entity.
The price of the shares we issue may therefore be less, and potentially significantly less, than the market price for our shares at such
time.
We may engage the underwriter or its affiliates
to provide additional services to us, which may include acting as financial advisor in connection with an initial business combination
or as placement agent in connection with a related financing transaction. The underwriter is entitled to receive deferred commissions
that will be released from the trust only upon completion of an initial business combination. These financial incentives may cause the
underwriter to have potential conflicts of interest in rendering any such additional services to us, including, for example, in connection
with the sourcing and consummation of an initial business combination.
We may engage the underwriter
or its affiliates to provide additional services to us, including, for example, identifying potential targets, providing financial advisory
services, acting as a placement agent in a private offering or arranging debt financing. We may pay the underwriter or its affiliates
fair and reasonable fees or other compensation that would be determined at that time in an arm’s length negotiation. The underwriter
is also entitled to receive deferred commissions that are conditioned on the completion of an initial business combination. The fact that
the underwriter or its affiliates’ financial interests are tied to the consummation of a business combination transaction may give
rise to potential conflicts of interest in providing any such additional services to us, including potential conflicts of interest in
connection with the sourcing and consummation of an initial business combination.
If the funds not being held in the trust
account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our
initial business combination and we will depend on loans from our sponsor or management team to fund our search for an initial business
combination, to pay our taxes and to complete our initial business combination. If we are unable to obtain these loans, we may be unable
to complete our initial business combination.
As of December 31, 2023, only
$29,844 was available to us outside the trust account to fund our working capital requirements. 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 we may be forced to liquidate.
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 $2,000,000 of such loans may be convertible into units at a price of $10.00 per unit at the option of the
lender at the time of the business combination. The units would be identical to the placement units. We do not expect to seek loans from
parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and
provide a waiver against any and all rights to seek access to funds in our trust account. If we are unable to obtain these loans,
we may be unable to complete our initial business combination. If we are unable to complete our initial business combination because we
do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. Consequently, our
public stockholders may only receive $10.10 per share on our redemption of our public shares, and our warrants will expire worthless.
In certain circumstances, our public stockholders may receive less than $10.10 per share on the redemption of their shares. Please 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” and other risk factors in this section.
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Subsequent to consummation of our initial
business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have
a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some
or all of your investment.
Even if we conduct extensive
due diligence on a target business with which we combine, we cannot assure you that this examination will uncover all material risks that
may be presented by a particular target business, or that factors outside of the target business and outside of our control will not later
arise. Even if our due diligence successfully identifies the principal risks, unexpected risks may arise and previously known risks may
materialize in a manner not consistent with our preliminary risk analysis. As a result, from time to time following our initial business
combination, we may be forced to write-down or write-off assets, restructure our operations, or incur impairment or other charges that
could result in our reporting losses. 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 securityholders who choose
to remain securityholders following the initial business combination could suffer a reduction in the value of their securities. Such securityholders
are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the
breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring
a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the initial business
combination constituted an actionable material misstatement or omission.
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.
Placing funds in the trust
account may not protect those funds from third party claims against us. Although we seek to have all vendors, service providers (except
our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute
agreements with us waiving any right, title, interest or claim 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, claims for fraudulent inducement, breach of fiduciary responsibility
or other similar claims, as well as claims challenging the enforceability of the waiver. If any third party refuses to execute an agreement
waiving 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 without a waiver if management believes that such third party’s engagement would be significantly
more beneficial to us than any available alternative. If we do not obtain a waiver from a third party, we will obtain the written consent
of our sponsor before entering into an agreement with such third party.
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 management believes to be significantly superior to those of other consultants who would execute a waiver or in cases
where management is unable to find a service provider willing to execute a waiver and where our sponsor executes a written consent. In
addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising
out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemption
of our public shares, if we are unable to complete a business combination within the required time frame, or upon the exercise of a redemption
right in connection with a business combination, we will be required to provide for payment of claims of creditors that were not waived
that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public
stockholders could be less than the $10.10 per share initially held in the trust account due to claims of such creditors. Pursuant to
a written agreement, Emerald ESG Sponsor, LLC has agreed that it will be liable to us if and to the extent any claims by a third party
for services rendered or products sold to us, or a prospective target business with which we discussed entering into a transaction agreement,
reduce the amounts in the trust account to below $10.10 per share except as to any claims by a third party who executed a waiver of rights
to seek access to the trust account and except as to any claims under our indemnity of the underwriter of the initial public offering
against certain liabilities, including liabilities under the Securities Act. Moreover, if an executed waiver is deemed to be unenforceable
against a third party, Emerald ESG Sponsor, LLC will not be responsible to the extent of any liability for such third party claims. We
have not independently verified whether Emerald ESG Sponsor, LLC has sufficient funds to satisfy its indemnity obligations, we have not
asked Emerald ESG Sponsor, LLC to reserve for such indemnification obligations and we believe that its only assets are securities of our
company. Therefore, we cannot assure you that it would be able to satisfy these obligations.
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Our directors may decide not to enforce
the indemnification obligations of Emerald ESG Sponsor, LLC, resulting in a reduction in the amount of funds in the trust account available
for distribution to our public stockholders.
If proceeds in the trust account
are reduced below $10.10 per public share and Emerald ESG Sponsor, LLC asserts that it is unable to satisfy its obligations or that it
has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action
against Emerald ESG Sponsor, LLC to enforce its indemnification obligations. While we currently expect that our independent directors
would take legal action on our behalf against Emerald ESG Sponsor, LLC 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 share.
We may not have sufficient funds to satisfy
indemnification claims of our directors and executive officers.
We have agreed to indemnify
our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right,
title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any
reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside
of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may
discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions
also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action,
if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected
to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
If, after we distribute the proceeds in
the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us
that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as
having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive
damages.
If, after we distribute the
proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed
against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy
laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek
to recover all amounts received by our stockholders. In addition, by making distributions to public stockholders before making provision
for creditors, 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 for punitive damages.
If, before distributing the proceeds in
the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us
that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share
amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the
proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed
against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included
in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any
bankruptcy claims deplete the trust account, the per-share amount that would otherwise be received by our stockholders in connection with
our liquidation may be reduced.
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Our stockholders may be held liable for
claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
Under the DGCL, stockholders
may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event
we do not consummate our initial business combination within the completion window may be considered a liquidation distribution under
Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes
reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against
the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period
before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution
is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any
liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our
public shares as soon as reasonably possible following the end of the completion window if we do not consummate an initial business combination
and, therefore, we do not intend to comply with those procedures.
Because we will not be complying
with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for
our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our
dissolution. However, because we are a blank check company, rather than an operating company, and our operations are limited to searching
for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers or investment
bankers) 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 if we do not consummate our initial business combination within the completion window
is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant
to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution,
instead of three years, as in the case of a liquidation distribution.
We may not hold an annual meeting of stockholders
until after we consummate a business combination.
We may not hold an annual
meeting of stockholders until after we consummate a business combination (unless required by NASDAQ), and thus may not be in compliance
with Section 211(b) of the DGCL, which requires that an annual meeting of stockholders be held for the purposes of electing directors
in accordance with a company’s bylaws unless directors are elected by written consent in lieu of such a meeting. Therefore, if our
stockholders want us to hold an annual meeting prior to our consummation of a business combination, they may attempt to force us to hold
one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
Because we have not selected any specific
target businesses with which to pursue a business combination, you will be unable to ascertain the merits or risks of any particular target
business’ operations.
We will seek to consummate
a business combination with an operating company in the Target Sectors, but may also pursue acquisition opportunities in other business
sectors or geographic regions, except that we are not, under our amended and restated certificate of incorporation, permitted to effectuate
a business combination with another blank check company or similar company with nominal operations. Because we have not yet identified
any specific target business with respect to a business combination, you have 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. If we consummate
our initial business combination, we may be affected by numerous risks inherent in the business operations of the entity with which we
combine. Because we will seek to acquire businesses that potentially need financial, operational, strategic or managerial redirection,
we may be affected by the risks inherent in the business and operations of a financially or operationally unstable 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. Accordingly, any securityholders who choose to remain securityholders following the initial business
combination could suffer a reduction in the value of their securities. 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 an acquisition
target.
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We may seek investment opportunities in
sectors outside of our industry focus (which may or may not be outside of our management’s area of expertise).
Although we currently intend
to consummate a business combination in the Target Sectors, we will consider a business combination outside this industry if a business
combination candidate is presented to us and we determine that such candidate offers an attractive investment opportunity for our company.
If we elect to pursue an investment outside of the Target Sectors, our management’s expertise in that industry would not be directly
applicable to its evaluation or operation, and the information contained herein regarding the Target Sectors might not be relevant to
an understanding of the business that we elect to acquire.
Although we have identified general criteria
and guidelines that we believe are important in evaluating prospective target businesses, we may enter into a 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
specific criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter
into a business combination will not have all of these positive attributes. If we consummate a 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. We also cannot assure you that an investment in our units will not ultimately prove to be
less favorable to investors than a direct investment, if an opportunity were available, in an initial business combination candidate.
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 NASDAQ, or we decide to obtain stockholder approval for business or other reasons, it may be
more difficult for us to obtain stockholder approval of our initial business combination if the target business does not meet our general
criteria and guidelines. If we are unable to complete our initial business combination, our public stockholders may only receive $10.10
per share on our redemption, and our warrants will expire worthless.
We may seek acquisition opportunities with
an early stage company, a financially unstable business or an entity lacking an established record of revenue or earnings, which could
subject us to volatile revenues or earnings, intense competition and difficulties in obtaining and 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 sales 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 and with limited historical 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 significant risk factors
and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave
us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We are not required to obtain an opinion
from an independent investment banking firm and, consequently, you may have no assurance from an independent source that the price we
are paying for the target in our initial business combination is fair to our stockholders from a financial point of view.
Unless we consummate our initial
business combination with an affiliated entity or our board cannot independently determine the fair market value of the target business,
we are not required to obtain an opinion from an independent investment banking firm that the price we are paying is fair to our stockholders
from a financial point of view. If we do not obtain an opinion, our stockholders will be relying on the judgment of our board of directors,
who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed
in our tender offer documents or proxy solicitation materials, as applicable, related to our initial business combination.
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If we hold a stockholder vote and 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.
If we hold a stockholder vote
to approve our initial business combination, 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. If we make
a tender offer for our public shares, we will include the same financial statement disclosure in our tender offer documents whether or
not they are required under the tender offer rules. These financial statements must be prepared in accordance with GAAP or IFRS, depending
on the circumstances, and the historical financial statements must be audited in accordance with the standards of the PCAOB. These financial
statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide
such statements in time for us to disclose such statements in accordance with federal proxy rules and consummate our initial business
combination within the completion window.
The requirement that we maintain a minimum
net worth or retain a certain amount of cash could increase the probability that we will be unable to complete a proposed business combination
and that you would have to wait for liquidation in order to redeem your stock.
If, pursuant to the terms
of our proposed business combination, we are required to maintain a minimum net worth or retain a certain amount of cash in trust in order
to consummate the business combination, the ability of our public stockholders to cause us to redeem their shares in connection with such
proposed transaction will increase the risk that we will not meet that condition and, accordingly, that we will not be able to complete
the proposed transaction. If we do not complete a proposed business combination, you would not receive your pro rata portion of the trust
account until we liquidate or you are able to sell your stock in the open market. If you were to attempt to sell your stock in the open
market at that time, the price you receive could represent a discount to the pro rata amount in our 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.
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.
The Sarbanes-Oxley Act requires
that we maintain a system of internal controls and that we evaluate and report on such system of internal controls. In addition,
once we are no longer an “emerging growth company,” we must have our system of internal controls audited. The fact
that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared
to other public companies because a target company with which we seek to complete a 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 controls of any
such entity in order to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such
acquisition.
We do not have a specified maximum redemption
threshold. The absence of such a redemption threshold will make it easier for us to consummate a business combination with which a substantial
number of our stockholders do not agree.
We may be able to consummate
a business combination even though a substantial number of our public stockholders do not agree with the transaction and have redeemed
their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with
our business combination pursuant to the tender offer rules, if our sponsor, officers, directors or their affiliates have entered into
privately negotiated agreements with public stockholders to acquire public shares. However, 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 consummation of our initial business combination,
and the amount that we redeem may be further limited by the terms and conditions of our initial business combination. In such case, we
would not proceed with the redemption of our public shares and the related initial business combination, and instead may search for an
alternate business combination.
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Unlike many blank check companies, our balance
sheet reflects negative stockholders’ equity.
The financial statements in
this annual report, after collaboration with our independent registered public accounting firm, reflect that all of the public shares
are subject to redemption, even though we are prohibited under our amended and restated certificate of incorporation from redeeming all
of the public shares since such redemption would result in our net tangible assets to be less than $5,000,001 upon consummation of our
initial business combination. As a result, all of the public shares are classified as temporary equity, presented outside of the stockholders’
deficit section of our balance sheet. This accounting presentation may not be consistent with that of other blank check companies and
may make comparison of our financial statements to that of other blank check companies more difficult.
In order to effectuate an initial business
combination, blank check companies have, in the recent past, amended various provisions of their charters and other governing instruments,
including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation,
or governing instruments in a manner that will make it easier for us to complete our initial business combination that our stockholders
may not support.
In order to effectuate an
initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified