10-K
1
f10k2020_cffinanceacq3.htm
ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________
to __________
Commission file number: 001-39826
CF FINANCE ACQUISITION CORP. III
(Exact name of registrant as specified in
its charter)
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including
area code: (212) 938-5000
Securities registered pursuant to Section 12(b)
of the Act:
Class A common stock, par value $0.0001 per share CFAC The Nasdaq Stock Market
Securities registered pursuant to Section 12(g)
of the Act: None
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer, “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by
check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
The registrant’s shares were not listed
on any exchange and had no value as of the last business day of the second fiscal quarter of 2020. The registrant’s units
begin trading on the Nasdaq Stock Market on November 13, 2020 and the registrant’s
shares of Class A common stock and warrants began trading on the Nasdaq Stock Market
on January 4, 2021. The aggregate market value of the units outstanding, other than shares held by persons who may be deemed affiliates
of the registrant, computed by reference to the closing price for the units on December 30, 2020, as reported on the
Nasdaq Stock Market was $241,500,000.
As of March 15, 2021 there were 23,500,000
shares of Class A common stock, par value $0.0001 per share and 5,750,000 shares
of the Class B common stock, par value $0.0001 per share, of the registrant issued and outstanding.
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 1
Item 1A. Risk Factors 20
Item 1B. Unresolved Staff Comments 20
Item 2. Properties 20
Item 3. Legal Proceedings 20
Item 4. Mine Safety Disclosures 20
PART II
Item 6. Selected Financial Data 21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 25
Item 8. Financial Statements and Supplementary Data 25
Item 9A. Controls and Procedure 25
Item 9B. Other Information 26
PART III
Item 10. Directors, Executive Officers and Corporate Governance 27
Item 11. Executive Compensation 31
Item 14. Principal Accounting Fees and Services 37
PART IV
Item 15. Exhibits and Financial Statement Schedules 38
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This Report (as defined
below), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These forward-looking statements
can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,”
“anticipates,” “expects,” “intends,” “plans,” “may,” “will,”
“potential,” “projects,” “predicts,” “continue,” or “should,” or, in
each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not
materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to
consummate any acquisition or other business combination and any other statements that are not statements of current or historical
facts. These statements are based on management’s current expectations, but actual results may differ materially due to various
factors, including, but not limited to:
● our pool of prospective target businesses;
● our public securities’ potential liquidity and trading;
● the lack of a market for our securities;
● our financial performance.
The forward-looking statements
contained in this Report 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. For
forward-looking statements relating to AEye (as defined below) and the AEye Business Combination, please see the AEye Registration
Statement (as defined below) to be filed with the SEC (as defined below).
ii
Unless otherwise stated
in this Report, or the context otherwise requires, references to:
● “AEye” are to AEye, Inc., a Delaware corporation;
● “board of directors” or “board” are to the board of directors of the Company;
● “DGCL” are to the Delaware General Corporation Law;
● “Exchange Act” are to the Securities Exchange Act of 1934, as amended;
● “FINRA” are to the Financial Industry Regulatory Authority;
● “JOBS Act” are to the Jumpstart Our Business Startups Act of 2012;
● “management” or our “management team” are to our officers;
● “Nasdaq” are to the Nasdaq Stock Market;
iii
● “PCOAB” are to the Public Company Accounting Oversight Board (United States);
● “public stockholders” are to the holders of our public shares;
● “Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002;
● “SEC” are to the U.S. Securities and Exchange Commission;
● “Securities Act” are to the Securities Act of 1933, as amended;
iv
PART I
Item 1. Business.
Overview
We are a blank check company
formed on March 15, 2016 as a Delaware corporation for the purpose of effecting an initial business combination. Since our
initial public offering, we have focused our search for an initial business combination on businesses that may provide significant
opportunities for attractive investor returns and on structuring, negotiating and consummating an initial business combination.
Our efforts to identify a prospective target business are not limited to a particular industry or geographic region, although we
expect to focus on a target in an industry where we believe our management team and founders’ expertise will provide us with
a competitive advantage, including the financial services, healthcare, real estate services, technology and software industries.
Our management team consists
of:
We, the sponsor, and CF&Co
are all affiliates of Cantor. Cantor is a diversified company specializing in financial and real estate services for customers
operating in the global financial and commercial real estate markets, whose businesses include CF&Co, a leading independent
middle market investment bank and primary dealer; BGC Partners, Inc., or BGC, whose common stock trades on the Nasdaq Global Select
Market under the ticker symbol “BGCP”, a leading global financial technology and brokerage business primarily servicing
the global financial markets; and Newmark Group, Inc., or Newmark, whose Class A common stock trades on the Nasdaq Global
Select Market under the ticker symbol “NMRK”, a leading full-service commercial real estate services business. We believe
that the combination of our management team’s and our affiliates’ financial services, financial and real estate technology,
and real estate industry expertise and proven ability to grow businesses through acquisitions make us uniquely qualified to pursue
acquisitions.
Past performance of Cantor,
its affiliates and our management team is not a guarantee either (i) that we will be able to identify a suitable candidate
for our initial business combination or (ii) of success with respect to any business combination we may consummate. You should
not rely on the historical performance record of Cantor, its affiliates, or our management team as indicative of our future performance.
Initial Public Offering
On November 17, 2020, we
consummated our initial public offering of 23,000,000 units, including 3,000,000 units issued to the underwriters upon full exercise
of their over-allotment option. Each unit consists of one public share and one-third of a public warrant. The units were sold at
a price of $10.00 per unit, generating gross proceeds to the Company of $230,000,000.
Simultaneously with the
closing of the initial public offering, we completed the private sale of an aggregate of 500,000 private placement units to the
sponsor at a purchase price of $10.00 per private placement unit, generating gross proceeds of $5,000,000.
A total of $230,000,000,
comprised of $225,000,000 of the proceeds from the initial public offering and $5,000,000 of the proceeds of the sale of the private
placement units, was placed in the trust account maintained by Continental, acting as trustee.
We must complete our initial
business combination by May 17, 2021, six months from the closing of our initial public offering, as such date may be extended
by the sponsor for an additional four months up to four times, for a total of up to 22 months, or to September 17, 2022, in
accordance with the Charter (subject to the sponsor depositing additional funds into the trust account as set out below). If
our initial business combination is not consummated within the allotted time, then our existence will terminate, and we will distribute
all amounts in the trust account.
Our units, public shares
and public warrants are each traded on the Nasdaq under the symbols “CFACU,” “CFAC” and “CFACW,”
respectively. Our units commenced public trading on November 13, 2020, and our public shares and public warrants commenced separate
public trading on January 4, 2021.
AEye Business Combination
On February 17, 2021, we
entered into the Merger Agreement with Merger Sub and AEye. Pursuant to the Merger Agreement, subject to the terms and conditions
set forth therein, upon the closing of the transactions contemplated thereby (the “Closing”), Merger Sub will merge
with and into AEye (the “Merger” and together with the other transactions contemplated by the Merger Agreement, the
“Transactions”), whereby the separate corporate existence of Merger Sub will cease and AEye will be the surviving corporation
of the Merger and become a wholly owned subsidiary of the Company. As a result of the Merger, among other things, (i) all outstanding
shares of capital stock of AEye will be cancelled and AEye’s stockholders will receive a number of shares of Class A common
stock for each share of AEye capital stock held equal to the quotient obtained by dividing the Price Per AEye Share (as defined
below) by $10.00 (the “Exchange Ratio”), (ii) all outstanding options and warrants to purchase capital stock of AEye
will be assumed by the Company and instead represent the right to acquire shares of Class A common stock, with the number of shares
and price per share thereunder adjusted at the Closing based on the Exchange Ratio, and (iii) the Company will amend its charter
to, among other matters, change its name to “AEye Holdings, Inc.”
The “Price Per AEye
Share” is obtained by dividing (x) $1.9 billion (together with the aggregate exercise price of any outstanding options or
warrants being assumed by the Company), by (y) the number of outstanding shares of capital stock of AEye (calculated on a fully-diluted
basis in accordance with the Merger Agreement).
Contemporaneously with
the execution of the Merger Agreement, the Company entered into separate Subscription Agreements (the “Subscription Agreements”)
with a number of subscribers (each a “Subscriber”), including the sponsor, pursuant to which the Subscribers agreed
to purchase, and the Company agreed to sell to the Subscribers, an aggregate of 22.5 million shares of Class A common stock (the
“PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $225 million (the “PIPE
Investments”), with the sponsor’s Subscription Agreement accounting for $9.5 million of such aggregate PIPE Investments
(of which the sponsor has assigned $4.5 million of its subscription to an unrelated third-party).
Contemporaneously with
the execution of the Merger Agreement, the Company and certain AEye stockholders entered into a Stockholder Support Agreement (the
“Stockholder Support Agreement”), pursuant to which, among other things, certain AEye stockholders agreed (i) not to
transfer, and to vote their shares of AEye capital stock in favor of the Merger Agreement (including by execution of a written
consent), the Merger and the other Transactions, (ii) to consent to the termination of certain stockholder agreements with AEye,
effective at Closing, and (iii) release the sponsor, the Company, AEye and its subsidiaries from pre-Closing claims relating to
their capacity as stockholders, subject to customary exceptions. The AEye stockholders party to the Stockholder Support Agreement
collectively have a sufficient number of votes to approve the Merger.
Contemporaneously with
the execution of the Merger Agreement, the Company entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”)
with the sponsor and AEye, pursuant to which, among other things: (i) for the benefit of AEye, the sponsor has agreed to comply
with its obligations under the letter agreement, dated as of November 12, 2020 (the “Insider Letter”), by and among
the Company, the sponsor and certain officers and directors of the Company to not transfer, to not participate in the redemption
offered to stockholders of the Company in connection with the AEye Business Combination and to vote its shares of common stock
in favor of the Merger Agreement and the Transactions (in each case other than as permitted by the Sponsor Support Agreement),
and the Company agreed to enforce such provisions, and the Company and the sponsor provided AEye with certain consent rights with
respect to transfers of the Company securities owned by the sponsor and amendments, modifications or waivers under the Insider
Letter, (ii) to waive the anti-dilution rights of the founder shares under the Charter, and (iv) to release the Company, AEye,
Merger Sub and their respective subsidiaries effective as of the Closing from all pre-Closing claims, subject to customary exceptions.
Concurrently with the execution
of the Merger Agreement, the Company and AEye entered into separate Lock-Up Agreements (each a “Lock-Up Agreement”)
with a number of AEye stockholders, pursuant to which the securities of the Company held by such stockholders upon will be locked-up
and subject to transfer restrictions for a period of time following the Closing, as described below, subject to certain exceptions.
The securities held by such stockholders will be locked-up until the earlier of: (i) the one (1) year anniversary of the date of
the Closing, (ii) the date on which the last reported sale price of Class A common stock exceeds $12.00 per share (adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like), for any 20 trading days within any 30-trading
day period commencing at least 150 days after the Closing, and (iii) the date on which the Company consummates a liquidation, merger,
capital stock exchange, reorganization, or other similar transaction after the Closing which results in all of the Company’s
stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Concurrently with the execution
of the Merger Agreement, the Company and certain AEye stockholders (the “Investors”) entered into a Registration Rights
Agreement (the “Registration Rights Agreement”), which shall be effective at the Closing. Pursuant to the terms of
the Registration Rights Agreement, the Company will be obligated, among other matters, to file one or more registration statements
to register the resales of Class A common stock held by such Investors after the Closing. Investors holding at least 25% of the
registrable securities owned by all Investors are entitled under the Registration Rights Agreement to make a written demand for
registration under the Securities Act of all or part of their registrable securities, up to a total of three (3) such demands (subject
to the right of one of the Investors to initiate one such demand on its own without any of the other Investors).
Business Strategy
Our acquisition and value
creation strategy is to identify, acquire and, after our initial business combination, which would include the AEye Business Combination,
help to build a company in an industry that complements the experience and expertise of our management team. Our acquisition selection
process leverages the network of contacts developed by our management team and those of the sponsor and its affiliates, including
relationships in the financial services, healthcare, real estate services, technology and software industries, comprising management
teams of public and private companies, investment bankers, private equity sponsors, venture capital investors, advisers, attorneys
and accountants that we believe should provide us with a number of business combination opportunities. We deployed a proactive
sourcing strategy and focused on companies where we believe the combination of our operating experience, relationships, capital
and capital markets expertise can be catalysts to transform a target company and can help accelerate the target’s growth
and performance. Following our initial public offering, our management team communicated with their network of relationships, including
employees of Cantor and its affiliates, and set forth the type of company that we wanted to target so that we could locate, identify,
pursue and review potential target companies and promising leads, which resulted in the AEye Business Combination.
Our management team and
Cantor and its affiliates have experience in:
● sourcing, structuring, acquiring and selling businesses;
● negotiating transactions favorable to investors;
● acquiring and integrating companies; and
Investment Criteria
We seek to acquire one or
more businesses with an aggregate enterprise value of approximately $500 million to $1.25 billion or more. We developed
the following high level, non-exclusive investment criteria that we will use to screen for and evaluate target businesses.
We seek to acquire a business that (1) has sustainable competitive advantages, (2) generates, or has the near-term potential
to generate, predicable free cash flows, (3) would benefit from the capabilities of the sponsor and management team to improve
its operations and market position, (4) has an experienced and capable management team, (5) has the potential to grow
both organically and through additional acquisitions and (6) can be acquired at an attractive valuation to maximize potential
returns to our stockholders.
While we may pursue an acquisition
opportunity in any business, industry, sector or geographical location, we are focusing on industries that complement our management
team’s background, and to capitalize on the ability of our officers and directors to identify and acquire a business or businesses
consistent with the experience of our management team and affiliates of the sponsor. We therefore are focusing on potential target
companies in the financial services, healthcare, real estate services, technology and software industries.
These criteria are not intended
to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent
relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant.
In the event that we decide to enter into our initial business combination with a target business that only meets some but not
all of the above criteria and guidelines, we will disclose that the target business does not meet all of the above criteria in
our stockholder communications related to our initial business combination, which, as discussed in this Report, would be in the
form of proxy solicitation materials or tender offer documents that we would file with the SEC
Initial Business Combination
We will initially have
until May 17, 2021 to consummate an initial business combination. However, if we anticipate that we may not be able to consummate
our initial business combination by May 17, 2021, and subject to the sponsor depositing additional funds into the trust account
as set out below, our time to consummate a business combination shall be extended for an additional four months up to four times,
until September 17, 2022, for a total of up to 22 months to complete a business combination. Our stockholders will not be
entitled to vote or redeem their shares in connection with any such extension. However, our stockholders will be entitled to vote
and redeem their shares in connection with a stockholder meeting held to approve an initial business combination or in a tender
offer undertaken in connection with such an initial business combination if we propose such a business combination during any four-month extension
period. Pursuant to the terms of the Charter and the trust agreement we entered into with Continental on the date of the consummation
of our initial public offering, in order for the time available for us to consummate our initial business combination to be extended,
the sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the
trust account $2,300,000 ($0.10 per unit, up to an aggregate of 9,200,000) on or prior to the date of the applicable deadline,
for each four-month extension. Any such payments would be made in the form of a non-interest bearing loan which would be due
and payable on the consummation of our initial business combination out of the proceeds of the trust account released to us. If
we do not complete a business combination, we may repay such loans solely from assets not held in the trust account, if any.
In the event that we receive
notice from the sponsor five days prior to the applicable deadline of its wish for us to effect an extension, we intend to issue
a press release announcing such intention at least three days prior to the applicable deadline. In addition, we intend to issue
a press release the day after the applicable deadline announcing whether or not the funds had been timely deposited. The sponsor
and its affiliates or permitted designees are not obligated to extend the time for us to complete our initial business combination.
If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released
to us. If we are unable to complete our initial business combination within such time period, 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.
So long as we maintain
a listing for our securities on Nasdaq, we must complete one or more business combinations having an aggregate fair market value
of at least 80% of the value of the assets held in the trust account (excluding taxes payable on the interest earned on the trust
account) at the time of our signing a definitive agreement in connection with our initial business combination. 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 firm 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. Additionally, pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent
directors. If we are no longer listed on Nasdaq, we would not be required to satisfy the above-referenced fair market value
test.
We anticipate structuring
our initial business combination, such as the AEye Business Combination, either (i) in such a way so that the post-transaction company
in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or
businesses, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests
or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other
reasons. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50%
or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient
for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company
owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination
may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and
us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new
shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling
interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately
prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business
combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the
post-transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into
account for purposes of Nasdaq’s 80% fair market value test. If the initial business combination involves more than one target
business, the 80% fair market value test will be based on the aggregate value of all of the transactions and we will treat the
target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval,
as applicable.
We do not believe we will
need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates
of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination
are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our
initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination
or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination,
in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we are
targeting businesses with enterprise values that are greater than we could acquire with the net proceeds of our initial offering
and the sale of the private placement units, and, as a result, if any cash portion of the purchase price, exceeds the amount available
from the trust account, net of amounts needed to satisfy redemptions by public stockholders, we may be required to seek additional
financing to complete such proposed 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. 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, including pursuant to forward
purchase agreements or backstop arrangements into which we may enter. Subject to compliance with applicable securities laws, we
would only complete such financing simultaneously with the completion of our 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. In addition, following our initial business combination, if cash on hand is insufficient, we may
need to obtain additional financing in order to meet our obligations.
For more information regarding
the PIPE Shares to be issued and the PIPE Investments to be made in connection with the AEye Business Combination, please see “AEye
Business Combination” above.
Our Business Combination Process
In evaluating prospective
business combinations, we conduct a thorough due diligence review that encompasses, among other things, a review of historical
and projected financial and operating data, meetings with management and their advisors (if applicable), on-site inspection
of facilities and assets to the extent possible, discussion with customers and suppliers, document reviews, as well as a review
of financial, operational, legal and other information which will be made available to us and which we deem appropriate. We utilize
our expertise and the sponsor’s expertise in analyzing companies and evaluating operating projections, financial projections
and determining the appropriate return expectations.
We are not prohibited from
pursuing an initial business combination with a business that is affiliated with Cantor or its affiliates or the sponsor, officers
or directors. While AEye is not affiliated with the sponsor or our officers or directors, in the event we do not consummate the
AEye Business Combination and we seek to complete our initial business combination with a business that is affiliated with Cantor
or its affiliates or the sponsor or our officers or directors, we, or a committee of independent directors, will obtain an opinion
from an independent investment banking firm or another independent firm that commonly renders valuation opinions that our initial
business combination is fair to our stockholders from a financial point of view.
Cantor is the beneficial
owner of founder shares and/or private placement units by virtue of its ownership of the sponsor and members of our management
team may indirectly own such securities. Either the sponsor will transfer up to 20,000 founder shares to each of our independent
directors or we will pay cash fees to such directors, at our discretion. Because of such ownership and interests, Cantor and our
officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business
with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest
with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors
were to be included by a target business as a condition to any agreement with respect to our initial business combination.
All of our officers are
employed by Cantor or its affiliates. Cantor is continuously made aware of potential business opportunities, one or more of which
we may desire to pursue for an initial business combination. While Cantor does not have any duty to offer acquisition opportunities
to us, Cantor may become aware of a potential transaction that is an attractive opportunity for us, which Cantor may decide to
share with us.
The sponsor, officers,
directors, Cantor and their affiliates may participate in the formation of, or become an officer or director of, any other blank
check company prior to completion of our initial business combination. In particular, certain of our executive officers and directors
also serve as executive officers or directors of other special purpose acquisition companies sponsored by Cantor as set forth below,
each of which is focused on searching for businesses that may provide significant opportunities for attractive investor returns
in industries similar to the industries in which our search is focused. As a result, the sponsor, officers or directors could have
conflicts of interest in determining whether to present business combination opportunities to us or to any other blank check company
with which they may become involved.
Each of our officers and
directors presently has, and any of them in the future may have additional, fiduciary, contractual or other obligations or duties
to one or more other entities pursuant to which such officer or director is or will be required to present a business combination
opportunity. The Charter provides 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,
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.
Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for one
or more entities to which he or she has fiduciary, contractual or other obligations or duties, he or she will honor these obligations
and duties to present such business combination opportunity to such entities first, and only present it to us if such entities
reject the opportunity and he or she determines to present the opportunity to us.
Our Management Team
Members of our management
team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as
they deem necessary to our affairs until we have completed our initial business combination. The amount of time that any member
of our management team will devote in any time period will vary based on whether a target business has been selected for our initial
business combination and the current stage of the business combination process.
We believe our management
team’s operating and transaction experience and relationships with companies will provide us with a substantial number of
potential business combination targets, such as AEye. Over the course of their careers, the members of our management team have
developed a broad network of contacts and corporate relationships in various industries. This network has grown through the activities
of our management team sourcing, acquiring and financing businesses, our management team’s relationships with sellers, financing
sources and target management teams and the experience of our management team in executing transactions under varying economic
and financial market conditions.
Status as a Public Company
We believe our structure
makes us an attractive business combination partner to target businesses. As a public company, we offer a target business an alternative
to the traditional initial public offering through a merger or other business combination with us. Following an initial business
combination, we believe the target business would have greater access to capital and additional means of creating management incentives
that are better aligned with stockholders’ interests than it would as a private company. A target business can further benefit
by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination
transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business
for shares of Class A common stock (or shares of a new holding company) or for a combination of shares of Class A common stock
and cash, allowing us to tailor the consideration to the specific needs of the sellers.
Although there are various
costs and obligations associated with being a public company, 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, marketing and road show efforts
that may not be present to the same extent in connection with an initial business combination with us.
Furthermore, once a proposed
initial 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. Following an initial business combination,
we believe the target business would then have greater access to capital and an additional means of providing management incentives
consistent with stockholders’ 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 stockholder 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 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 stockholder 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 November 17, 2025, (b) in
which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated
filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million
as of the prior June 30, 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. References herein to emerging growth company will have the meaning associated
with it in the JOBS Act.
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 prior June 30, or (2) our annual revenues exceed
$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 30.
In addition, only holders
of our founder shares have the right to vote on the election of directors prior to the consummation of our initial business combination.
As a result, Nasdaq considers us to be a “controlled company” within the meaning of Nasdaq corporate governance standards.
Under Nasdaq corporate governance standards, a company of which more than 50% of the voting power for the election of directors
is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain
corporate governance requirements. We have utilized, and we intend to continue to utilize, these exemptions.
Financial Position
With funds available for
an initial business combination initially in the amount of $230,000,000, 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 or leverage ratio. Because we are 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, other than
with respect to the PIPE Investments for the AEye Business Combination, we have not taken any steps to secure any other third party
financing and there can be no assurance any additional third party financing will be available to us.
Effecting Our Initial Business Combination
We are not presently engaged
in, and we will not engage in, any operations other than the pursuit of our business combination, at which point we will engage
in the business of the target we acquire in our initial business combination. We intend to effectuate our initial business combination
using cash from the proceeds of our initial public offering and the private placement of the private placement units, the proceeds
of the sale of our securities in connection with our initial business combination (pursuant to forward purchase contracts or any
backstop agreements we may enter into following the consummation of our initial public offering or otherwise), 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.
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 common stock, we
may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance
or expansion of operations of 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 seek to raise additional
funds through a private offering of debt or equity securities in connection with the completion of our initial business combination
(which may include a specified future issuance), and we may effectuate our initial business combination using the proceeds of such
offering rather than using the amounts held in the trust account. In addition, we are targeting businesses larger than we could
acquire with the net proceeds of our initial public offering and the sale of the private placement units, and may as a result be
required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable
securities laws, we would expect to complete such financing only simultaneously with the completion of our initial business combination.
In the case of an initial business combination funded with assets other than the trust account assets, our proxy materials or tender
offer documents disclosing the initial business combination would disclose the terms of the financing and, only if required by
law, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately, including
pursuant to any specified future issuance, or through loans in connection with our initial business combination. Other than with
respect to the Subscription Agreements, 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.
Sources of Target Businesses
Target business candidates
are brought to our attention from various unaffiliated sources, including investment bankers and investment professionals. Target
businesses are also brought to our attention by such unaffiliated sources as a result of being solicited by us by calls or mailings.
These sources 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 prospectus of our initial public offering and know what types of businesses we are targeting.
Our officers and directors, as well as the sponsor and its affiliates, have brought, and may bring, to our attention target business
candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions
they may have. In addition, we have received 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 and the sponsor and its affiliates.
We may also contact targets that any of the other special purpose acquisition companies sponsored by Cantor had considered if we
become aware that such targets are interested in a potential initial business combination with us and such transaction would be
attractive to our shareholders.
While we have not and do
not 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, advisory 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 the sponsor or any
of our existing officers or directors, or any entity with which the sponsor or officers are affiliated, be paid any finder’s
fee, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation by the company prior to, or
in connection with any services rendered 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) other than as described herein. Some of our officers and directors
may enter into employment or consulting agreements with the post-transaction company following our initial business combination.
The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an initial
business combination candidate.
We are not prohibited from
pursuing an initial business combination with a business that is affiliated with Cantor or its affiliates or the sponsor, officers
or directors. While AEye is not affiliated with the sponsor, its affiliates or our officers or directors, in the event we do not
consummate the AEye Business Combination and we seek to complete our initial business combination with an initial business combination
target that is affiliated with the sponsor, its affiliates or our officers or directors, we, or a committee of independent directors,
would obtain an opinion from an independent investment banking firm or another independent firm that commonly renders valuation
opinions that such an initial business combination is fair to our stockholders from a financial point of view. We are not required
to obtain such an opinion in any other context.
Each of our officers and
directors presently has, and any of them in the future may have additional, fiduciary, contractual or other obligations or duties
to one or more other entities pursuant to which such officer or director is or will be required to present a business combination
opportunity to such entities. Our officers and directors also may become aware of business opportunities which may be appropriate
for presentation to us and the other entities to which they owe certain fiduciary, contractual or other duties. Accordingly, if
any of our officers or directors becomes aware of a business combination opportunity which is suitable for one or more entities
to which he or she has fiduciary, contractual or other obligations or duties, he or she will honor these obligations and duties
to present such business combination opportunity to such entities first, and only present it to us if such entities reject the
opportunity and he or she determines to present the opportunity to us. These conflicts may not be resolved in our favor and a potential
target business may be presented to another entity prior to its presentation to us. The Charter provides that we renounce our interest
in any corporate opportunity offered to any director or officer unless (i) such opportunity is expressly offered to such person
solely in his or her capacity as a director or officer of our company, (ii) such opportunity is one we are legally and contractually
permitted to undertake and would otherwise be reasonable for us to pursue and (iii) the director or officer is permitted to refer
the opportunity to us without violating another legal obligation.
Selection of a Target Business and Structuring
of our Initial Business Combination
So long as we obtain and
maintain a listing for our securities on Nasdaq, we must complete one or more business combinations having an aggregate fair market
value of at least 80% of the value of the assets held in the trust account (excluding taxes payable on the interest earned on the
trust account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair
market value of our initial business combination will be determined by our board of directors based upon one or more standards
generally accepted by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of
comparable public businesses or a valuation based on the financial metrics of M&A transactions of comparable businesses. 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 firm that commonly renders valuation opinions
with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to
make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it
is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as
to the value of a target’s assets or prospects. We do not intend to purchase multiple businesses in unrelated industries
in conjunction with our initial business combination. Subject to this requirement, our management will have virtually unrestricted
flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate
our initial business combination with another blank check company or a similar company with nominal operations.
In any case, we will only
complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target
or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company
under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or
businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what
will be taken into account for purposes of Nasdaq’s 80% fair market value test. There is no basis for our investors to evaluate