Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
References to the
“Company,” “our,” “us” or “we” refer to Novus Capital Corporation II. The following
discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with
the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
The following discussion
and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited
financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary
Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item
1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check
company formed under the laws of the State of Delaware on September 29, 2020, for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses.
We intend to effectuate our business combination using cash from the proceeds of our IPO and the sale of the private warrants,
our capital stock, debt or a combination of cash, stock and debt.
We expect to continue
to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business
combination will be successful.
Results of Operations
We have neither engaged
in any operations nor generated any operating revenues to date. Our only activities from inception through December 31, 2020
were organizational activities and those necessary to prepare for our IPO, described below. We do not expect to generate any operating
revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form
of interest income on marketable securities held after our IPO. We expect that we will incur increased expenses as a result of
being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses
in connection with searching for, and completing, a business combination.
For the period from
September 29, 2020 (inception) through December 31, 2020, we had a net loss of $1,104, which consisted of formation and
operating expenses.
Liquidity and Capital Resources
As of December 31,
2020, we had cash of $172,854. Until the consummation of our IPO, our only source of liquidity was an initial purchase of common
stock by our initial stockholders and loans from our initial stockholders.
On February 8,
2021, we consummated our IPO of 28,750,000 Units, at a price of $10.00 per unit, which included the full exercise by the underwriters
of their over-allotment option in the amount of 3,750,000 units, generating gross proceeds of $287,500,000. Simultaneously with
the closing of our IPO, we consummated the sale of 5,166,666 private warrants to the Company’s initial stockholders, including
Cowen Investments (an affiliate of the underwriter in our IPO) at a price of $1.50 per private warrant generating gross proceeds
of $7,750,000.
Following our IPO,
the full exercise of the over-allotment option, and the sale of the private warrants, a total of $287,500,000 was placed in the
trust account. We incurred $6,224,714 in transaction costs, including $5,750,000 of underwriting fees and $474,714 of other offering
costs.
We intend to use substantially
all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less income
taxes payable), to complete our business combination. To the extent that our capital stock or debt is used, in whole or in part,
as consideration to complete our business combination, the remaining proceeds held in the trust account will be used as working
capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the
funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives
or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete
a business combination.
In order to fund working
capital deficiencies or finance transaction costs in connection with a business combination, our founders or affiliates of our
founders or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete
a business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event
that a business combination does not close, we may use a portion of the working capital held outside the trust account to repay
such loaned amounts, but no proceeds from our trust account would be used for such repayment. Up to $2,000,000 of such loans may
be convertible into warrants, at a price of $1.50 per warrant, at the option of the lender. The warrants would be identical to
the private warrants.
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 estimate
of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a 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 business
combination. Moreover, we may need to obtain additional financing either to complete our business combination or because we become
obligated to redeem a significant number of our public shares upon consummation of our business combination, in which case we may
issue additional securities or incur debt in connection with such business combination. 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 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 business combination, if cash on hand is insufficient, we may need
to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Financing Arrangements
We have no obligations,
assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2020. We do not participate
in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable
interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not
entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments
of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any
long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.
The underwriters are entitled to a cash
underwriting discount of $0.20 per Unit, or $5,750,000 which was paid upon the closing of our IPO.
We engaged the underwriters
as an advisor in connection with a business combination to assist the Company in holding meetings with its stockholders to discuss
the potential business combination and the target business’ attributes, introduce the Company to potential investors that
are interested in purchasing the Company’s securities in connection with a business combination, provide financial advisory
services to assist the Company in the Company’s efforts to obtain any stockholder approval for the business combination and
assist the Company with its press releases and public filings in connection with the business combination. The Company will pay
the underwriters a cash fee for such services upon the consummation of a business combination in an amount equal to, in the aggregate,
3.5% of the gross proceeds of our IPO.
Critical Accounting Policies
The preparation of
financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates. We have not identified any critical accounting policies.
Recent Accounting Standards
Management does not
believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk
Not required for smaller
reporting companies.
Item 8. Financial Statements and
Supplementary Data.
This information appears
following Item 15 of this Report and is included herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls
are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed
under the Exchange Act, such as this annual report, is recorded, processed, summarized, and reported within the time period specified
in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information
is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate
to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief
executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls
and procedures as of December 31, 2020, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation,
our Certifying Officers concluded that, as of December 31, 2020, our disclosure controls and procedures were effective.
We do not expect that
our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are
resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure
controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected
all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly
on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.
Management’s Report on Internal
Controls Over Financial Reporting
This annual report
on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting
or an attestation report of our independent registered public accounting firm due to a transition period established by rules of
the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
There were no changes
in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the
Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate
Governance.
Our current directors and executive officers are as follows:
Name Age Title
Robert J. Laikin 57 Chief Executive Officer and Director
Larry M. Paulson 66 Chairman
Hersch Klaff 67 Director
Vincent Donargo 60 Chief Financial Officer
Jeffrey Foster 43 Director
Heather Goodman 47 Director
Ronald J. Sznaider 61 Director
Robert
J. Laikin has served as our Chief Executive Officer and a member of our board of directors since our inception.
Mr. Laikin cofounded and served as Chairman of Novus Capital Corporation [NASDAQ: NOVSU; NOVS; NOVSW] since its inception
in March 2020 until its business combination with AppHarvest, Inc. in January 2021 and is currently a director at
AppHarvest, Inc. [NASDAQ: APPH; APPHW]. Mr. Laikin has served as a managing member of Novus Capital Associates, LLC,
one of our initial stockholders, since its formation in October 2020. Mr. Laikin currently serves as the non-executive
Chairman of the Board of Washington Prime Group Inc. (NYSE:WPG), where he has held a director role since May 2014. Mr. Laikin
held the Lead Independent Director role at Washington Prime Group Inc. until the position was eliminated by the Board in 2016 and
he at that time became Chairman of the Board. Mr. Laikin has also been the managing member of L7 Investments LLC, a closely
held company that invests primarily in multi-family apartments as well as single purpose buildings, hotels, divestitures and single-family
homes, since January 2015. Mr. Laikin served as Executive Advisor to the CEO and Government Relations Executive of Ingram
Micro Inc. (NYSE:IM), a wholesale technology distributor and supply chain management and mobile device lifecycle services company,
from November 2012 to December 2019. Previously Mr. Laikin served as the founder, Chief Executive Officer and member
of the board of directors of Brightpoint, Inc. (Nasdaq:CELL) from August 1989 until it was acquired by Ingram Micro Inc.
in November 2012. Mr. Laikin holds a Bachelor of Science from Indiana University. We believe Mr. Laikin is well
qualified to serve on our board of directors because of his significant experience in the areas of executive leadership, corporate
management, retail, real estate, business strategy and corporate finance, banking, financing, accounting, corporate management,
general business and global business operations, accounting, corporate governance, public company compliance, political/governmental
matters, audit/compliance, entrepreneurism, real estate development, sales, charitable/philanthropic matters, marketing, risk management/insurance,
legal, investor, media and public relations, negotiation and deal structure.
Larry
M. Paulson has served as our non-executive Chairman since our inception. Mr. Paulson co-founded Novus Capital
Corporation and has served as its Chief Executive Officer and a director since its inception in March 2020 until its business
combination with AppHarvest, Inc. in January 2021. Mr. Paulson has served as a managing member of Novus Capital
Associates, LLC since its formation in October 2020. He has also served as principal and founder of Rancho Santa Fe Solutions,
a wireless industry consulting company he founded in February 2010. From 2013 to January 2020, Mr. Paulson was with
Qualcomm (Nasdaq:QCOM) where he served as Vice President of Product Management (2013-16), Vice President and President India and
SAARC (2016-2018) and Vice President Sales NA and Australia (2018-Jan 2020). Prior to Qualcomm, he served as Executive Vice President
and Chief Marketing Officer of Brightpoint, Inc., a provider of worldwide distribution and integrated logistics services to
the wireless communications industry, from 2011 to 2013. Prior to that he served with Nokia (NYSE:NOK) from 1987 to 2009 where
he had numerous roles including global Senior Vice President and General Manager CDMA Product line. Mr. Paulson holds a BA
in Communications from Point Park University. We believe Mr. Paulson is well qualified to serve as our Chairman because of
his more than thirty years of global senior management positions in the tech industry with expertise in wireless communications.
Hersch
Klaff has served as a member of our board of directors since our inception. Mr. Klaff
is the founder and Chief Executive Officer of Klaff Realty which he formed in 1984. Klaff Realty deploys several entrepreneurial
strategies to unlock value for its investors, including its flagship business line of acquiring distressed and under-utilized retail
real estate and operating businesses. To date, Klaff Realty (including through partnerships and entities managed by it or its affiliates)
has acquired properties and invested in operating entities that control in excess of 200 million square feet with a value in excess
of $10 billion. Mr. Klaff is currently on the board of directors of Albertsons Companies, Inc. (NYSE: ACI), Tienda Inglesa
(Uruguay), and Chlorum Solutions (Brazil). Mr. Klaff began his career with the public accounting firm of Altschuler, Melvoin
and Glasser in Chicago. Mr. Klaff holds a degree in Economics and Accounting from the University of the Witwatersrand in Johannesburg,
South Africa. We believe Mr. Klaff is well qualified to serve on our board of directors because of his expertise
in the farming industry and retail development, his accounting and investment experience, as well as his extensive knowledge of
merger and acquisitions which broadens the scope of our board of directors’ oversight of our financial performance.
Vincent
Donargo has served as our Chief Financial Officer since our inception. Mr. Donargo co-founded Novus Capital
Corporation and served as its Chief Financial Officer since its inception in March 2020 until its business combination with
AppHarvest, Inc. in January 2021. Since August 2020, Mr. Donargo has served as the Chief Accounting Officer
for Calumet Specialty Products Partners, LP, a leading producer of specialty hydrocarbons and fuels. From December 2019 to
August 2020, Mr. Donargo provided financial advisory and consulting services to private clients. From May 2019 to
December 2019, Mr. Donargo served as Executive Vice President and Chief Financial Officer of the Celadon Group Inc. (OTC:CGIPQ).
From November 2017 to April 2019, he was Vice President and Chief Accounting Officer of the Celadon Group Inc., where
he was brought in to assist with Celadon Group’s financial restructuring. Celadon Group filed a voluntary petition for bankruptcy
on December 8, 2019. From August 2016 to November 2017, Mr. Donargo was Executive Vice President and Chief
Financial Officer of Beaulieu Group LLC, a North American carpet and flooring manufacturing company, where he assisted the company
with its financial restructuring process. Beaulieu Group LLC filed a voluntary petition for bankruptcy on July 16, 2017. Prior
to joining Beaulieu Group, Mr. Donargo held senior finance positions at several publicly traded companies, including Executive
Vice President and Chief Financial Officer of Brightstar Corporation from April 2014 to August 2016 and Executive Vice
President, Chief Financial Officer and Treasurer of Brightpoint, Inc. from September 2005 until it was acquired by Ingram
Micro Inc. in November 2012. From 1998 to 2005, Mr. Donargo was the strategic business unit controller, director of finance
and corporate controller of Aearo Company, a safety products manufacturing company. Prior to that, from 1990 to 1998, Mr. Donargo
was employed in various financial positions with National Starch and Chemical Company, a specialty chemical manufacturing company.
Mr. Donargo holds a BA in Accounting from Rutgers University.
Jeffrey
Foster has served as a member of our board of directors since our inception. Mr. Foster is an active real
estate investor, managing a portfolio of multi-family, commercial and single-family assets. Mr. Foster has been the managing
member of New Frontier LLC since its inception in 2012. Mr. Foster was a professional basketball player, playing for
the NBA’s Indiana Pacers from 1999 through 2012. Mr. Foster holds a B.A.A.S. from Texas State University. We believe
Mr. Foster is well qualified to serve on our board of directors because experience in mergers and acquisitions, investments
experience and the healthcare, technology and logistics industries, and his knowledge of the public markets broadens the scope
of our board of directors’ oversight of our financial performance.
Heather
Goodman has served as a member of our board of directors since our inception. Ms. Goodman has served as a
director of Novus Capital Corporation since its inception in March 2020 until its business combination with AppHarvest, Inc.
in January 2021. Since March 2007, Ms. Goodman has served as the Chief Operating Officer and President of True
Capital Management, a boutique multi-family office specializing in business management and investment advisory services for athletes,
entertainers and high net worth individuals. Previously Ms. Goodman acted as Financial Advisor at Morgan Stanley Smith Barney
from February 2002 to February 2007. Ms. Goodman holds a BS in Business Administration with an emphasis in Accounting
from California Polytechnic State University, San Luis Obispo. She is a Certified Public Accountant and maintains Series 63,
65 and life insurance licenses. We believe Ms. Goodman is well qualified to serve as a director given her experience in building
infrastructures which have created scalable platforms to achieve goals.
Ronald
J. Sznaider has served as a member of our board of directors since our inception. Previously Mr. Sznaider has
held executive leadership positions in several global technology companies. In January 2020, Mr. Sznaider founded
Sznaider Consulting LLC, a firm which provides expert business advisory services, and has served as its President since its formation.
Mr. Sznaider serves as a member of the board of directors of the TBG AG ownership group overseeing DTN LLC, where he
has served as Vice Chairman since December 2018. Mr. Sznaider held several executive positions with DTN LLC from
1998 serving as its chief executive officer from November 2018 through his retirement in December 2019. Mr. Sznaider
is also currently a member of the American Meteorological Society Commission on Weather, Water, and Climate Enterprise.
Mr. Sznaider holds a BS from the University of Wisconsin-Madison. We believe Mr. Sznaider is well suited to serve as
a Board member because he has significant operational experience in multiple technology business disciplines, considerable M&A
experience, and private-public-partnership experience relating to environmental and sustainability topics including active initiatives
with the United Nations.
Number and Terms of Office of Officers
and Directors
Our board of directors is divided into three classes,
with only one class of directors being elected in each year, and with each class (except for those directors appointed prior to our first
annual meeting of stockholders) serving a three-year term. The term of office of the first class of directors, consisting of Ms. Goodman
and Mr. Sznaider, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting
of Messrs. Paulson and Klaff, will expire at our second annual meeting of stockholders. The term of office of the third class of
directors, consisting of Messrs. Laikin and Foster, will expire at our third annual meeting of stockholders.
Our officers are appointed
by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our
board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws
will provide that our officers may consist of a Chairman of the Board, a Chief Executive Officer, a Chief Financial Officer, a
Secretary and such other officers (including without limitation, a President, Vice Presidents, Assistant Secretaries, and a Treasurer)
as our board of directors from time to time may determine.
Executive Officer and Director Compensation
None of our officers or directors have
received any compensation for services rendered to us. Our founders, officers, directors and their respective affiliates will be
reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis
all payments that were made by us to our sponsors, officers, directors or our or any of their respective affiliates.
After the completion of our initial business
combination, directors or members of our management team who remain with us may be paid consulting, management or other compensation
from the combined company. All compensation will be fully disclosed to stockholders, to the extent then known, in the tender offer
materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. It
is unlikely the amount of such compensation will be known at the time such materials are distributed, because the directors of
the post-combination business will be responsible for determining executive officer and director compensation. Any compensation
to be paid to our officers after the completion of our initial business combination will be determined by a compensation committee
constituted solely by independent directors.
We are not party to any agreements with
our officers and directors that provide for benefits upon termination of employment. The existence or terms of any such employment
or consulting arrangements may influence our management’s motivation in identifying or selecting a target business, and we
do not believe that the ability of our management to remain with us after the consummation of our initial business combination
should be a determining factor in our decision to proceed with any potential business combination.
Committees of the Board of Directors
Our board of directors has three standing
committees: an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will
be composed solely of independent directors. Subject to phase-in rules, the rules of the NYSE and Rule 10A-3 of the Exchange
Act require that the audit committee of a listed company be comprised solely of independent directors, and the rules of the
NYSE require that the compensation committee and the nominating and corporate governance committee of a listed company be comprised
solely of independent directors. Each committee will operate under a charter that will be approved by our board of directors and
will have the composition and responsibilities described below. The charter of each committee is available on our website.
Audit Committee
He have established an audit committee
of the board of directors. The members of our audit committee are Heather Goodman, Larry M. Paulson and Ronald J. Sznaider. Ms. Goodman
serves as chairwoman of the audit committee.
Each member of the audit committee is financially
literate and our board of directors has determined that Heather Goodman qualifies as an “audit committee financial expert”
as defined in applicable SEC rules and has accounting or related financial management expertise.
Our audit committee charter details the
purpose and principal functions of the audit committee, including:
Compensation Committee
We have established a compensation committee
of the board of directors. The members of our compensation committee are Larry M. Paulson, Heather Goodman and Hersch Klaff. Mr. Paulson
serves as chairman of the compensation committee.
Our compensation committee charter details
the purpose and responsibilities of the compensation committee, including:
• reviewing our executive compensation policies and plans;
The charter also provides that the compensation
committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other
adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However,
before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation
committee will consider the independence of each such adviser, including the factors required by the NYSE and the SEC.
Nominating and Corporate Governance Committee
We have established a nominating and corporate
governance committee of the board of directors. The members of our nominating and corporate governance committee are Hersh Klaff,
Jeffrey Foster and Ronald J. Sznaider. Mr. Klaff serves as chair of the nominating and corporate governance committee.
Our nominating and corporate governance
committee charter details the purpose and responsibilities of the nominating and corporate governance committee, including:
The charter also provides that the nominating
and corporate governance committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firm
to be used to identify director candidates, and will be directly responsible for approving the search firm’s fees and other
retention terms.
We have not formally established any specific,
minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating
nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge
of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our
stockholders. Prior to our initial business combination, holders of our public shares will not have the right to recommend director
candidates for nomination to our board of directors.
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of
the Exchange Act requires our officers, directors and persons who beneficially own more than ten percent of our common stock
to file reports of ownership and changes in ownership with the SEC. These reporting persons are also required to furnish us with
copies of all Section 16(a) forms they file. Based solely upon a review of such forms, we believe that since our inception
on September 29, 2020 there have been no delinquent filers.
Code of Ethics
We have adopted a code
of ethics that applies to our officers, directors and employees. You will be able to review this document by accessing our public
filings at the SEC’s website at www.sec.gov and on our website. In addition, a copy of our Code of Ethics
will be provided without charge upon request from us.
Conflicts of Interest
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. Mr. Laikin is a director of AppHarvest, Inc. Additionally, our officers and directors may in the future become
affiliated with entities that are engaged in a similar business, including other blank check companies that may have acquisition
objectives that are similar to our company. 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.
We do not believe, however, that the fiduciary,
contractual or other obligations or duties of our officers or directors will materially affect our ability to complete our initial
business combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate
opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her
capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake
and would otherwise be reasonable for us to pursue.
Potential investors should also be aware
of the following other potential conflicts of interest:
The conflicts described above may not be resolved in our favor.
In general, officers and directors of a
corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation
if:
• the corporation could financially undertake the opportunity;
• the opportunity is within the corporation’s line of business; and
Accordingly, as a result of multiple business
affiliations, our officers and directors have similar legal obligations and duties relating to presenting business opportunities
meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation will
provide that the doctrine of corporate opportunity will not apply with respect to any of our officers or directors in circumstances
where the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have, and there
will not be any expectancy that any of our directors or officers will offer any such corporate opportunity of which he or she may
become aware to us. Below is a table summarizing the entities to which our officers and directors currently have fiduciary duties
or contractual obligations that may present a conflict of interest:
Name of Individual Entity Name Entity’s Business Affiliation
Robert J. Laikin AppHarvest, Inc. AggTech Director
Washington Prime Group Inc. Publicly-traded REIT Chairman
L7 Investments LLC Real Estate Investment Company Managing Member
Hersch Klaff Albertsons Companies, Inc. Food and Drug Retailer Director
Klaff Realty LP Real Estate/Private Equity Chief Executive Officer
Tienda Inglesa Food Retailer Director
Chlorum Solutions Industrial/ Chlor-Alkali Production Director
HMK Advisor LLC Investment Adviser Manager
MONS Investments LLC Diversified Investment Holding Company Investment Advisor
Klaff Family Foundation Non-Profit Officer
Jeffrey Foster New Frontier LLC Private Investment Firm Managing Partner
Global Fitness Partners LLC Fitness Centers Director
Ronald J. Sznaider Sznaider Consulting LLC Consulting Firm President
DTN LLC Information Service Provider Vice Chairman
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.
We do not believe, however, that the fiduciary,
contractual or other obligations or duties of our officers or directors will materially affect our ability to complete our initial
business combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate
opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her
capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake
and would otherwise be reasonable for us to pursue.
We are not prohibited from pursuing an
initial business combination with a business that is affiliated with our sponsors, officers or directors. In the event we seek
to complete our initial business combination with a business that is affiliated with our sponsors, officers or directors, we, or
a committee of independent and disinterested directors, will obtain an opinion from an independent investment banking firm that
is a member of FINRA or from an independent accounting firm, that such initial business combination is fair to our company from
a financial point of view.
In addition, our initial stockholders or
any of their affiliates may make additional investments in the company in connection with the initial business combination, although,
our initial stockholders and their affiliates have no obligation or current intention to do so. If our initial stockholders or
any of their affiliates elects to make additional investments, such proposed investments could influence our initial stockholders’
motivation to complete an initial business combination.
Further, pursuant to a Business Combination
Marketing Agreement, we have engaged Cowen and Company, LLC to provide certain specified services to us in connection with our
initial business combination. In particular, Cowen and Company, LLC may assist us in holding meetings with our stockholders to
discuss the potential business combination and the target business’s attributes, introduce us to potential investors that
are interested in purchasing our securities in connection with the potential business combination, provide financial advisory services
to assist us in our efforts to obtain any stockholder approval for the business combination and assist us with our press releases
and public filings in connection with the business combination, but will not provide any M&A-related advisory services pursuant
to the Business Combination Marketing Agreement. We will pay Cowen and Company, LLC the Marketing Fee for such services upon the
consummation of our initial business combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of our IPO,
including any proceeds from the full or partial exercise of the over-allotment option. In the ordinary course of business, Cowen
and Company, LLC and its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions,
for its own account and the accounts of customers, in debt or equity securities of us, our affiliates or other entities that may
be involved in the transactions contemplated by the Business Combination Marketing Agreement, and may provide advisory and other
services to one or more actual or potential business combination targets, investors or other parties to any business combination
or other transaction entered into by us, for which services Cowen and Company, LLC or one or more of its affiliates may be paid
fees, including fees conditioned upon the closing of a particular business combination or other transaction or transactions. This
financial interest may result in Cowen and Company, LLC having a conflict of interest when providing the services to us in connection
with an initial business combination. See “Underwriting — Business Combination Marketing Agreement.”
In the event that we submit our initial
business combination to our public stockholders for a vote, our initial stockholders, officers and directors have agreed to vote
any founder shares and any public shares held by them in favor of our initial business combination, and our officers and directors
have also agreed to vote public shares purchased by them (if any) after our IPO in favor of our initial business combination.
Limitation on Liability and Indemnification of Officers and
Directors
Our amended and restated certificate of
incorporation will provide that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware
law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation will
provide that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary
duty as directors, except to the extent such exemption from liability or limitation thereof is not permitted by the DGCL.
We will enter into agreements with our
officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and
restated certificate of incorporation. Our bylaws also permit us to maintain insurance on behalf of any officer, director or employee
for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We will
obtain a policy of directors’ and officers’ liability insurance that insures our officers and directors against the
cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify
our officers and directors.
A stockholder’s investment may be
adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these
indemnification provisions.
We believe that these provisions, the insurance
and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions,
we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
Item 11. Executive Compensation.
No executive officer
has received any cash compensation for services rendered to us.
No compensation or
fees of any kind will be paid to our initial stockholders, members of our management team or their respective affiliates, for services
rendered prior to or in connection with the consummation of our initial business combination (regardless of the type of transaction
that it is). However, they will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities
on our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses
and business combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses
to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable by us.
After our initial
business combination, members of our management team who remain with us may be paid consulting, management or other fees from the
combined company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the proxy solicitation
materials furnished to our stockholders. However, the amount of such compensation may not be known at the time of the stockholder
meeting held to consider an initial business combination, as it will be up to the directors of the post-combination business to
determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its determination
in a Current Report on Form 8-K or a periodic report, as required by the SEC.
We may not take any
action to ensure that members of our management team maintain their positions with us after the consummation of our initial business
combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements
to remain with us after the initial business combination. The existence or terms of any such employment or consulting arrangements
to retain their positions with us may influence our management’s motivation in identifying or selecting a target business
but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination
will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements
with our officers and directors that provide for benefits upon termination of employment.
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters.
We have no compensation plans under which
equity securities are authorized for issuance.
The following table sets forth information
regarding the beneficial ownership of our common stock as of the date of this annual report.
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares
of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the private
placement warrants because these warrants are not exercisable within 60 days of the date of this annual report.
Number of Shares Beneficially Owned(2) Percentage of Outstanding Common Stock
Name and Address of Beneficial Owner(1)
* Less than one percent.
(7) Represents shares of Class B common stock held by V Donargo LLC.
Item 13. Certain Relationships
and Related Transactions, and Director Independence.
Founder Shares
On
October 12, 2020, our founders purchased an aggregate of 7,187,500 shares of Class B common stock (the “founder
shares”) for an aggregate purchase price of $25,000. The founder shares included an aggregate of up to 937,500 shares subject
to forfeiture by our founders to the extent that the underwriter’s over-allotment is not exercised in full or in part, so
that our founders would collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after
the IPO. As a result of the underwriters’ election to fully exercise their over-allotment option, no founder shares are currently
subject to forfeiture.
Our founders have
agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the founder shares until the earlier to occur
of: (1) one year after the completion of a business combination or (B) subsequent to a business combination, (x) if
the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as 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 a business combination, or (y) the date on which the Company completes a liquidation, merger,
capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to
exchange their shares of common stock for cash, securities or other property.
Private Warrants
Simultaneously with
the IPO, the founders purchased an aggregate of 5,166,666 private warrants at a price of $1.50 per private warrant ($7.75 million
in the aggregate) in a private placement. Each private warrant entitles the holder to purchase one share of our common stock at
a price of $11.50 per share, subject to adjustment. Proceeds from the private warrants were added to the net proceeds from the
IPO held in the trust account. If we do not complete an initial business combination within 24 months from the closing of
our IPO, or by February 8, 2023, the proceeds from the sale of the private warrants will be used to fund the redemption of
the public shares (subject to the requirements of applicable law) and the private warrants will expire worthless. The private warrants
will be non-redeemable and exercisable on a cashless basis so long as they are held by our founders or their permitted transferees.
Registration Rights
Pursuant to a registration
rights agreement entered into on February 3, 2021, the holders of the founder shares, private warrants and any warrants that
may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise
of the private warrants and warrants that may be issued upon conversion of Working Capital Loans) will have registration rights
to require the Company to register a sale of any of the securities for resale (in the case of the founder shares, only after conversion
to shares of Class A common stock). The holders of these securities are entitled to make up to three demands, excluding short
form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to the completion of a business combination and rights to require
the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. Notwithstanding the foregoing,
Cowen Investments may not exercise its demand and “piggyback” registration rights after five and seven years, respectively,
after the effective date of our IPO. The registration rights agreement does not contain liquidating damages or other cash settlement
provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in
connection with the filing of any such registration statements.
Promissory Note and Potential Related
Party Loans
On October 1, 2020, certain of the Company’s
directors agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to our IPO pursuant to promissory notes
(the “Promissory Notes”). From October 1, 2020 through December 31, 2020, the Company borrowed an aggregate of $160,000
under the Promissory Notes. The Promissory Notes are non-interest bearing and are payable on the earlier of (i) September 30,
2021 and (ii) the consummation of our IPO. The outstanding balance under the Promissory Notes was fully repaid on February 10,
2021.
In order to finance transaction costs in
connection with a business combination, our founders or certain of the Company’s directors and officers may, but are not
obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a business
combination, the Company would repay the Working Capital Loans out of the proceeds of the trust account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the trust account. In the event that a business
combination does not close, the Company may use a portion of proceeds held outside the trust account to repay the Working Capital
Loans, but no proceeds held in the trust account would be used to repay the Working Capital Loans. Except for the foregoing, the
terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.
The Working Capital Loans would either be repaid upon consummation of a business combination, without interest, or, at the lender’s
discretion, up to $2,000,000 of such Working Capital Loans may be convertible into warrants of the post-business combination entity
at a price of $1.50 per warrant. The warrants would be identical to the private warrants.
Underwriter’s Agreement
The underwriters were entitled to a cash
underwriting discount of $0.20 per unit in connection with the IPO and were paid $5,750,000 upon the closing of our IPO.
Business Combination Marketing Agreement
The Company engaged the underwriters as
an advisor in connection with a business combination to assist the Company in holding meetings with its stockholders to discuss
the potential business combination and the target business’ attributes, introduce the Company to potential investors that
are interested in purchasing the Company’s securities in connection with a business combination, provide financial advisory
services to assist the Company in the Company’s efforts to obtain any stockholder approval for the business combination and
assist the Company with its press releases and public filings in connection with the business combination. The Company will pay
the underwriters a cash fee for such services upon the consummation of a business combination in an amount equal to, in the aggregate,
3.5% of the gross proceeds of our IPO.
Other Arrangements
No compensation or
fees of any kind will be paid to the Novus initial stockholders, members of our management team or their respective affiliates,
for services rendered prior to or in connection with the consummation of our initial business combination (regardless of the type
of transaction that it is). However, such individuals will receive reimbursement for any out-of-pocket expenses incurred by them
in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence
on suitable target businesses and business combinations as well as traveling to and from the offices, plants or similar locations
of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable
by us.
After our initial
business combination, members of our management team who remain with us may be paid consulting, management or other fees from the
Combined Company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the proxy solicitation
materials furnished to our stockholders. However, the amount of such compensation may not be known at the time of the stockholder
meeting held to consider an initial business combination, as it will be up to the directors of the post-combination business to
determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its determination
in a Current Report on Form 8-K or a periodic report, as required by the SEC.
All ongoing and future
transactions between us and any of our officers and directors or their respective affiliates will be on terms believed by us to
be no less favorable to us than are available from unaffiliated third parties. Such transactions will require prior approval by
a majority of our uninterested “independent” directors or the members of our board who do not have an interest in the
transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into
any such transaction unless our disinterested “independent” directors determine that the terms of such transaction
are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third
parties.
Related Party Policy