ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to make disclosures
under this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
We currently maintain our principal executive offices
at 40 10th Avenue, Floor 7, New York, NY 10014. The cost for this space is included in the $10,000 per-month fee (subject
to deferral as described herein) payable to HSAC 2 Holdings, LLC, for office space, utilities and secretarial services. Our agreement
with HSAC 2 Holdings, LLC provides that, commencing on the date that our ordinary shares were first listed on the Nasdaq Capital Market
and until we consummate a business combination, such office space, as well as utilities and secretarial services, will be made available
to us as may be required from time to time. We believe that the fee charged by HSAC 2 Holdings, LLC is at least as favorable as we could
have obtained from an unaffiliated person. We consider our current office space, combined with the other office space otherwise available
to our executive officers, adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
We may be subject to legal proceedings, investigations
and claims incidental to the conduct of our business from time to time. We are not currently a party to any material litigation or other
legal proceedings brought against us. We are also not aware of any legal proceeding, investigation or claim, or other legal exposure
that has a more than remote possibility of having a material adverse effect on our business, financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
9
part II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our ordinary shares began to trade on The Nasdaq
Capital Market, or Nasdaq, under the symbol “HSAQ” on August 4, 2020.
Holders of Record
As of January 23, 2023, there were 11,212,117 of
our ordinary shares issued and outstanding held by 7 holders of record. The number of record holders was determined from the records
of our transfer agent and does not include beneficial owners of ordinary shares whose shares are held in the names of various security
brokers, dealers, and registered clearing agencies.
Dividends
We have not paid any cash dividends on our ordinary
shares to date and do not intend to pay cash dividends prior to the completion of an initial business combination. The payment of cash
dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition
subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within
the discretion of our board of directors at such time. It is the present intention of our board of directors to retain all earnings,
if any, for use in our business operations and, accordingly, our board of directors does not anticipate declaring any dividends in the
foreseeable future. In addition, our board of directors is not currently contemplating and does not anticipate declaring any share dividends
in the foreseeable future. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants
we may agree to in connection therewith.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Extension Proposal
On July 26, 2022, we held an extraordinary general
meeting of our shareholders, where the shareholders approved a special resolution (the “Extension Proposal”) to amend the
Company’s amended and restated memorandum and articles of association to (i) extend from August 6, 2022 (the “Original Termination
Date”) to November 6, 2022 (the “Extended Date”), the date by which, if we had not consummated an initial business
combination, the Company must liquidate and dissolve, and (ii) allow us, without another shareholder vote, to elect to extend the date
to consummate a business combination on a monthly basis for up to three times by an additional one month each time after the Extended
Date, upon five days’ advance notice prior to the applicable deadlines, until February 6, 2023 or a total of up to six months after
the Original Termination Date, unless the closing of our initial business combination shall have occurred. On October 31, 2022, November
15, 2022, and December 15, 2022, our board of directors of elected to extend the deadline until December 6, 2022, January 6, 2023, and
February 6, 2023, respectively.
In connection with the vote to approve the Extension
Proposal, the holders of 9,237,883 Public Shares properly exercised their right to redeem their shares for cash at a redemption price
of approximately $10.02 per share, for an aggregate redemption amount of approximately $92.6 million. As such, approximately 57.7% of
the Public Shares were redeemed and approximately 42.3% of the Public Shares remain outstanding. After the satisfaction of such redemptions,
the balance in our Trust Account was $67.8 million.
Business Combination Meeting
On January 24, 2023, we held an
extraordinary general meeting of shareholders (the “General Meeting”) for the purpose of considering and voting upon,
among other things, the Orchestra Business Combination. Each of the proposals presented at the General Meeting, as more fully
described in the proxy statement/prospectus dated December 16, 2022, was approved. The submission of the Orchestra Business
Combination to the shareholders entitled holders of Public Shares to redeem their shares for their pro rata portion of the funds
held in the Trust Account. In connection with the General Meeting, as of January 24, 2023, we received requests for redemption from
holders with respect to 1,597,888 Public Shares. The closing date of the Orchestra Business Combination is anticipated to be in
January 2023.
ITEM 6. [RESERVED]
10
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “Health
Sciences Acquisitions Corporation 2,” “our,” “us” or “we” refer to Health Sciences Acquisitions
Corporation 2. The following discussion and analysis of the Company’s financial condition and results of operations should be read
in conjunction with the annual 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.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have
based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements
are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed
or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause
or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission
(“SEC”) filings
Overview
We are a blank check company incorporated as a Cayman
Islands exempted company on May 25, 2020. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, recapitalization, reorganization or similar business combination with one or more businesses, which we refer to throughout
this annual report as our initial business combination. Although there is no restriction or limitation on what industry our target operates
in, it is our intention to pursue prospective targets that are focused on healthcare innovation. We are an emerging growth company and,
as such, we are subject to all of the risks associated with emerging growth companies.
Our sponsor is HSAC 2 Holdings, LLC (the “Sponsor”).
The registration statement for our initial public offering (the “Initial Public Offering”) was declared effective on August
3, 2020. On August 6, 2020, we consummated an Initial Public Offering of 16,000,000 ordinary shares (the “Public Shares”),
including the 2,086,956 Public Shares as a result of the underwriters’ full exercise of their over-allotment option, at an offering
price of $10.00 per Public Share, generating gross proceeds of $160.0 million, and incurring offering costs of approximately $9.4 million,
inclusive of $5.6 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public
Offering, we consummated a private placement (the “Private Placement”) with the Sponsor of (i) 450,000 ordinary shares (the
“Private Placement Shares”) at $10.00 per Private Placement Share (for a total purchase price of $4.5 million) and (ii) 1,500,000
warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant (for a total purchase price
of $1.5 million), generating gross proceeds of $6.0 million.
Upon the closing of the Initial Public Offering and
the Private Placement (including the exercise of the over-allotment option), $160.0 million (or $10.00 per Public Share) of the net proceeds
of the sale of the Public Shares in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust
Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and held as cash
or invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company
Act, with a maturity of 185 days or less, or in money market funds meeting certain conditions under the Investment Company Act, which
invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of an initial
business combination and (ii) the distribution of the Trust Account.
11
We paid a total of $3.2 million in underwriting discounts
and commissions (not including the $5.6 million deferred underwriting commissions payable at the consummation of the initial business
combination) and approximately $0.6 million for other costs and expenses related to our formation and the Initial Public Offering.
We will have until February 6, 2023, or such later
time as our shareholders may approve in accordance with the Company’s amended and restated memorandum (the “Combination Period”),
or such later time as our shareholders may approve in accordance with the Company’s amended and restated memorandum and articles
of association, to complete our initial business combination. If we do not complete an initial business combination by that date, it
will trigger the Company’s automatic winding up, liquidation and dissolution and, upon notice from us, the trustee of the Trust
Account will distribute the amount in the Trust Account to holders of the Public Shares (the “Public Shareholders”). Concurrently,
we shall pay, or reserve for payment, from funds not held in trust, our liabilities and obligations, although we cannot assure that there
will be sufficient funds for such purpose. If there are insufficient funds held outside the Trust Account for such purpose, our Sponsor
has agreed that it will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses
or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us and which
have not executed a waiver agreement. However, we cannot assure that the liquidator will not determine that he or she requires additional
time to evaluate creditors’ claims (particularly if there is uncertainty over the validity or extent of the claims of any creditors).
We also cannot assure that a creditor or shareholder will not file a petition with the Cayman Islands Court which, if successful, may
result in the Company’s liquidation being subject to the supervision of that court. Such events might delay distribution of some
or all of our assets to the Public Shareholders.
Proposed Business Combination
On July 4, 2022, we entered into an agreement and
plan of merger agreement (as amended on July 21, 2022, the “Merger Agreement”) with HSAC Olympus Merger Sub, Inc., a Delaware
corporation and our wholly owned subsidiary (“Merger Sub”), and Orchestra BioMed, Inc., a Delaware corporation (“Orchestra”).
Pursuant to the terms of the Merger Agreement, a business combination between us and Orchestra (the “Orchestra Business Combination”)
will be effected in two steps. First, before the closing of the Orchestra Business Combination, we will deregister in the Cayman Islands
and domesticate as a Delaware corporation. Second, at the closing of the Orchestra Business Combination, Merger Sub will merge with and
into Orchestra, with Orchestra surviving such merger as the surviving entity (the “Merger”). Upon consummation of the Orchestra
Business Combination, Orchestra will become our wholly owned subsidiary. We will then change our name to “Orchestra BioMed Holdings,
Inc.”. We refer to the Company, after giving effect to the Orchestra Business Combination, as “New Orchestra”.
The Merger Agreement contains customary representations,
warranties and covenants of the parties thereto. The consummation of the proposed Merger is subject to certain conditions as further
described in the Merger Agreement.
Simultaneously with the execution of the Merger Agreement,
we and Orchestra entered into separate forward purchase agreements (the “Forward Purchase Agreements”) with certain funds
managed by RTW Investments, LP (the “RTW Funds”) and Covidien Group S.à.r.l., an affiliate of Medtronic plc (“Medtronic”
and the RTW Funds, each a “Purchasing Party”), pursuant to which each of the Purchasing Parties agreed to purchase approximately
$10.0 million of our ordinary shares, for a total of approximately $20.0 million, less the dollar amount of our ordinary shares holding
redemption rights that the Purchasing Party acquires and holds until immediately prior to the domestication.
Simultaneously with the execution of the Merger Agreement
and the Forward Purchase Agreements, we, Orchestra, and the RTW Funds entered into a Backstop Agreement (the “Backstop Agreement”)
pursuant to which the RTW Funds, jointly and severally, agreed to purchase such number of our ordinary shares at a price of $10.00 per
share to the extent that the amount of Parent Closing Cash (as defined in the Merger Agreement) as of immediately prior to the closing
of the Orchestra Business Combination is less than $60.0 million (inclusive of the $10.0 million commitment by the RTW Funds pursuant
to the Forward Purchase Agreement described above).
12
On October 21, 2022, the Backstop Agreement and the
Forward Purchase Agreement with the RTW Funds were amended to provide that: (1) the per share purchase price under each of the Backstop
Agreement and the Forward Purchase Agreement will not exceed the redemption price available to Public Shareholders exercising redemption
rights at the shareholder meeting held to approve the business combination; (2) any shares purchased pursuant to the Backstop Agreement
or the Forward Purchase Agreement, or otherwise acquired by the RTW Funds outside of the existing redemption offer, will not be voted
in favor of approving the business combination; and (3) the RTW Funds will waive redemption rights with respect to such purchases in
the vote to approve the business combination. The amendments have been filed with the SEC on a Current Report on Form 8-K on October
21, 2022. The Forward Purchase Agreement with Medtronic was not amended.
The closing under the Forward Purchase Agreement
with the RTW Funds occurred on July 22, 2022, pursuant to which the RTW Funds purchased 1,000,000 of our ordinary shares at a price of
$10.01 per share from an accredited investor in a privately negotiated transaction. The closing under the Forward Purchase Agreement
with Medtronic and the closing under the Backstop Agreement, if any, will occur immediately prior to the domestication. The Sponsor and
the Purchasing Parties will have registration rights pursuant to the Amended and Restated Registration Rights and Lock-Up Agreement with
respect to our ordinary shares, received in the domestication.
In addition, the Sponsor has agreed that 25% or 1,000,000
shares of its New Orchestra common stock received in the domestication will be forfeited to New Orchestra on the first business day following
the fifth anniversary of the closing unless, as to 500,000 shares, the VWAP (as defined in the Merger Agreement) of the New Orchestra
common stock is greater than or equal to $15.00 per share over any 20 Trading Days (as defined in the Merger Agreement) within any 30-Trading
Day period, and as to the remaining 500,000 shares, the VWAP of the New Orchestra common stock is greater than or equal to $20.00 per
share over any 20-Trading Days within any 30-Trading Day period. In addition, subject to the closing of the Orchestra Business Combination,
the Sponsor has agreed to forfeit 50% of its Private Placement Warrants, comprising 750,000 Private Placement Warrants, for no consideration.
Further, the Sponsor and the other shareholders as of immediately prior to our Initial Public Offering (the “Initial Stockholders”)
have agreed to subject the 4,000,000 shares of New Orchestra common stock to be received in the domestication in exchange for the 4,000,000
ordinary shares held or controlled by the Initial Shareholders prior to the Initial Public Offering (the “Insider Shares”)
and 450,000 shares of New Orchestra common stock to be received in the domestication in exchange for the 450,000 Private Placement Shares,
to a lock-up for up to 12 months.
See the proxy statement/prospectus included in the
Registration Statement on Form S-4/A filed by us with the SEC on December 13, 2022 for additional information.
Extension, Redemptions and Private Purchase
On July 26, 2022, we held an extraordinary general
meeting of our shareholders, where the shareholders approved a special resolution (the “Extension Proposal”) to amend the
Company’s amended and restated memorandum and articles of association to (i) extend from August 6, 2022 (the “Original Termination
Date”) to November 6, 2022 (the “Extended Date”), the date by which, if we had not consummated an initial business
combination, the Company must liquidate and dissolve, and (ii) allow us, without another shareholder vote, to elect to extend the date
to consummate a business combination on a monthly basis for up to three times by an additional one month each time after the Extended
Date, upon five days’ advance notice prior to the applicable deadlines, until February 6, 2023 or a total of up to six months after
the Original Termination Date, unless the closing of our initial business combination shall have occurred. On October 31, 2022, November
15, 2022, and December 15, 2022, our board of directors of elected to extend the deadline until December 6, 2022, January 6, 2023, and
February 6, 2023, respectively.
13
In connection with the vote to approve the Extension
Proposal, the holders of 9,237,883 Public Shares properly exercised their right to redeem their shares for cash at a redemption price
of approximately $10.02 per share, for an aggregate redemption amount of approximately $92.6 million. As such, approximately 57.7% of
the Public Shares were redeemed and approximately 42.3% of the Public Shares remain outstanding. After the satisfaction of such redemptions,
the balance in our Trust Account was $67.8 million.
See the proxy statement/prospectus included in the
Registration Statement on Form S-4/A filed by us with the SEC on December 13, 2022 for additional information.
Business Combination Meeting
On January 24, 2023, we held an extraordinary
general meeting of shareholders (the “General Meeting”) for the purpose of considering and voting upon, among other things,
the Orchestra Business Combination. Each of the proposals presented at the General Meeting, as more fully described in the proxy statement/prospectus
dated December 16, 2022, was approved. The submission of the Orchestra Business Combination to the shareholders entitled holders of Public
Shares to redeem their shares for their pro rata portion of the funds held in the Trust Account. In connection with the General Meeting,
as of January 24, 2023, we received requests for redemption from holders with respect to 1,597,888 Public Shares.
Liquidity and Going Concern
As of December 31, 2022, we had approximately $175,000
of cash in our operating account and a working capital deficit of approximately $1.8 million.
Prior to the completion of the Initial Public
Offering, our liquidity needs had been satisfied through a payment of $28,750 from our Sponsor to exchange for the issuance of
3,593,750 ordinary shares to the Sponsor, and a loan of $300,000 pursuant to a promissory note originally issued to our Sponsor on
June 11, 2020 (the “Note”), which was repaid in full on August 7, 2020. Subsequent to the consummation of the Initial
Public Offering and Private Placement, our liquidity needs have been satisfied with the proceeds from the consummation of the
Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with an initial
business combination, the Sponsor may, but is not obligated to, provide us loans (the “Working Capital Loans”). As of
December 31, 2022 and 2021, there were no Working Capital Loans available or outstanding.
In connection with our assessment of going concern
considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about
an Entity’s Ability to Continue as a Going Concern,” management has determined that the working capital deficit, as well
as the mandatory liquidation and subsequent dissolution raises substantial doubt about our ability to continue as a going concern. Management
intends to complete a business combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts
of assets or liabilities should we be required to liquidate after February 6, 2023. The consolidated financial statements do not include
any adjustment that might be necessary if we are unable to continue as a going concern.
Various social and political circumstances in the
United States and around the world (including wars and other forms of conflict, including rising trade tensions between the United States
and China, and other uncertainties regarding actual and potential shifts in the United States and foreign, trade, economic and other
policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes,
hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration
in the United States and worldwide. Specifically, the rising conflict between Russia and Ukraine and resulting market volatility could
adversely affect our ability to complete a business combination. In response to the conflict between Russia and Ukraine, the United States
and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions,
export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on our ability to complete
a business combination and the value of our securities.
Management continues to evaluate the impact of these
types of risks on the industry and has concluded that while it is reasonably possible that these types of risks could have a negative
effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable
as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Results of Operations
We will not be generating any operating revenues
until the closing and completion of our initial business combination, at the earliest. We generate non-operating income in the form of
interest income on investments held in the Trust Account. We are incurring expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance) and expenses related to our search for an initial business combination.
14
For the year ended December 31, 2022, we had a net
loss of approximately $2.7 million, which consisted of approximately $3.0 million in general and administrative expenses and related
party administrative fees of $120,000, partially offset by approximately $345,000 of interest income from investments held in the Trust
Account.
For the year ended December 31, 2021, we had a net
loss of approximately $379,000 which consisted of approximately $275,000 in general and administrative expenses and related party administrative
fees of $120,000, partially offset by approximately $16,000 of net income on the investments held in the Trust Account.
Related Party Transactions
Insider Shares
On June 11, 2020, we issued 3,593,750 ordinary shares
to the Sponsor for an aggregate purchase price of $28,750. On August 3, 2020, we effected a share dividend of 0.113043478 ordinary shares
for each outstanding share (an aggregate of 406,250 ordinary shares), resulting in an aggregate of 4,000,000 ordinary shares outstanding
(the “Insider Shares”). All shares and associated amounts have been retroactively restated to reflect the share dividend.
The holders of the Insider Shares had agreed to forfeit up to an aggregate of 521,739 Insider Shares, on a pro rata basis, to the extent
that the option to purchase additional ordinary shares is not exercised in full by the underwriters. On August 6, 2020, the underwriters
fully exercised the over-allotment option; thus, the 521,739 Insider Shares were no longer subject to forfeiture.
The Initial Shareholders have agreed not to transfer,
assign or sell any of their Insider Shares (except to certain permitted transferees) until, with respect to 50% of the Insider Shares,
the earlier of six months after the date of the consummation of the initial business combination and the date on which the closing price
of our ordinary shares equals or exceeds $12.50 per ordinary share for any 20 trading days within a 30-trading day period following the
consummation of the initial business combination, and, with respect to the remaining 50% of the Insider Shares, six months after the
date of the consummation of the initial business combination, or earlier in each case if, subsequent to the initial business combination,
we complete a liquidation, merger, stock exchange or other similar transaction which results in all of the shareholders having the right
to exchange their ordinary shares for cash, securities or other property.
Related Party Loans
On June 11, 2020, our Sponsor agreed to loan us up
to $300,000 to be used for the payment of costs related to the Initial Public Offering pursuant to the Note. The Note was non-interest
bearing, unsecured and due on the date we consummate the Initial Public Offering. We borrowed $300,000 under the Note and repaid the
Note in full on August 7, 2020. Subsequent to the repayment, the facility was no longer available to us.
In addition, in order to finance transaction costs
in connection with an initial business combination, the Initial Shareholders or their affiliates may, but are not obligated to, loan
us the Working Capital Loans, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each
loan would be evidenced by a promissory note. The notes would either be paid upon consummation of the business combination, without interest,
or, at the lender’s discretion, up to $500,000 of such loans may be converted upon consummation of the business combination into
additional private warrants at a price of $1.00 per warrant. If we do not complete a business combination within the Combination Period,
the Working Capital Loans will be repaid only from amounts remaining outside the Trust Account, if any. The warrants would be identical
to the Private Placement Warrants. As of December 31, 2022 and 2021, the Company had no borrowings under the Working Capital Loans.
15
Administrative Services Agreement
Commencing on the date of the prospectus relating
to our Initial Public Offering, we agreed to pay the Sponsor a total of $10,000 per month for office space and certain office and secretarial
services. Upon completion of the business combination or our liquidation, we will cease paying these monthly fees. For the years ended
December 31, 2022 and 2021, we incurred $120,000 in expenses for these services. As of December 31, 2022 and 2021, $0 and $150,000 were
due to the Sponsor and are included in accrued expenses - related party on the accompanying consolidated balance sheets, respectively.
Purchase Agreements and Backstop Agreement
On August 3, 2020, in connection with the consummation
of the Initial Public Offering, we entered into a purchase agreement (“FPA”) with our Sponsor pursuant to which the Sponsor
agreed that it will purchase an aggregate of 2,500,000 ordinary shares of our Company at a price of $10.00 per share, for an aggregate
purchase price of $25.0 million prior to, currently with, or following the consummation of a business combination, either in open market
transactions (to the extent permitted by law) or in a private placement with us. This FPA commitment has been satisfied by the RTW Funds
through: (a) an investment of $15 million in Orchestra’s Series D Financing, and (b) the Forward Purchase Agreement described
below.
Simultaneously with the execution of the Merger Agreement,
our Company and Orchestra entered into separate Forward Purchase Agreements with the RTW Funds and Medtronic, pursuant to which each
of the Purchasing Parties agreed to purchase approximately $10.0 million of our ordinary shares, for a total of approximately $20.0 million,
less the dollar amount of the our ordinary shares holding redemption rights that the Purchasing Party acquires and holds until immediately
prior to the domestication.
Simultaneously with the execution of the Merger Agreement
and the Forward Purchase Agreements, our Company, Orchestra, and the RTW Funds entered into the Backstop Agreement, pursuant to which
the RTW Funds, jointly and severally, agreed to purchase such number of the our ordinary shares at a price of $10.00 per share to the
extent that the amount of Parent Closing Cash (as defined in the Merger Agreement) as of immediately prior to the closing of the Orchestra
Business Combination is less than $60.0 million (inclusive of the $10.0 million commitment by the RTW Funds pursuant to the Forward Purchase
Agreement described above).
On October 21, 2022, the Backstop Agreement and the
Forward Purchase Agreement with the RTW Funds were amended to provide that: (1) the per share purchase price under each of the Backstop
Agreement and the Forward Purchase Agreement will not exceed the redemption price available to Public Shareholders exercising redemption
rights at the shareholder meeting held to approve the business combination; (2) any shares purchased pursuant to the Backstop Agreement
or the Forward Purchase Agreement, or otherwise acquired by the RTW Funds outside of the existing redemption offer, will not be voted
in favor of approving the business combination; and (3) the RTW Funds will waive redemption rights with respect to such purchases in
the vote to approve the business combination. The amendments have been filed with the SEC on a Current Report on Form 8-K on October
21, 2022. The Forward Purchase Agreement with Medtronic was not amended.
The closing under the Forward Purchase Agreement
with the RTW Funds occurred on July 22, 2022, pursuant to which the RTW Funds purchased 1,000,000 of our ordinary shares at a price of
$10.01 per share from an accredited investor in a privately negotiated transaction. The closing under the Forward Purchase Agreement
with Medtronic and the closing under the Backstop Agreement, if any, will occur immediately prior to the domestication. The Sponsor and
the Purchasing Parties will have registration rights pursuant to the Amended and Restated Registration Rights and Lock-Up Agreement with
respect to our ordinary shares, received in the domestication.
16
Company Shareholder Support Agreement and Forfeiture
Contemporaneously with the execution of the Merger
Agreement, we and Orchestra entered into a support agreement (the “Parent Support Agreement”) with the Sponsor and certain
of our other shareholders (each a “Shareholder”) pursuant to which the Shareholders identified therein have agreed (a) to
appear at any shareholder meetings called to approve the Merger or any proposal to extend the period of time we are afforded under our
organizational documents and our prospectus to consummate an initial business combination (an “Extension Proposal”), (b)
not to redeem their shares or any other of our equity securities now or in future acquired or beneficially owned, (c) to vote such shares
and equity securities, to the extent permitted by law, (i) in favor of the domestication, the Merger and related transactions, (ii) in favor of any Extension Proposal,
(iii) against any change in our business, management or board contrary to the Merger Agreement and against any other proposal reasonably
expected to breach, prevent or impede the Merger, and (d) to waive anti-dilution and similar rights with respect to such shares, whether
under our amended and restated memorandum and articles of association, applicable law, or a contract regarding the Merger and related
transactions with us. In addition, the Sponsor has agreed that 25% or 1,000,000 shares of its New Orchestra Common Stock received in
the domestication will be forfeited to New Orchestra on the first business day following the fifth anniversary of the closing of the
Orchestra Business Combination unless, as to 500,000 shares, the VWAP (as defined in the Merger Agreement) of the New Orchestra Common
Stock is greater than or equal to $15.00 per share over any 20 Trading Days (as defined in the Merger Agreement) within any 30-Trading
Day period, and as to the remaining 500,000 shares, the VWAP of the New Orchestra Common Stock is greater than or equal to $20.00 per
share over any 20-Trading Days within any 30-Trading Day period. Further, subject to the closing of the Orchestra Business Combination,
the Sponsor has agreed to forfeit 50% of its warrants, comprising 750,000 warrants, for no consideration, immediately prior to the Closing.
Pursuant to the terms of the Merger Agreement, immediately following such forfeiture and prior to the Closing, the Company will issue
750,000 New Warrants to eleven specified employees and directors of Orchestra. These New Warrants will have substantially similar terms
to the forfeited Private Warrants, except that they will become exercisable between 24 and 36 months after the Closing.
Contractual Obligations
Registration Rights
The holders of the Insider Shares, the Private Placement
Shares, the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any ordinary shares
issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans)
are entitled to registration rights pursuant to a registration rights agreement. The holders of a majority of these securities are entitled
to make up to two demands that we register such securities. The holders of the majority of the Insider Shares can elect to exercise these
registration rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow.
The holders of a majority of the Private Placement Shares, the Private Placement Warrants or warrants that may be issued upon conversion
of Working Capital Loans made to us can elect to exercise these registration rights at any time after we consummate a business combination.
In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent
to our consummation of the initial business combination. We will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting
discount of $0.20 per share, or $3.2 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, the
underwriters will be entitled to a deferred underwriting commission of $0.35 per share, or $5.6 million in the aggregate since the underwriters’
over-allotment option was exercised in full. The deferred fee will become payable to the underwriters from the amounts held in the Trust
Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
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Critical Accounting Policies and Estimates
Cash and Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account
has been comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with
a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily
determinable fair value, or a combination thereof. When our investments held in the Trust Account were comprised of U.S. government securities,
the investments are classified as trading securities. When our investments held in the Trust Account were comprised of money market funds,
the investments were recognized at fair value. Trading securities and investments in money market funds are presented on the consolidated
balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities
are included in interest income from investments held in the Trust Account in the accompanying consolidated statements of operations.
The estimated fair values of investments held in the Trust Account were determined using available market information. On July 25, 2022,
the entire Trust Account balance was transferred into cash following redemptions in connection with the vote to approve the Extension
Proposal. As of December 31, 2022, only cash is held in the Trust Account.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible
redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject
to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable ordinary
shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary
shares are classified as shareholders’ equity. Our Public Shares feature certain redemption rights that are considered to be outside
of our control and subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2022 and 2021, 6,762,117 and
16,000,000 ordinary shares subject to possible redemption, respectively, are presented as temporary equity, outside of the shareholders’
deficit section of the accompanying consolidated balance sheets.
Under ASC 480-10-S99, we have elected to recognize
changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value
at the end of the reporting period. This method would view the end of the reporting period as if it were also the redemption date of
the security. Effective with the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption
amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements
of FASB ASC Topic 260, “Earnings Per Share.” Net loss per ordinary share is calculated by dividing the net loss by the
weighted average number of ordinary shares outstanding for the respective period.
The calculation of diluted net loss per
ordinary share does not consider the effect of the Private Placement Warrants to purchase 1,500,000 ordinary shares since their exercise
is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net
loss per share is the same as basic net loss per share for years ended December 31, 2022 and 2021. Accretion associated with the redeemable
ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we did not have
any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual
obligations.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.
We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public company effective dates.
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Additionally, we are in the process of evaluating
the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth
in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant
to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the
Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the
financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation
between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These
exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an
“emerging growth company,” whichever is earlier.
Recent Accounting Pronouncements
Our management does not believe there are any
recently issued, but not yet effective, accounting pronouncements, if currently adopted, that would have a material effect on our consolidated
financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required
to make disclosures under this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and the notes thereto begin on page
F-1 of this Annual Report.
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. Based
upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31, 2022.
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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
As required by SEC rules and regulations implementing
Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with
U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of
our internal control over financial reporting as of December 31, 2022. In making these assessments, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013).
Based on our assessments and those criteria, management determined that our internal controls over financial reporting were effective
as of December 31, 2022.
This Annual Report on Form 10-K does not include
an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth
company under the JOBS Act.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter,
there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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part III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information about our directors and executive
officers:
Name Age Position
Roderick Wong 45 President, Chief Executive Officer and Chairman
Alice Lee 52 Vice President of Operations, Secretary and Treasurer
Pedro Granadillo 75 Director
Carsten Boess 56 Director
Stuart Peltz 63 Director
Michael Brophy 43 Director
Roderick Wong, MD, has served as our President
and Chief Executive Officer since June 2020 and as a member of our board of directors since our inception. Dr. Wong has more than 16
years of healthcare investing experience. Since 2009, he has served as Managing Partner and Chief Investment Officer of RTW. Prior to
forming RTW, Dr. Wong was a Managing Director and sole Portfolio Manager for the Davidson Kempner Healthcare Funds. Prior to joining
Davidson Kempner, Dr. Wong held various healthcare investment and research roles at Sigma Capital Partners and Cowen & Company. Dr.
Wong served as Chairman of the board of directors of Health Sciences Acquisitions Corporation (“HSAC”) and its Chief Executive
Officer from January 2019 until December 2019. Other current and previous directorships include: Rocket Pharmaceuticals, Inc., where
he serves as Chairman, a position he has held since Rocket’s inception in July 2015; Attune Pharmaceuticals, a portfolio company
of RTW, where he has served as a director since June 2018; Landos Biopharma, where he served as a director from 2019 to June 2022; Ji
Xing Pharmaceuticals, a portfolio company of RTW, where he has served as director since 2019; and NiKang Therapeutics, a portfolio company
of RTW, where he has served as a director since September 2020. Dr. Wong previously served on the board of directors of Penwest Pharmaceuticals
in 2010 and Avidity Biosciences from 2019 until August 2021. He simultaneously received an MD from the University of Pennsylvania Medical
School and an MBA from Harvard Business School, and graduated Phi Beta Kappa with a BS in Economics from Duke University.
Naveen Yalamanchi, MD, has served as our Executive
Vice President and Chief Financial Officer and as a member of our board of directors since June 2020. Dr. Yalamanchi has more than 15
years of healthcare investment and research experience. Since 2015, Dr. Yalamanchi has been a Partner and Portfolio Manager at RTW. Prior
to joining RTW, Dr. Yalamanchi was Vice President and Co-Portfolio Manager at Calamos Arista Partners, a subsidiary of Calamos Investments,
a position he held from 2011 to 2015. Prior to joining Calamos Arista Partners, Dr. Yalamanchi held various healthcare investment roles
at Millennium Management and Davidson Kempner Capital Management, where he worked with Dr. Wong. Dr. Yalamanchi graduated Phi Beta Kappa
with a BS in Biology from the Massachusetts Institute of Technology and received an MD from the Stanford University School of Medicine.
He completed his surgical internship at UCLA Medical Center. Dr. Yalamanchi served as Vice President and Chief Financial Officer of HSAC
from January 2019 until December 2019 and as a director of HSAC from December 2018 until December 2019. Other prior and current directorships
include: Rocket Pharmaceuticals, Inc., where he has served as a director since Rocket’s inception in July 2015, and Ancora Heart
and Magnolia Medical Technologies, portfolio companies of RTW, where Dr. Yalamanchi serves as an observer to the board of directors.
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Alice Lee, JD, has served as our Vice President
of Operations and as our Secretary and Treasurer since June 2020. Ms. Lee has served as RTW’s Senior Counsel since October 2017
and Chief Compliance Officer from February 2019 to February 2021 and has more than a decade of experience advising life sciences companies
in corporate and transactional matters. Prior to joining RTW, she most recently served as a senior associate in the Life Sciences practice
at Ropes & Gray LLP from 2015 to 2017. Prior to that, she worked in the Intellectual Property Transactions and Technology practice
at Sullivan & Cromwell LLP from 2010 to 2015, and she began her legal career in the Mergers & Acquisitions practice at Cravath,
Swaine & Moore LLP. Ms. Lee served as Vice President of Operations of HSAC from January 2019 until December 2019. Ms. Lee received
her law degree from Columbia Law School, where she served as a Senior Editor of Columbia Law Review and was a Harlan Fiske Stone Scholar.
She earned an MS from Stanford University in Computer Science (with an emphasis in Bioinformatics), completed two years of pre-clinical
coursework at the Stanford University School of Medicine, where she was an MD candidate, and graduated Phi Beta Kappa and summa cum laude
with a BA in Philosophy from Columbia University. Prior to law school, Ms. Lee worked as a computational biologist at the H. Lee Moffitt
Cancer Center & Research Institute at the University of South Florida and co-authored “The promise of gene signatures in cancer
diagnosis and prognosis” included in the Encyclopedia of Genetics, Genomics, Proteomics and Bioinformatics and “Fundamentals
of Cancer Genomics and Proteomics” included in Surgery: Basic Science and Clinical Evidence. She also worked as a software development
engineer intern at Amazon.com.
Stephanie A. Sirota has served as our Vice
President of Corporate Strategy and Corporate Communications since June 2020. Ms. Sirota has served as RTW’s Chief Business Officer
since 2012 and as a Partner since 2014. Ms. Sirota is responsible for strategy and oversight of RTW’s business development and
strategic partnerships with counterparties including limited partners, banks and academic institutions. She is also responsible for shaping
the firm’s governance policies underscoring impact and sustainability. Ms. Sirota has more than a decade of deal experience in
financial services. Prior to joining RTW, from 2006 to 2010, she served as a director at Valhalla Capital Advisors, a macro and commodity
investment manager. From 2000 to 2003, Ms. Sirota worked in the New York and London offices of Lehman Brothers, where she advised on
various mergers & acquisitions, IPOs, and capital market financing transactions with a focus on cross-border transactions for the
firm’s global corporate clients. She began her career on the Fixed Income trading desk at Lehman Brothers, structuring derivatives
for municipal issuers from 1997 to 1999. Ms. Sirota served as Vice President of Corporate Strategy of HSAC from January 2019 until December
2019. Other current directorships include RTW Venture Fund Limited (LSE: “RTW”), where Ms. Sirota has served as a director
since October 2019. Ms. Sirota graduated with honors from Columbia University and also received an MS from the Columbia Graduate School
of Journalism. She has contributed to Fortune Magazine and ABCNews.com. Ms. Sirota is a supporter of the arts, science, and children’s
initiatives. She serves as Co-Chairman of the Council of the Phil at the New York Philharmonic. She also serves as President of RTW Charitable
Foundation.
Pedro Granadillo has served as our director
since August 2020. Mr. Granadillo has nearly 50 years of biopharmaceutical industry experience with expertise in human resources, manufacturing,
quality control, and corporate governance. From 1970 until his retirement in 2004, Mr. Granadillo held multiple leadership roles at Eli
Lilly and Company, including Senior Vice President of Global Manufacturing and Human Resources and a member of the Executive Committee.
Mr. Granadillo currently serves on the board of directors of Rocket Pharmaceuticals, Inc., a position he has held since January 2018.
Mr. Granadillo has previously served on the boards of directors at Haemonetics Corporation from 2004 to 2019, Dendreon Corporation, Nile
Therapeutics and Noven Pharmaceuticals, as well as NPS Pharmaceuticals, which was sold to Shire for $5.2 billion in 2015. Mr. Granadillo
is also a co-founder and board member of Neumentum Pharmaceuticals, a private non opioid pain company. Mr. Granadillo graduated from
Purdue University with a Bachelor of Science in Industrial Engineering.
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Carsten Boess has served as our director since
August 2020. Mr. Boess has served as a director for Rocket Pharmaceuticals, Inc. since January 2016, Avidity Biosciences since April
2020, and Achilles Therapeutics since April 2020. Previously, Mr. Boess was the Executive Vice President of Corporate Affairs at Kiniksa
Pharmaceuticals, Ltd. from August 2015 until February 2020. Before Kiniksa, Mr. Boess was the Chief Financial Officer at Alexion Pharmaceuticals
from 2004 to 2005 and the Senior Vice President and Chief Financial Officer at Synageva BioPharma Corp. from 2011 until the company’s
acquisition by Alexion Pharmaceuticals in 2015. Previously, Mr. Boess served in multiple roles with increasing responsibility at Insulet
Corporation, including Chief Financial Officer from 2006 to 2009 and Vice President of International Operations from 2009 to 2011. Prior
to that, Mr. Boess served as Executive Vice President of Finance at Serono Inc. from 2005 to 2006. In addition, he was a member of the
Geneva-based World Wide Executive Finance Management Team while at Serono. Mr. Boess also held several financial executive roles at Novozymes
of North America and Novo Nordisk in France, Switzerland and China. During his tenure at Novo Nordisk, he served on Novo Nordisk’s
Global Finance Board. Mr. Boess received a Bachelor’s degree and Master’s degree in Economics and Finance, specializing in
Accounting and Finance from the University of Odense, Denmark.
Stuart Peltz, PhD, has served as our director
since August 2020. Dr. Peltz founded PTC Therapeutics in 1998 and has served as Chief Executive Officer and a member of the board of
directors since its inception. Prior to founding PTC, Dr. Peltz was a Professor in the Department of Molecular Genetics & Microbiology
at the Robert Wood Johnson Medical School, Rutgers University. Dr. Peltz currently serves as a director of the Biotechnology Industry
Organization (BIO) and serves on BIO’s Emerging Companies Section Governing Board. Dr. Peltz received a Ph.D. from the McArdle
Laboratory for Cancer Research at the University of Wisconsin.
Michael Brophy has served as our director
since August 2020. Mr. Brophy has served as the Chief Financial Officer of Natera since February 2017. Previously, Mr. Brophy served
as Natera’s Senior Vice President, Finance and Investor Relations since September 2016, and prior to that, as Vice President, Corporate
Development and Investor Relations since September 2015. Prior to joining Natera, Mr. Brophy served in the investment banking division
at Morgan Stanley and Deutsche Bank where he focused on advising corporate clients in the life science tools and diagnostics sector.
Mr. Brophy holds an MBA from the University of California, Los Angeles and a Bachelor of Science in Economics from the United States
Air Force Academy.
Number and Terms of Office of Officers and Directors
Our board of directors has six members, four of whom
are “independent” under SEC and Nasdaq rules. Our board of directors is divided into three classes with only one class of
directors being elected in each year and each class serving a three-year term. We may not hold an annual general meeting until after
we consummate our initial business combination.