Item 1A. Risk
Factors.
You should carefully
consider the following risk factors and all the other information contained in this Report, including the financial statements.
If any of the following risks occur, our business, financial condition or results of operations may be materially and adversely
affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.
The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with
respect to us and our business. For risks relating to the Katapult Business Combination, see our preliminary proxy statement/prospectus
filed on January 29, 2021.
Risks Related to Our Business and Corporate
Structure
We are a blank check company with
no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a blank check
company with no operating results. Because we lack an operating history, you have no basis upon which to evaluate our ability
to achieve our business objective of completing our initial business combination with one or more target businesses. We may be
unable to complete our initial business combination. If we fail to complete our initial business combination, we will never generate
any operating revenues.
You will not be entitled to protections
normally afforded to investors of some other blank check companies.
Since the net proceeds
of our initial public offering and the sale of the placement units are intended to be used to complete an initial business combination
with a target business that has not been identified, we may be deemed to be a “blank check” company under the United
States securities laws. However, because we have net tangible assets in excess of $5,000,000, we are exempt from rules promulgated
by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors are not afforded the benefits
or protections of those rules. Among other things, this means we may have a longer period of time to complete our business combination
then do companies subject to Rule 419. If our initial public offering were subject to Rule 419, that rule would prohibit the release
of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released
to us in connection with our completion of an initial business combination.
If we are deemed to be an investment
company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities
may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to
be an investment company under the Investment Company Act, our activities may be restricted, including:
● restrictions on the nature of our investments; and
In addition, we may
have imposed upon us burdensome requirements, including:
● registration as an investment company;
● adoption of a specific form of corporate structure; and
In order not to be
regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that
we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not
include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our
total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify
and complete an initial business combination and thereafter to operate the post-transaction business or assets for the long term.
We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated
businesses or assets or to be a passive investor.
20
We do not believe
that our principal activities subject us to the Investment Company Act. To this end, the proceeds held in the trust account may
only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment
Company Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement,
the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments,
and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling
businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company”
within the meaning of the Investment Company Act. The trust account is intended as a holding place for funds pending the earliest
to occur of: (i) the completion of our initial business combination; (ii) the redemption of any public shares properly submitted
in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance
or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public
shares if we do not complete our initial business combination by November 5, 2021 or (B) with respect to any other provision
relating to stockholders’ rights or pre-initial business combination activity; or (iii) absent an initial business
combination by November 5, 2021, our return of the funds held in the trust account to our public stockholders as part of our redemption
of the public shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company
Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would
require additional expenses for which we have not allotted funds and may hinder our ability to complete an initial business combination
or may result in our liquidation. If we are unable to complete our initial business combination, our public stockholders may receive
only approximately $10.00 per share on the liquidation of our trust account and our warrants will expire worthless.
Our initial stockholders may exert
a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Our initial stockholders
own shares representing approximately 21.7 % of our issued and outstanding shares of common stock (including the placement shares).
Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you
do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate
transactions. If our initial stockholders purchase any additional shares of common stock in the aftermarket or in privately negotiated
transactions, this would increase their control. Factors that would be considered in making such additional purchases would include
consideration of the current trading price of our Class A common stock. In addition, our board of directors, whose members were
elected by our initial stockholders, is divided into three classes, each of which generally serves for a term of three years with
only one class of directors being elected in each year. As a consequence of our “staggered” board of directors, not
all directors will be considered for election at our annual meetings of stockholders prior to the consummation of our initial
business combination and our initial stockholders, because of their ownership position, will have considerable influence regarding
the outcome. Accordingly, our initial stockholders will continue to exert control at least until the completion of our initial
business combination.
The requirements of being a public
company may strain our resources and divert management’s attention.
As a public company,
we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes Oxley Act”),
the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities
rules and regulations. Compliance with these rules and regulations increase our legal and financial compliance costs, make some
activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are
no longer an “emerging growth company.” The Sarbanes-Oxley Act requires, among other things, that we maintain effective
disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve
our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources
and management oversight may be required. As a result, management’s attention may be diverted from other business concerns,
which could adversely affect our business and operating results. We may need to hire more employees in the future or engage outside
consultants to comply with these requirements, which will increase our costs and expenses
21
We are an emerging growth company
and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from
disclosure requirements available to emerging growth companies and smaller reporting companies, this could make our securities
less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging
growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important.
We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier,
including if the market value of our Class A common stock held by non-affiliates exceeds $700 million as of any June 30 before
that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether
investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities
less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise
would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out
of such extended transition period, which means that when a standard is issued or revised and it has different application dates
for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private
companies adopt the new or revised standard. This may make comparison of our financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accountant standards used.
Additionally, we are
a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial
statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of
our common stock held by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) our annual
revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates
exceeds $700 million as of the prior June 30th. To the extent we take advantage of such reduced disclosure obligations,
it may also make comparison of our financial statements with other public companies difficult or impossible.
Provisions in our amended and restated
certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing
to pay in the future for our Class A common stock and could entrench management.
Our amended and restated
certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider
to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors
to designate the terms of and issue new series of preferred shares, which may make the removal of management more difficult and
may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject
to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may
make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium
over prevailing market prices for our securities.
22
Our amended and restated certificate
of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against
our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought
only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit
will be deemed to have consented to service of process on such stockholder’s counsel, which may have the effect of discouraging
lawsuits against our directors, officers, other employees or stockholders.
Our amended and restated
certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions
against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be
brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the
suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which
the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction
of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within
ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court
of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under
the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent
jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed
to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation. This choice
of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes
with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such
claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules
and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in our amended and
restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated
with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Our amended and restated
certificate of incorporation provides that the exclusive forum provision will be applicable to the fullest extent permitted by
applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty
or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will
not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal
courts have exclusive jurisdiction.
Changes in laws or regulations,
or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and
complete our initial business combination and results of operations.
We are subject to
laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain
SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming
and costly.
Those laws and regulations
and their interpretation and application may also change from time to time and those changes could have a material adverse effect
on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations,
as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete
our initial business combination and results of operations.
We may face risks related to businesses
in the financial services industry or businesses providing technology services to the financial industry.
Business combinations
with businesses in the financial services industry or businesses providing technology services to the financial industry may involve
special considerations and risks. If we complete our initial business combination with a business in the financial services industry
or businesses providing technology services to the financial industry, we will be subject to the following risks, any of which
could be detrimental to us and the business we acquire:
23
Any of the foregoing
could have an adverse impact on our operations following a business combination. However, our efforts in identifying prospective
target businesses are not limited to businesses in the financial services industry or businesses providing technology services
to the financial industry. Accordingly, if we acquire a target business in another industry, these risks will likely not affect
us and we will be subject to other risks attendant with the specific industry in which we operate or target business which we
acquire, none of which can be presently ascertained.
Risks Related to Our Initial Business
Combination
Our public stockholders may not
be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business
combination even if a majority of our public stockholders do not support such a combination.
If the Katapult Business
Combination is not consummated and we seek to enter into a business combination with other target companies, we may choose not
to hold a stockholder vote to approve our initial business combination unless the initial business combination would require stockholder
approval under applicable law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or
other legal reasons. Except as required by law, the decision as to whether we will seek stockholder approval of a proposed initial
business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our
discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction
would otherwise require us to seek stockholder approval. Accordingly, we may complete our initial business combination even if
holders of a majority of our public shares do not approve of the initial business combination we complete.
If we seek stockholder approval
of our initial business combination, our initial stockholders have agreed to vote in favor of such initial business combination,
regardless of how our public stockholders vote.
Pursuant to the letter
agreement, our sponsor, officers and directors have agreed to vote their founder shares and placement shares, as well as any public
shares purchased after our initial public offering (including in open market and privately negotiated transactions), in favor
of our initial business combination. As a result, in addition to our initial stockholders’ founder shares and placement
shares, we would need only 9,042,501, or 36.2%, of the 25,000,000 public shares sold in our initial public offering to be voted
in favor of an initial business combination (assuming all outstanding shares are voted) in order to have our initial business
combination approved. As of December 31, 2020, our initial stockholders own shares representing approximately 21.7% of our
outstanding shares of common stock. Accordingly, if we seek stockholder approval of our initial business combination after approval
of our board, the agreement by our initial stockholders to vote in favor of our initial business combination will increase the
likelihood that we will receive the requisite stockholder approval for such initial business combination.
24
Your only opportunity to affect
the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your
shares from us for cash, unless we seek stockholder approval of the initial business combination.
Although we are seeking
stockholder approval of the Katapult Business Combination, if such transaction is not consummated and we seek to enter into an
initial business combination with other target companies, our Board of Directors may complete such business combination without
seeking stockholder approval. Under such circumstance, public stockholders may not have the right or opportunity to vote on the
initial business combination, unless we seek such stockholder vote. Accordingly, if we do not seek stockholder approval, your
only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your
redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents
mailed to our public stockholders in which we describe our initial business combination.
The ability of our public stockholders
to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which
may make it difficult for us to enter into an initial business combination with a target.
We may seek to enter
into an initial business combination agreement with a prospective target that requires as a closing condition that we have a minimum
net worth or a certain amount of cash.
In particular, the
Merger Agreement provides for a minimum cash of $225 million in cash and cash equivalents, from funds in the trust account and
from any equity financing, as a closing condition for the Katapult Business Combination. While we will have access to approximately
$150 million committed capital from gross proceeds from the private placements to be consummated at the closing of the Katapult
Business Combination, we may have to satisfy a higher minimum cash closing condition if the Katapult Business Combination is not
consummated and we seek to enter into a business combination with other target companies. Under those circumstances, if too many
public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would
not be able to proceed with the initial business combination. Furthermore, 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 underwriters’ fees and commissions (so that we are not subject to the SEC’s
“penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement
relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause
our net tangible assets to be less than $5,000,001 or such greater amount necessary to satisfy a closing condition, each as described
above, we would not proceed with such redemption and the related business combination and may instead search for an alternate
business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into an initial business
combination with us.
The ability of our public stockholders
to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business
combination or optimize our capital structure.
At the time we enter
into an agreement for our initial business combination (including the Katapult Business Combination), we will not know how many
stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations
as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to
use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing,
we will need to reserve a portion of the cash in the trust account to meet such requirements, or arrange for third party financing.
In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure
the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing, such as the
$150 million in third-party equity financing to be consummated in connection with the Katapult Business Combination. Raising additional
third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels.
Furthermore, this dilution would increase to the extent that the anti-dilution provision of the Class B common stock result in
the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock at the time of our
business combination. The above considerations may limit our ability to complete the most desirable business combination available
to us or optimize our capital structure. The amount of the deferred underwriting commissions payable to the underwriters will
not be adjusted for any shares that are redeemed in connection with an initial business combination. The per-share amount we will
distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commission
and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay
the deferred underwriting commissions.
25
The ability of our public stockholders
to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business
combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our initial business
combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us
to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased.
If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we
liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market;
however, at such time our stock may trade at a discount to the pro rata amount per share in the trust account. In either situation,
you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until
we liquidate or you are able to sell your stock in the open market.
The requirement that we complete
our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating
an initial business combination and may decrease our ability to conduct due diligence on potential business combination targets
as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms
that would produce value for our stockholders.
Any potential target
business with which we enter into negotiations concerning an initial business combination will be aware that we must complete
our initial business combination by November 5, 2021. Consequently, such target business may obtain leverage over us in negotiating
an initial business combination, knowing that if we do not complete our initial business combination with that particular target
business, we may be unable to complete our initial business combination with any target business. This risk will increase as we
get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into
our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
We may not be able to complete our
initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose
of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.00
per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our amended and restated
certificate of incorporation provides that we must complete our initial business combination by November 5, 2021. We may not be
able to complete the Katapult Business Combination or find another a suitable target business and complete our initial business
combination by such date. If we have not completed our initial business combination by such date, we will: (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter,
redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account
including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (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 the case of clauses (ii) and (iii)
above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In
such case, our public stockholders may only receive $10.00 per share, and our warrants will expire worthless. In certain circumstances,
our public stockholders may receive less than $10.00 per share on the redemption of their shares.
26
If we seek stockholder approval
of our initial business combination, our sponsor, directors, officers, and their affiliates may elect to purchase shares or warrants
from public stockholders, which may influence a vote on a proposed initial business combination and reduce the public “float”
of our Class A common stock.
If we seek stockholder
approval of our initial business combination (such as the Katapult Business Combination) and we do not conduct redemptions in
connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, officers, or their
affiliates may purchase shares or public warrants or a combination thereof in privately negotiated transactions or in the open
market either prior to or following the completion of our initial business combination, although they are under no obligation
to do so. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated
any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares or public
warrants in such transactions.
Such a purchase may
include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial
owner thereof and therefore agrees not to exercise its redemption rights. In the event that our sponsor, directors, officers,
or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to
exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their
shares. The purpose of such purchases could be to vote such shares in favor of the initial business combination and thereby increase
the likelihood of obtaining stockholder approval of the initial business combination, or to satisfy a closing condition in an
agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial
business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of
public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted
to the warrantholders for approval in connection with our initial business combination. Any such purchases of our securities may
result in the completion of our initial business combination that may not otherwise have been possible. Any such purchases will
be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting
requirements.
In addition, if such
purchases are made, the public “float” of our Class A common stock or public warrants and the number of beneficial
holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading
of our securities on a national securities exchange.
If a stockholder fails to receive
notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the
procedures for tendering its shares, such shares may not be redeemed.
We will comply with
the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination.
Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable,
such stockholder may not become aware of the opportunity to redeem its shares. In addition, proxy materials or tender offer documents,
as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe
the various procedures that must be complied with in order to validly tender or redeem public shares, which will include the requirement
that a beneficial holder must identify itself. For example, we may require our public stockholders seeking to exercise their redemption
rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates
to our transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business
days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials,
or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or
any other procedures, its shares may not be redeemed.
27
If we seek stockholder approval
of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group”
of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such
shares in excess of 15% of our Class A common stock.
If we seek stockholder
approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination
pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder,
together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to an aggregate
of 15% or more of the shares sold in our initial public offering without our prior consent, which we refer to as the “Excess
Shares.” However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess
Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence
over our ability to complete our initial business combination and you could suffer a material loss on your investment in us if
you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to
the Excess Shares if we complete our initial business combination. And as a result, you will continue to hold that number of shares
exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially
at a loss.
Because of our limited resources
and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial
business combination. If we are unable to complete our initial business combination, our public stockholders may receive only
approximately $10.00 per share on our redemption of our public shares, or less than such amount in certain circumstances, and
our warrants will expire worthless.
We have encountered
and expect to continue to encounter intense competition from other entities having a business objective similar to ours, including
private investors (which may be individuals or investment partnerships), other blank check companies and other entities competing
for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive
experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services
to various industries. Many of these competitors possess greater technical, human and other resources or more industry knowledge
than we do, and our financial resources are relatively limited when contrasted with those of many of these competitors. While
we believe there are numerous target businesses we could potentially acquire with the net proceeds of our initial public offering
and the sale of the placement units, our ability to compete with respect to the acquisition of certain target businesses that
are sizable is limited by our available financial resources. This inherent competitive limitation gives others an advantage in
pursuing the acquisition of certain target businesses. Furthermore, because we are obligated to pay cash for the shares of Class
A common stock which our public stockholders redeem in connection with our initial business combination, target companies will
be aware that this may reduce the resources available to us for our initial business combination. This may place us at a competitive
disadvantage in successfully negotiating an initial business combination. If we are unable to complete our initial business combination,
our public stockholders may receive only approximately $10.00 per share on the liquidation of our trust account and our warrants
will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share upon our liquidation.
If the net proceeds of our initial
public offering and the sale of the placement units not being held in the trust account are insufficient to allow us to operate
until November 5, 2021, we may be unable to complete our initial business combination, in which case our public stockholders may
only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
The funds available
to us outside of the trust account may not be sufficient to allow us to operate until November 5, 2021, assuming that our initial
business combination is not completed during that time. We believe that the funds available to us outside of the trust account
as of December 31, 2020 of $1,043,895 are sufficient to allow us to complete the Katapult Business Combination; however, we cannot
assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to
pay fees to consultants to assist us with our search for a target business. If we are unable to complete our initial business
combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our trust account and
our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share upon
our liquidation.
28
If the net proceeds of our initial
public offering and the sale of the placement units 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.
Of the net proceeds
of our initial public offering and the sale of the placement units, only approximately $1,043,895 (as of December 31, 2020) is
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 may be forced to liquidate.
None of our sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us
in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from funds released
to us upon completion of our initial business combination. Up to $1,500,000 of such loans may be convertible into units, at a
price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination. The units would be
identical to the placement units. Prior to the completion of our initial business combination, we do not expect to seek loans
from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan
such funds and provide a waiver against any and all rights to seek access to funds in our trust account. If we are unable to obtain
these loans, we may be unable to complete our initial business combination. If we are unable to complete our initial business
combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust
account. Consequently, our public stockholders may only receive approximately $10.00 per share on our redemption of our public
shares, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00
per share on the redemption of their shares.
Subsequent to
the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment
or other charges that could have a significant negative effect on our financial condition, results of operations and our stock
price, which could cause you to lose some or all of your investment.
Even if we conduct
extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all
material issues that may be present inside a particular target business, that it would be possible to uncover all material issues
through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not
later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations,
or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies
certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary
risk analysis. Although these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we
report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges
of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing
debt held by a target business or by virtue of our obtaining debt financing to partially finance the initial business combination.
Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction
in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able
to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary
duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation
or tender offer materials, as applicable, relating to the initial business combination constituted an actionable material misstatement
or omission.
The grant of registration rights
to our initial stockholders, as well as sellers and investors in connection with our initial business combination, may make it
more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market
price of our Class A common stock.
Pursuant to an agreement
entered into concurrently with our initial public offering, our initial stockholders and their permitted transferees can demand
that we register the placement warrants, the shares of Class A common stock issuable upon exercise of the placement warrants,
the shares of Class A common stock issuable upon conversion of the founder shares, the shares of Class A common stock included
in the placement units and holders of unit that may be issued upon conversion of working capital loans may demand that we register
such Class A common stock, warrants or the Class A common stock issuable upon exercise of such units and warrants. Pursuant to
an amended and restated registration rights agreement to be entered into in connection with the closing of the Katapult Business
Combination, New Katapult will be required to file a resale registration statement shortly after the closing which registers for
resale the common shares (including common shares underlying the placement units and common shares issued or issuable upon the
conversion or exercise of founder shares or placement warrants) held by our sponsor, officers and directors and certain stockholders
of Katapult. Following the consummation of the Katapult Business Combination, New Katapult is also required to file and maintain
an effective registration statement under the Securities Act covering securities to be issued to the PIPE Investors.
29
We will bear the cost
of registering these securities. The registration and availability of such a significant number of securities for trading in the
public market may have an adverse effect on the market price of our Class A common stock.
Because we are not limited to evaluating
a target business in a particular industry sector, you will be unable to ascertain the merits or risks of any particular target
business’s operations.
We will seek to complete
an initial business combination with companies in the technology industry but may also pursue other business combination opportunities,
except that we are not, under our amended and restated certificate of incorporation, permitted to effectuate our initial business
combination with another blank check company or similar company with nominal operations. There is currently no basis to evaluate
the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity,
financial condition or prospects. To the extent we complete our initial business combination, we may be affected by numerous risks
inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or
an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations
of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks
inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant
risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of
our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct
investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to
remain stockholders following our initial business combination could suffer a reduction in the value of their securities. Such
stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction
was due to a breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to
successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable,
relating to the business combination contained an actionable material misstatement or material omission.
If the Katapult Business Combination
is not consummated, we may seek business combination opportunities in industries or sectors which may or may not be outside of
our management’s area of expertise.
As of the date of
this Report, we have been focusing on business combination opportunities in the financial services industry broadly, but with
particular emphasis on businesses that are providing or changing technology for traditional financial services, specialty finance
companies, and asset management companies. Even if the Katapult Business Combination is not consummated, we intend to continue
to focus on identifying business combination candidates in the financial services industry. However, we will consider an initial
business combination outside of our management’s area of expertise if an initial business combination candidate is presented
to us and we determine that such candidate offers an attractive business combination opportunity for our company or we are unable
to identify a suitable candidate in this sector after having expanded a reasonable amount of time and effort in an attempt to
do so. Although our management will endeavor to evaluate the risks inherent in any particular business combination candidate,
we cannot assure you that we will adequately ascertain or assess all of the significant risk factors, especially risks in connection
with target businesses in industries outside of our management’s area of expertise. We also cannot assure you that an investment
in our securities will not ultimately prove to be less favorable to investors in our initial public offering than a direct investment,
if an opportunity were available, in an initial business combination candidate.
In the event we elect
to pursue a business combination outside of the areas of our management’s expertise, our management’s expertise may
not be directly applicable to its evaluation or operation, and the information contained in this Report regarding the areas of
our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result,
our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly, any stockholders
who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their shares.
Such stockholders are unlikely to have a remedy for such reduction in value.
30
Although we have identified general
criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial
business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with
which we enter into our initial business combination may not have attributes entirely consistent with our general criteria and
guidelines.
Although we have identified
general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business, such as Katapult,
with which we enter into our initial business combination will not have all of these attributes. If we complete our initial business
combination with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination
with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business
combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise
their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires
us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required
by law, or we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain
stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines.
If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per
share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders
may receive less than $10.00 per share on the redemption of their shares.
We may seek business combination
opportunities with a financially unstable business or an entity lacking an established record of revenue, cash flow or earnings,
which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.
To the extent we complete
our initial business combination with a financially unstable business or an entity lacking an established record of revenues or
earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include
volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will
endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all
of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks
may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact
a target business.
We are not required to obtain a
fairness opinion and consequently, you may have no assurance from an independent source that the price we are paying for the business
is fair to our company from a financial point of view.
Unless we complete
our initial business combination with an affiliated entity or our board cannot independently determine the fair market value of
the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm or another
independent entity that commonly renders valuation opinions that the price we are paying is fair to our company from a financial
point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will
determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed
in our proxy materials or tender offer documents, as applicable, related to our initial business combination. However, our stockholders
may not be provided with a copy of such opinion, nor will they be able to rely on such opinion.
31
We may issue additional common stock
or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial
business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio
greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained
in our amended and restated certificate of incorporation. Any such issuances would dilute the interest of our stockholders and
likely present other risks.
Our amended and restated
certificate of incorporation authorizes the issuance of up to 100,000,000 shares of Class A common stock, par value $0.0001 per
share, 10,000,000 shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value
$0.0001 per share. There are 61,502,500 and 3,750,000 authorized but unissued shares of Class A common stock and Class B common
stock, respectively, available for issuance, which amount takes into account the shares of Class A common stock reserved for issuance
upon exercise of outstanding warrants but not the shares of Class A common stock issuable upon conversion of Class B common stock.
There are currently no shares of preferred stock issued and outstanding. Shares of Class B common stock are convertible into shares
of our Class A common stock initially at a one-for-one ratio but subject to adjustment as set forth herein, including in
certain circumstances in which we issue Class A common stock or equity-linked securities related to our initial business combination.
We may issue a substantial
number of additional shares of common or preferred stock to complete our initial business combination or under an employee incentive
plan after completion of our initial business combination (although our amended and restated certificate of incorporation provides
that we may not issue securities that can vote with common stockholders on matters related to our pre-initial business combination
activity). We may also issue shares of Class A common stock upon conversion of the Class B common stock at a ratio greater than
one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended
and restated certificate of incorporation. However, our amended and restated certificate of incorporation provides, among other
things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle
the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination. These provisions
of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation,
may be amended with the approval of our stockholders. However, our executive officers and directors have agreed, pursuant to a