Item 1A. Risk Factors 25
Item 1B. Unresolved Staff Comments 25
Item 2. Properties 25
Item 3. Legal Proceedings 25
Item 4. Mine Safety Disclosures 25
PART II
Item 6. [Reserved] 27
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31
Item 8. Financial Statements and Supplementary Data 31
Item 9A. Controls and Procedures 31
Item 9B. Other Information 31
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 31
PART III
Item 10. Directors, Executive Officers and Corporate Governance 32
Item 11. Executive Compensation 39
Item 14. Principal Accountant Fees and Services 42
PART IV
Item 15. Exhibits and Financial Statement Schedules 43
Signatures 45
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS; SUMMARY OF RISK FACTORS
Some
of the statements contained in this Annual Report on Form 10-K may constitute “forward-looking statements.” Our forward-looking
statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions
or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future
events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “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 on Form 10-K 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;
● the trust account not being subject to claims of third parties; or
● our financial performance following the initial public offering.
The
forward-looking statements contained in this Annual Report on Form 10-K are based on our current expectations and beliefs concerning
future developments and their potential effects on us. Future developments affecting us may not 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.
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.
Summary
of Risk Factors
An
investment in our securities involves a high degree of risk. 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 materially adversely
affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and
you could lose all or part of your investment. Such risks include, but are not limited to:
PART
I
Item
1. Business.
In
this Annual Report on Form 10-K (the “Form 10-K”), references to the “Company” and to “we,” “us,”
“our” and refer to Pono Capital Three, Inc.
Overview
We
are a blank check company incorporated on March 11, 2022, 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.
On October 14, 2022, we redomiciled in the Cayman Islands. We have not selected any business combination target and we have not, nor
has anyone on our behalf, initiated any substantive discussions directly or indirectly, with any business combination target. We intend
to effectuate our initial business combination using cash from the proceeds of our Initial Public Offering (the “Initial Public
Offering”) and the private placement of the placement units, the proceeds of the sale of our shares in connection with our initial
business combination, shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or
a combination of the foregoing.
Our
management team is led by our Chief Executive Officer, Davin Kazama, an entrepreneur with a wealth of experience in the fields of finance,
real estate development, financial advising, and tax-efficient investment strategies. He is a seasoned professional in raising capital
from angel investors and venture capitalists alike. Since 2012, Mr. Kazama has been the Founder and Manager of Driven PV LLC, which develops
and manages clean energy systems. In this position, he educates and consults parties on clean energy products and the benefits of such
products, including tax incentives and business structuring. He also manages relationships with investors and offtakes, oversees maintenance
of the Company, and performs accounting responsibilities. From 2011 to 2013, Mr. Kazama served as an Advisor to Kai Medical, Inc. In
these roles, he was responsible for raising angel and venture capital investment, managing relationships with the investor base, advising
investors on tax-efficient strategies, and preparing financial reports. From 2007 to 2010, Mr. Kazama served as Chief Operating Officer
(“COO”) of Kai Medical, Inc., an award-winning developer of state-of-the-art medical technology. As the Founder and Manager
of Kai Clothing LLC from 2004 to 2009, Mr. Kazama established numerous strategic partnerships with some of Hawaii’s most reputable
companies and ultimately negotiated the sale of the Company in 2009. Mr. Kazama holds a Bachelor of Business Administration degree from
the University of Puget Sound (1998), an Executive Master of Business Administration degree from the University of Hawaii at Manoa (2003),
and a Master of Liberal Arts (ALM) in Extension Studies in Finance at Harvard University (2022). Mr. Kazama’s management experience
paired with his entrepreneurial skills in a diverse array of industries makes him a valuable member of our management team and board
of directors.
The
Company’s sponsor is Mehana Capital LLC, a Delaware limited liability company (the “Sponsor”). The registration statement
for the Company’s Initial Public Offering was declared effective on February 9, 2023. On February 14, 2023, the Company consummated
its Initial Public Offering of 10,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in
the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $100,000,000 (see Note 6).
The Company granted the underwriter a 45-day option to purchase up to an additional 1,500,000 Units at the Initial Public Offering price
to cover over-allotments, if any.
Simultaneously
with the consummation of the closing of the Offering, the Company consummated the private placement of an aggregate of 511,375 units
(the “Placement Units”) to the Sponsor at a price of $10.00 per Placement Unit, generating total gross proceeds of $5,113,750
(the “Private Placement”).
On
February 14, 2023, the underwriters exercised the over-allotment option in full, and the closing of the issuance and sale of the additional
Units occurred (the “Over-allotment Option Units”). The total aggregate issuance by the Company of 1,500,000 units at a price
of $10.00 per unit resulted in total gross proceeds of $15,000,000. On February 14, 2023, simultaneously with the sale of the Over-allotment
Option Units, the Company consummated the private sale of an additional 54,000 Placement Units, generating gross proceeds of $540,000.
The Placement Units were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions did not involve
a public offering.
A
total of $117,875,000, comprised of the proceeds from the Initial Public Offering and the proceeds of private placements that closed
on February 14, 2023, net of the underwriting commissions, discounts, and offering expenses, was deposited in a trust account established
for the benefit of the Company’s public shareholders.
Our
Business Strategy
Our
business strategy is to identify and complete our initial business combination with a company that can benefit from (i) the managerial
and operational experience of our management team, (ii) additional capital, and (iii) access to public securities markets. We plan to
leverage our management team’s network of growing companies where we believe a combination of our relationships, knowledge and
experience in the technology sector could effect a positive transformation or augmentation of existing businesses to improve their overall
value.
The
Company’s focus is on emerging growth technology companies that are well positioned for the recent changes in how businesses operate
or how and what consumers buy. These changes have accelerated over the past year. Industries that fit this well, include but are not
limited to, enterprise security and operations applications, cloud-based content and digital streaming services, drone technology and
service, AI companies, consumer healthcare and wellness, biomedical technology, entertainment/gaming companies, distance learning, online
retail and e-sports companies.
We
believe that the way businesses and consumers operate, make decisions, and spend has forever been changed because of the pandemic. These
changes have accelerated an already growing digital transformation trend in businesses and reshaped consumer behavior. In particular,
we have seen significant changes to distributed work, entertainment, and services that push value points from physical locations to more
distant endpoints, most often homes.
There
is no geographic limitation to the location of targets, as these types of opportunities are not necessarily bound by geography. We do
believe that there are attractive business combination candidates in East Asia, particularly Japan. There are many growing technology
companies there that are looking to the US for both opportunities and capital. We believe that a US-based company with a listing and
capital would be an ideal fit for one of those companies. Such a connection would unlock value and increase growth opportunities for
the right growing technology company.
We
have existing relationships with a number of growing companies looking for an opportunity to create liquidity for current investors and
currency to acquire other companies. This provides us numerous opportunities and we would be well positioned given the difficulty in
bridging technology and/or capital opportunities between the East and West. Further, we believe that the management team and board member’s
extensive background, careers, reputations, and relationships in cross border business experience gives us the insight and position to
identify the ideal targets for a business combination that creates long-term opportunity and value growth and to complete the business
combination.
We
believe that many of the companies in our target industries understand the risks of delay and uncertainty in their given markets and
would welcome the opportunity to raise capital and have a US public listing sooner. Further, like in many rapidly growing industries,
many of these companies operate in fragmented markets and see an opportunity to consolidate and grow value within their vertical through
acquisition using their publicly traded stock as a currency.
Our
Acquisition Criteria
Our
acquisition philosophy is rooted in several core tenets, consistent with those that have been utilized in the past by members of our
management team as they have evaluated investment opportunities:
Our
Acquisition Process
In
evaluating a potential target business, we expect to conduct a comprehensive due diligence review to seek to determine a company’s
quality and its intrinsic value. That due diligence review may include, among other things, financial statement analysis, detailed document
reviews, technology diligence, multiple meetings with management, consultations with relevant industry and academic experts, competitors,
customers and suppliers, as well as a review of additional information that we will seek to obtain as part of our analysis of a target
company.
We
expect to place significant emphasis on a business combination target’s technology and intellectual property as part of our acquisition
evaluation process, consistent with the investment approach of our management team. This due diligence may include the engagement of
multiple technical experts across both industry and academia to review the technology, participation in joint due diligence meetings
with these technical experts and management, as well as detailed intellectual property due diligence, to determine the nature and quality
of a company’s technology innovation.
We
are not prohibited from pursuing an initial business combination with a business that is affiliated with our Sponsor, officers or directors.
In the event we seek to complete our initial business combination with a business that is affiliated with our Sponsor, officers or directors,
we, or a committee of independent directors, will obtain an opinion from either an independent investment banking firm that is a member
of the Financial Industry Regulatory Authority (“FINRA”) or an independent accounting firm that our initial business combination
is fair to our Company from a financial point of view. Furthermore, in the event that we seek such a business combination, we expect
that the independent members of our board of directors would be involved in the process for considering and approving the transaction.
Members
of our management team, including our officers and directors, directly or indirectly own our securities following the Initial Public
Offering and, accordingly, may have a conflict of interest in determining whether a particular target company is an appropriate business
with which to effectuate our initial business combination. Each of our officers and directors, as well as our management team, may have
a conflict of interest with respect to evaluating a particular business combination, including if the retention or resignation of any
such officers, directors, and management team members was included by a target business as a condition to any agreement with respect
to such business combination.
Each
of our directors and officers presently have and any of them in the future may have additional, fiduciary or contractual obligations
to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly,
if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or
she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present
such opportunity to such entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or
directors will materially affect our ability to identify and pursue business combination opportunities or complete our initial business
combination.
Our
amended and restated memorandum and articles of association provide that we renounce our interest in any corporate opportunity offered
to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or
officer of our Company, and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable
for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal
obligation.
Our
founder, Sponsor, officers, and directors may sponsor, form or participate in other blank check companies similar to ours during the
period in which we are seeking an initial business combination and their respective participation in any such companies may present additional
conflicts of interest in respect of determining to which such company a particular business combination opportunity should be presented,
particularly in the event there is overlap among the investment mandates of such companies.
Moreover,
because our management team has significant experience in identifying and executing multiple acquisition opportunities simultaneously
and we are not limited by industry or geography in terms of the acquisition opportunities we can pursue, except with respect to our prohibition
from seeking target acquisitions in China and Hong Kong. In addition, our founder, Sponsor, officers, and directors are not required
to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating management time
among various business activities, including identifying potential business combinations and monitoring the related due diligence.
Initial
Business Combination
Nasdaq
rules require that we complete one or more initial 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 interest earned on
the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of
directors will make the determination as to the fair market value of our initial business combination.
If
our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain
an opinion from an independent investment banking firm 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
anticipate structuring our initial business combination so that the post-transaction company in which our public shareholders own shares
will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target
business for the post-acquisition company to meet certain objectives of the target management team or shareholders or for other reasons,
but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires an interest in the target or assets sufficient for it not to be required to register as
an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act of 1940, as amended.
Even
if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders 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 shareholders immediately prior to our
initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination.
If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction
company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets
test. If the initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate
value of all of the target businesses and we will treat the target businesses together as the initial business combination for the purposes
of a tender offer or for seeking shareholder approval, as applicable.
The
net proceeds of the Initial Public Offering and the sale of the placement units released to us from the trust account upon the closing
of our initial business combination may be used as consideration to pay the sellers of a target business with which we complete our initial
business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released
from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemption
of our public shares, we may use the balance of the cash released to us from the trust account following the closing for general corporate
purposes, including for maintenance or expansion of operations of the post-transaction businesses, the payment of principal or interest
due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
In addition, we may be required to obtain additional financing in connection with the closing of our initial business combination to
be used following the closing for general corporate purposes as described above.
There
is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances
or other indebtedness in connection with our initial business combination. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our initial business combination. 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. None of our Sponsors, officers, directors or shareholders is required to provide any financing to us in connection with
or after our initial business combination. We may also obtain financing prior to the closing of our initial business combination to fund
our working capital needs and transaction costs in connection with our search for and completion of our initial business combination.
Our
amended and restated memorandum and articles of association provide that, following the Initial Public Offering and
prior to the consummation of our initial business combination, we will be prohibited from issuing additional securities that would
entitle the holders thereof to (i) receive funds from the trust account; or (ii) vote as a class with our public shares: (a) on any
initial business combination, or (b) to approve an amendment to our second amended and restated memorandum of association to: (x)
extend the time we have to consummate a business combination from the closing of the Initial Public Offering, or (y) amend the
foregoing provisions, unless (in connection with any such amendment to our amended and restated memorandum and articles of
association) we offer our public shareholders the opportunity to redeem their public shares.
Status
as a Public Company
We
believe our structure will make us an attractive business combination partner to target businesses. As an existing public company on February 14, 2023,
we offer a target business an alternative to the traditional initial public offering through a merger or other business combination
with us. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of
stock, shares or other equity interests in the target business for our Class A ordinary shares (or shares of a new holding company)
or for a combination of our Class A ordinary shares and cash, allowing us to tailor the consideration to the specific needs of the
sellers. We believe target businesses will find this method a more expeditious and cost-effective method to becoming a public
company than the typical initial public offering. The typical initial public offering process takes a significantly longer period of
time than the typical business combination transaction process, and there are significant expenses in the initial public offering
process, including underwriting discounts and commissions, that may not be present to the same extent in connection with a business
combination with us.
Furthermore,
once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public
offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could
delay or prevent the offering from occurring or could have negative valuation consequences. Once public, we believe the target business
would then have greater access to capital, an additional means of providing management incentives consistent with shareholders’
interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting
a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While
we believe that our structure and our management team’s backgrounds will make us an attractive business partner, some potential
target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek shareholder
approval of any proposed initial business combination, negatively.
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the The Jumpstart Our
Business Startups Act (the “JOBS Act”.) As such, we are eligible to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited
to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding
a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved,
If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the
prices of our securities may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of
the completion of the Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.235 billion (as adjusted
for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the
market value of our Class A ordinary shares that is held by non-affiliates equals or exceeds $700.0 million as of the prior June 30th,
and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Additionally,
we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our Class
A ordinary shares held by non-affiliates did not equal or exceed $250.0 million as of the prior June 30, or (2) our annual revenues did
not exceed $100.0 million during such completed fiscal year and the market value of our Class A ordinary shares held by non-affiliates
did not equal or exceed $700.0 million as of the prior June 30.
Financial
Position
With
funds available after our Initial Business Combination initially in the amount of $114,425,000 after payment of $3,450,000 of deferred
underwriting fees, before fees and expenses associated with our Initial Business Combination (other than deferred underwriting fees),
we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential
growth and expansion of its operations or strengthening its balance sheet by reducing its debt leverage ratio. Because were able to complete
our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility
to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs
and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available
to us.
Effecting
our Initial Business Combination
We
are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following the Initial Public
Offering. We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering, the private
placements of the placement units, our equity, debt or a combination of these as the consideration to be paid in our initial business
combination. We may seek to complete our initial business combination with a company or business that may be financially unstable or
in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If
our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account
are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A
ordinary shares, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including
for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness
incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We
may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash
than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public
shares upon completion of the initial business combination, in which case we may issue additional securities or incur debt in connection
with such business combination. There are no prohibitions on our ability to issue securities or incur debt in connection with our initial
business combination. We are not currently a party to any arrangement or understanding with any third party with respect to raising any
additional funds through the sale of securities, the incurrence of debt or otherwise.
Sources
of Target Businesses
Our
process of identifying acquisition targets will leverage our Sponsor and our management team’s industry experiences, proven deal
sourcing capabilities and broad and deep network of relationships in numerous industries, including executives and management teams,
private equity groups and other institutional investors, large business enterprises, lenders, investment bankers and other investment
market participants, restructuring advisers, consultants, attorneys and accountants, which we believe should provide us with a number
of business combination opportunities. We expect that the collective experience, capability and network of our Sponsor, our directors
and officers, combined with their individual and collective reputations in the investment community, will help to create prospective
business combination opportunities.
In
addition, we anticipate that target business candidates may be brought to our attention from various unaffiliated sources, including
investment bankers and private investment funds. Target businesses may be brought to our attention by such unaffiliated sources as a
result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think
we may be interested on an unsolicited basis, since many of these sources will have read the final prospectus for our Initial Public
Offering filed with the SEC and know what types of businesses we are targeting. Our officers and directors, as well as their respective
affiliates, may also bring to our attention target business candidates of which they become aware through their business contacts as
a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions.
We
also expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result
of the business relationships of our officers and directors. While we do not presently anticipate engaging the services of professional
firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals
in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s
length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the
use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis
with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily
tied to completion of a transaction; in which case any such fee will be paid out of the funds held in the trust account. In no event,
however, will our Sponsor or any of our existing officers or directors, or any entity with which they are affiliated, be paid any finder’s
fee, consulting fee or other compensation by the Company prior to, or for any services they render in order to effectuate, the completion
of our initial business combination (regardless of the type of transaction that it is). None of our Sponsor, executive officers or directors,
or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective
business combination target in connection with a contemplated acquisition of such target by us.
We
are not prohibited from pursuing an initial business combination with a business that is affiliated with our Sponsor, officers or directors.
In the event we seek to complete our initial business combination with a business that is affiliated with our Sponsor, officers or directors,
we, or a committee of independent directors, will obtain an opinion from either an independent investment banking firm that is a member
of FINRA or an independent accounting firm that our initial business combination is fair to our Company from a financial point of view.
Furthermore, in the event that we seek such a business combination, we expect that the independent members of our board of directors
would be involved in the process for considering and approving the transaction.
Each
of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations
to other entities, including entities that are affiliates of our Sponsor, pursuant to which such officer or director is or will be required
to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business
combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he
or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject
to their fiduciary duties under Cayman Islands law.
Evaluation
of a Target Business and Structuring of our Initial Business Combination
Nasdaq
rules require that we consummate an initial business combination with one or more operating businesses or assets with a fair market
value equal to at least 80% of the net assets held in the trust account (net of amounts disbursed to management for working capital
purposes, if permitted, and excluding the amount of any deferred underwriting commissions). 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 merger and acquisition transactions of comparable businesses. If our board of
directors is not able to independently determine the fair market value of our initial business combination (including with the
assistance of financial advisors), 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 operation.
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
valued for purposes of the 80% of fair market value test.
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 as described in more detail in our Registration Statement filed on SEC Form S-1.
In
evaluating a prospective target business, we expect to conduct a thorough due diligence review, which will encompass, among other things,
meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities,
as well as a review of financial, operational, legal and other information which will be made available to us. If we determine to move
forward with a particular target, we will proceed to structure and negotiate the terms of the initial business combination transaction.
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, and negotiation with, 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. The Company
will not pay any consulting fees to members of our management team, or any of their respective affiliates, for services rendered to or
in connection with our initial business combination.
Lack
of Business Diversification
For
an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely
on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with
multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate
the risks of being in a single line of business. By completing our initial business combination with only a single entity, our lack of
diversification may:
Limited
Ability to Evaluate the Target’s Management Team
Although
we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial
business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition,
the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future
role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination
as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial
business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following
our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial
business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge
relating to the operations of the particular target business.
We
cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The
determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business
combination. Following 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.
Shareholders
May Not Have the Ability to Approve our Initial Business Combination
We
may conduct redemptions without a shareholder vote pursuant to the tender offer rules of the SEC subject to the provisions of our second
amended and restated memorandum of association. However, we will seek shareholder approval if it is required by law or applicable stock
exchange rule, or we may decide to seek shareholder approval for business or other reasons.
Under
Nasdaq’s listing rules, shareholder approval would be required for our initial business combination if, for example:
The
decision as to whether we will seek shareholder approval of a proposed business combination in those instances in which shareholder approval
is not required by law will be made by us, solely in our discretion, and will be based on business and legal reasons, which include a
variety of factors, including, but not limited to:
● the expected cost of holding a shareholder vote;
● other time and budget constraints of the Company; and
Permitted
Purchases of Our Securities
If
we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business
combination pursuant to the tender offer rules, our Sponsor, initial shareholders, directors, officers, advisors or their affiliates
may purchase public shares or public warrants in privately-negotiated transactions or in the open market either prior to or following
the completion of our initial business combination. There is no limit on the number of shares or warrants our initial shareholders, directors,
officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules.
However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions
for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of
any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange
Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under
the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers
determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject
to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such
transactions prior to completion of our initial business combination.
Subsequent
to the consummation of the Initial Public Offering, we have adopted an insider trading policy which requires insiders to: (i) refrain
from purchasing our securities during certain blackout periods when they are in possession of any material non-public information and
(ii) clear all trades of Company securities with a compliance officer prior to execution. We cannot currently determine whether our insiders
will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to,
the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule
10b5-1 plan or determine that such a plan is not necessary.
The
purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase
the likelihood of obtaining shareholder approval of the initial business combination or to satisfy a closing condition in an agreement
with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination,
where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce
the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection
with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination
that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our Class A ordinary
shares or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult
to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our
Sponsor, officers, directors and/or any of their affiliates anticipate that they may identify the shareholders with whom our Sponsor,
officers, directors or their affiliates may pursue privately-negotiated purchases by either the shareholders contacting us directly or
by our receipt of redemption requests tendered by shareholders following our mailing of proxy materials in connection with our initial
business combination. To the extent that our Sponsor, officers, directors, advisors or their affiliates enter into a private purchase,
they would identify and contact only potential selling shareholders who have expressed their election to redeem their shares for a pro
rata share of the trust account or vote against our initial business combination, whether or not such shareholder has already submitted
a proxy with respect to our initial business combination. Such persons would select the shareholders from whom to acquire shares based
on the number of shares available, the negotiated price per share and such other factors as any such person may deem relevant at the
time of purchase. The price per share paid in any such transaction may be different than the amount per share a public shareholder would
receive if it elected to redeem its shares in connection with our initial business combination. Our Sponsor, officers, directors, advisors
or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal
securities laws.
Any
purchases by our Sponsor, officers, directors and/or their respective affiliates who are affiliated purchasers under Rule 10b-18 under
the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor
from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements
that must be complied with in order for the safe harbor to be available to the purchaser. Our Sponsor, officers, directors and/or their
respective affiliates will not make purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange
Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are
subject to such reporting requirements. Additionally, in the event our Sponsor, directors, officers, advisors or their affiliates were
to purchase shares or warrants from public shareholders, such purchases would be structured in compliance with the requirements of Rule
14e-5 under the Exchange Act including, in pertinent part, through adherence to the following:
Redemption
Rights for Public Shareholders upon Completion of our Initial Business Combination
We
will provide our public shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares upon the completion
of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust
account calculated as of two business days prior to the completion of the initial business combination, including interest earned on
the funds held in the trust account and not previously released to us to pay our taxes, if any, divided by the number of then outstanding
public shares, subject to the limitations described herein. The amount in the trust account is initially $10.25 per public share. The
per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions
we will pay to the underwriters.
The
redemption rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. Our
Sponsor, directors and each member of our management have entered into a letter agreement with us, pursuant to which they have agreed
to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with (i) the completion
of our initial business combination and (ii) a shareholder vote to approve an amendment to our amended and restated memorandum and articles
of association that would affect the substance or timing of our obligation to allow redemption in connection with our initial business
combination or to redeem 100% of our public shares if we have not completed an initial business combination within the period to consummate
the initial business combination. However, we will only redeem our public shares so long as (after such redemption) our net tangible
assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment
of deferred underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules).
If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net
tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares
at such time. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless
if we fail to complete our initial business combination within the 18-month time period.
We
expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be
funded from amounts remaining out of the approximately $950,000 of proceeds held outside the trust account, although we cannot assure
you that there will be sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in
the trust account to pay any tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated
with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay
taxes, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs
and expenses.
Manner
of Conducting Redemptions
We
will provide our public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of our
initial business combination either (i) in connection with a shareholder meeting called to approve the initial business combination or
(ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed business combination or conduct
a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction
and whether the terms of the transaction would require us to seek shareholder approval under applicable law or stock exchange listing
requirement or whether we were deemed to be a foreign private issuer (which would require a tender offer rather than seeking shareholder
approval under SEC rules). Asset acquisitions and share purchases would not typically require shareholder approval while direct mergers
with our Company where we do not survive and any transactions where we issue more than 20% of our outstanding ordinary shares or seek
to amend our second amended and restated memorandum of association would require shareholder approval. We currently intend to conduct
redemptions in connection with a shareholder vote unless shareholder approval is not required by applicable law or stock exchange listing
requirement and we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or other reasons. So long
as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with Nasdaq rules.
If
we held a shareholder vote to approve our initial business combination, we will, pursuant to our second amended and restated memorandum
of association:
● file proxy materials with the SEC.
In
the event that we seek shareholder approval of our initial business combination, we will distribute proxy materials and, in connection
therewith, provide our public shareholders with the redemption rights described above upon completion of the initial business combination.
If
we seek shareholder approval, we will complete our initial business combination only if a majority of the outstanding ordinary shares
voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the holder present in person
or by proxy of shares of outstanding capital stock of the Company representing a majority of the voting power of all outstanding shares
of capital stock of the Company entitled to vote at such meeting. Our initial shareholders will count towards this quorum and, pursuant
to the terms of a letter agreement entered into with us, our Sponsor and members of our management team have agreed to vote their founder
shares and any public shares purchased during or after the Initial Public Offering, in favor of our initial business combination. For
purposes of seeking approval of the majority of our outstanding ordinary shares voted, non-votes will have no effect on the approval
of our initial business combination once a quorum is obtained. Additionally, each public shareholder may elect to redeem its public shares
irrespective of whether they vote for or against the proposed transaction.
These
quorums and voting thresholds, and the voting agreements of our initial shareholders, may make it more likely that we will complete our
initial business combination. Each public shareholder may elect to redeem its public shares irrespective of whether they vote for or
against the proposed transaction or whether they were a shareholder on the record date for the shareholder meeting held to approve the
proposed transaction. In addition, our Sponsor, directors and each member of our management, have entered into a letter agreement with