ITEM 1A. RISK FACTORS
Summary of Risk Factors
An investment in our securities
involves a high degree of risk. The occurrence of one or more of the events or circumstances described in the section titled “Risk
Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition
and operating results. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.
Such risks include, but are not limited to:
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Risks Relating to Our Search For, Consummation
of, or Inability to Consummate, a Business Combination
We may not be able to complete the Business
Combination pursuant to the Merger Agreement. If we are unable to do so, we will incur substantial costs associated with withdrawing from
the transaction and may not be able to find additional sources of financing to cover those costs.
In connection with the Merger
Agreement, we have incurred substantial costs researching, planning and negotiating the transaction. These costs include, but are not
limited to, costs associated with securing sources of financing, costs associated with employing and retaining third-party advisors who
performed the financial, auditing and legal services required to complete the transaction, and the expenses generated by our officers,
executives, and employees in connection with the transaction. If, for whatever reason, the transactions contemplated by the Merger Agreement
fail to close, we will be responsible for these costs, but will have no source of revenue with which to pay them. We may need to obtain
additional sources of financing in order to meet our obligations, which we may not be able to secure on the same terms as our existing
financing or at all. If we are unable to secure new sources of financing and do not have sufficient funds to meet our obligations, we
will be forced to cease operations and liquidate the trust account.
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As the number of special purpose acquisition
companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive target
businesses. This could increase the cost of our initial business combination and could even result in our inability to find a suitable
target business or to consummate an initial business combination.
In recent years, the number
of special purpose acquisition companies that have been formed has increased substantially. Many potential target businesses for blank
check companies have already entered into an initial business combination, and there are still many blank check companies preparing and
seeking target businesses for an initial public offering, as well as many such companies currently in registration. As a result, at times,
fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target
and to consummate an initial business combination.
In addition, because there
are more blank check companies seeking to enter into an initial business combination with available targets businesses, the competition
for available target businesses with attractive fundamentals or business models may increase, which could cause targets businesses to
demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns,
geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate target businesses
post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate
an initial business combination, and may result in our inability to consummate an initial business combination on terms favorable to our
investors altogether.
Changes in the market for directors and officers
liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination.
In recent months, the market
for directors and officers liability insurance for blank check companies has changed in ways adverse to us and our officers and directors.
Fewer insurance companies are offering quotes for directors and officers liability coverage, the premiums charged for such policies have
generally increased and the terms of such policies have generally become less favorable. These trends may continue into the future.
The increased cost and decreased
availability of directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and consummate
an initial business combination. In order to obtain directors and officers liability insurance or modify its coverage as a result of becoming
a public company, the post-business combination entity might need to incur greater expense, accept less favorable terms or both. However,
any failure to obtain adequate directors and officers liability insurance could have an adverse impact on the post business combination’s
ability to attract and retain qualified officers and directors.
In addition, even after we
were to complete an initial business combination, our directors and officers could still be subject to potential liability from claims
arising from conduct alleged to have occurred prior to the initial business combination. As a result, in order to protect our directors
and officers, the post-business combination entity may need to purchase additional insurance with respect to any such claims (“run-off
insurance”). The need for run off insurance would be an added expense for the post-business combination entity, and could interfere
with or frustrate our ability to consummate an initial business combination on terms favorable to our stockholders.
We may issue our shares to investors in connection
with our initial business combination at a price that is less than the prevailing market price of our shares at that time.
In connection with our initial
business combination, we may issue shares to investors in private placement transactions (so-called PIPE transactions) at a price of $10.00
per share or which approximates the per-share amounts in our trust account at such time, which is generally approximately $10.10. The
purpose of such issuances will be to enable us to provide sufficient liquidity to the post-business combination entity. The price of the
shares we issue may therefore be less, and potentially significantly less, than the market price for our shares at such time.
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Our public stockholders may not be afforded
an opportunity to vote on our proposed initial business combination, and even if we hold a vote, holders of our founder shares will participate
in such vote, which means we may complete our initial business combination even though a majority of our public stockholders do not support
such a combination.
We may not hold a stockholder
vote to approve our initial business combination unless the business combination would require stockholder approval under applicable state
law or the rules of Nasdaq or if we decide to hold a stockholder vote for business or other reasons. For instance, the Nasdaq rules currently
allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we
were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore,
if we were structuring a business combination that required us to issue more than 20% of our outstanding shares, we would seek stockholder
approval of such business combination. However, except for as required by law, the decision as to whether we will seek stockholder approval
of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely
in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction
would otherwise require us to seek stockholder approval. Even if we seek stockholder approval, the holders of our founder shares will
participate in the vote on such approval. Accordingly, we may consummate our initial business combination even if holders of a majority
of the outstanding shares of our common stock do not approve of the business combination we consummate. Please see the section entitled
“Proposed Business - Stockholders May Not Have the Ability to Approve Our Initial Business Combination” for additional information.
If we seek stockholder approval of our initial
business combination, our sponsor, officers and directors have agreed to vote in favor of such initial business combination, regardless
of how our public stockholders vote.
Unlike many other blank check
companies in which the initial stockholders agree to vote their founder shares in accordance with the majority of the votes cast by the
public stockholders in connection with an initial business combination, our sponsor, officers and directors have agreed to vote their
founder shares, as well as any public shares purchased during or after our initial public offering, in favor of our initial business combination.
Our sponsor, officers and directors own 88.7% of our outstanding shares of common stock. As a result, if we seek stockholder approval
of our initial business combination, it is more likely that we will received the necessary stockholder approval than would be the case
if our initial stockholders and their permitted transferees agreed to vote their founder shares in accordance with the majority of the
votes cast by the public stockholders. In addition, in the event that our board of directors amends our bylaws to reduce the number of
shares required to be present at a meeting of our stockholders, we would need even fewer public shares to be voted in favor of our initial
business combination to have such transaction approved.
Accordingly, if we seek stockholder
approval of our initial business combination, it is more likely that the necessary stockholder approval will be received than would be
the case if our initial stockholders agreed to vote their shares in accordance with the majority of the votes cast by our public stockholders.
Your only opportunity to affect the investment
decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash,
unless we seek stockholder approval of the business combination.
At the time of your investment
in us, you may not be provided with an opportunity to evaluate the specific merits or risks of one or more target businesses. Since our
board of directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right
or opportunity to vote on the business combination, unless we seek such stockholder vote. Accordingly, if we do not seek stockholder approval,
your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption
rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public
stockholders in which we describe our initial business combination.
The ability of our public stockholders to redeem
their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult
for us to enter into a business combination with a target.
We may seek to enter into
a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net
worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such
closing condition and, as a result, would not be able to proceed with the business combination. Prospective targets will be aware of these
risks and, thus, may be reluctant to enter into a business combination transaction with us.
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The ability of our public stockholders to exercise
redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or
optimize our capital structure.
At the time we enter into
an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore
will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If
our business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires
us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements,
or arrange for third party financing. In addition, if a larger number of shares is submitted for redemption than we initially expected,
we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing.
Raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable
levels. The amount of the fee payable to I-Bankers and Dawson James pursuant to the terms of the business combination marketing agreement
will not be adjusted for any shares that are redeemed in connection with an initial business combination. The above considerations may
limit our ability to complete the most desirable business combination available to us or optimize our capital structure, or may incentivize
us to structure a transaction whereby we issue shares to new investors and not to sellers of target businesses.
The ability of our public stockholders to exercise
redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would
be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our initial business combination
agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount
of cash at closing, the probability that our initial business combination would be unsuccessful is increased. If our initial business
combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If
you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade
at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment
or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open
market.
The requirement that we complete our initial
business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business
combination and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution
deadline, which could undermine our ability to complete our business combination on terms that would optimize value for our stockholders.
Any potential target business
with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination
within the combination period. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing
that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial
business combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition,
we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected
upon a more comprehensive investigation.
We may not be able to complete our initial
business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up
and we would redeem our public shares and liquidate.
We must complete our initial
business combination within the combination period. Our ability to complete our initial business combination may be negatively impacted
by general market conditions, volatility in the capital and debt markets and the other risks described herein. For example, the conflict
between Ukraine and Russia continues to grow and, while the extent of the impact of the conflict on us will depend on future developments,
it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased
market liquidity and third-party financing being unavailable on terms acceptable to us or at all. We may not be able to find a suitable
target business and complete our initial business combination within such time period. If we have not completed our initial business combination
within such time period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000
of interest to pay dissolution expenses) divided by the number of then outstanding public shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject
to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable law.
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If we seek stockholder approval of our initial
business combination, our initial stockholders, directors, executive officers, advisors and their affiliates may elect to purchase shares
from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our
common stock.
If we seek stockholder approval
of our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender
offer rules, our initial stockholders, directors, executive officers, advisors or their affiliates may purchase shares in privately negotiated
transactions or in the open market either prior to or following the completion of our initial business combination, although they are
under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record
holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event
that our initial stockholders, directors, executive officers, advisors or their affiliates purchase shares in privately negotiated transactions
from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to
revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the business
combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or to satisfy a closing
condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our
business combination, where it appears that such requirement would otherwise not be met. This may result in the completion of a business
combination that may not otherwise have been possible.
In addition, if such purchases
are made, the public “float” of our common stock and the number of beneficial holders of our securities may be reduced, possibly
making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of
our offer to redeem our public shares in connection with our business combination, or fails to comply with the procedures for tendering
its shares, such shares may not be redeemed.
We will comply with the tender
offer rules or proxy rules, as applicable, when conducting redemptions in connection with our business combination. Despite our compliance
with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become
aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will
furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that
must be complied with in order to validly tender or redeem public shares. In the event that a stockholder fails to comply with these procedures,
its shares may not be redeemed.
If we seek stockholder approval of our initial
business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders
are deemed to hold 15% or more of our common stock, you will lose the ability to redeem all such shares equal to or in excess of 15% of
our common stock.
If we seek stockholder approval
of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to
the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate
of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under
Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to an aggregate of 15% or more of the
shares sold in our initial public offering, which we refer to as the “Excess Shares.” However, we would not be restricting
our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our business combination. Your inability
to redeem the Excess Shares will reduce your influence over our ability to complete our business combination and you could suffer a material
loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions
with respect to the Excess Shares if we complete our business combination. And as a result, you will continue to hold that number of shares
equal to or exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially
at a loss.
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Because of our limited resources and the significant
competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we
are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share, on our
redemption, and our rights and warrants will expire worthless.
We expect to encounter intense
competition from other entities having a business objective similar to ours, including private investors (which may be individuals or
investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses
we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting,
directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors
possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources will be relatively
limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially
acquire with the net proceeds of our initial public offering and the sale of the private placement warrants, our ability to compete with
respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, if we are obligated
to pay cash for the shares of common stock redeemed and, in the event we seek stockholder approval of our business combination, we make
purchases of our common stock, the resources available to us for our initial business combination will potentially be reduced. Any of
these obligations may place us at a competitive disadvantage in successfully negotiating a business combination. If we are unable to complete
our initial business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust
account and our rights and warrants will expire worthless.
If the net proceeds of our initial public offering
and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate for at least
the term of the combination period, we may be unable to complete our initial business combination.
The funds available to us
outside of the trust account may not be sufficient to allow us to operate for at least the term of the combination period, assuming that
our initial business combination is not completed during that time. We believe that the funds available to us outside of the trust account
will be sufficient to allow us to operate for at least the term of the combination period; however, we cannot assure you that our estimate
is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us
with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision
(a provision in letters of intent designed to keep target businesses from “shopping” around for transactions with other companies
on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have
any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity from a target
business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient
funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to complete our initial
business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust account
and our rights and warrants will expire worthless.
If the net proceeds of our initial public offering
and the sale of the private placement warrants not being held in the trust account are insufficient, it could limit the amount available
to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from
our initial stockholders or management team to fund our search, to pay our taxes and to complete our business combination.
Of the net proceeds of our
initial public offering, the sale of the private placement warrants, and subsequent private financings, only approximately $16,204 as
of December 31, 2024 is available to us outside the trust account to fund our working capital requirements. If we are required to seek
additional capital, we would need to borrow funds from our initial stockholders, management team or other third parties to operate or
may be forced to liquidate. None of our initial stockholders, members of our management team or any of their affiliates is under any obligation
to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from
funds released to us upon completion of our initial business combination. Up to $1,500,000 of such working capital loans may be convertible
into private placement-equivalent warrants at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical
to the private placement warrants, including as to exercise price, exercisability and exercise period of the underlying warrants. We do
not expect to seek loans from parties other than our initial stockholders or an affiliate of our initial stockholders as we do not believe
third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust
account. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will
be forced to cease operations and liquidate the trust account. Consequently, our public stockholders may only receive approximately $10.10
per share on our redemption of our public shares, and our rights and warrants will expire worthless.
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We may seek acquisition opportunities in companies
that may be outside of our management’s areas of expertise.
We will consider a business
combination outside of our management’s areas of expertise if a business combination candidate is presented to us and we determine
that such candidate offers an attractive acquisition opportunity for our company. In the event we elect to pursue an acquisition outside
of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or
operation, and the information contained in this Report regarding the areas of our management’s expertise would not be relevant
to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess
all of the significant risk factors. Accordingly, any stockholders who choose to remain stockholders following our business combination
could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless
they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary
duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer materials or
proxy statement relating to the business combination contained an actionable material misstatement or material omission.
Although we have identified general criteria
and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination
with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial
business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified
general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter
into our initial business combination will not have all of these positive attributes. If we complete our initial business combination
with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business
that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target
that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may
make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain
amount of cash. In addition, if stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval
for business or other legal reasons, it may be more difficult for us to attain stockholder approval of our initial business combination
if the target business does not meet our general criteria and guidelines. If we are unable to complete our initial business combination,
our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust account and our rights and warrants
will expire worthless.
We are not required to obtain an opinion from
an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent
source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our business
combination with an affiliated entity, or our board cannot independently determine the fair market value of the target business or businesses,
we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent
accounting firm that the price we are paying for a target is fair to our company from a financial point of view. If no opinion is obtained,
our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally
accepted by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials,
as applicable, related to our initial business combination.
Resources could be wasted in researching acquisitions
that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.
If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share
on the liquidation of our trust account and our rights and warrants will expire worthless.
We anticipate that the investigation
of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments
will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to
complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be
recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business
combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs
incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable
to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation
of our trust account and our rights and warrants will expire worthless.
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We may have a limited ability to assess the
management of a prospective target business and, as a result, may effect our initial business combination with a target business whose
management may not have the skills, qualifications or abilities to manage a public company.
When evaluating the desirability
of effecting our initial business combination with a prospective target business, our ability to assess the target business’ management
may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore,
may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s
management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability
of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following
the business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such
reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of
a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that
the tender offer materials or proxy statement relating to the business combination contained an actionable material misstatement or material
omission.
The officers and directors
of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s
key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s
key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that
certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our
initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
We may engage in a business combination with
one or more target businesses that have relationships with entities that may be affiliated with our sponsor, executive officers and directors
which may raise potential conflicts of interest.
In light of the involvement
of our sponsor, executive officers and directors with other entities, we may decide to acquire one or more businesses affiliated with
our sponsor, executive officers and directors. Our directors also serve as officers and board members for other entities, including, without
limitation, those described under “Management - Conflicts of Interest.” Such entities may compete with us for business combination
opportunities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would
pursue such a transaction if we determined that such affiliated entity met our criteria for a business combination as set forth in “Proposed
Business - Effecting our initial business combination - Selection of a target business and structuring of our initial business combination”
and such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain an opinion from an independent
investment banking firm that is a member of FINRA, or from an independent accounting firm, regarding the fairness to our company from
a financial point of view of a business combination with one or more domestic or international businesses affiliated with our executive
officers or directors, potential conflicts of interest still may exist and, as a result, the terms of the business combination may not
be as advantageous to our public stockholders as they would be absent any conflicts of interest.
We will likely only be able to complete one
business combination with the proceeds of our initial public offering and the sale of the private placement warrants, which will cause
us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may
negatively impact our operations and profitability.
We may effectuate our initial
business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However,
we may not be able to effectuate our initial business combination with more than one target business because of various factors, including
the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that
present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By
completing our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic,
competitive and regulatory risks. Further, we would not be able to diversify our operations or benefit from the possible spreading of
risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different
industries or different areas of a single industry. Accordingly, the prospects for our success may be:
This lack of diversification
may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon
the particular industry in which we may operate subsequent to our initial business combination.
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We may attempt to simultaneously complete business
combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise
to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously
acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its
business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay
our ability, to complete our initial business combination. With multiple business combinations, we could also face additional risks, including
additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers)
and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies
in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results
of operations.
We may attempt to complete our initial business
combination with a private company about which little information is available, which may result in a business combination with a company
that is not as profitable as we suspected, if at all.
In pursuing our acquisition
strategy, we may seek to effectuate our initial business combination with a privately held company. By definition, very little public
information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial
business combination on the basis of limited information, which may result in a business combination with a company that is not as profitable
as we suspected, if at all.
Our management may not be able to maintain
control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control of a target
business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure our initial
business combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the
equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company
owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target
sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any
transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target,
our stockholders prior to the business combination may collectively own a minority interest in the post business combination company,
depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction
in which we issue a substantial number of new shares of common stock in exchange for all of the outstanding capital stock of a target.
In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares
of common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common
stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a
single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it
more likely that our management will not be able to maintain our control of the target business.
We may seek business combination opportunities
with a high degree of complexity that require significant operational improvements, which could delay or prevent us from achieving our
desired results.
We may seek business combination
opportunities with large, highly complex companies that we believe would benefit from operational improvements. While we intend to implement
such improvements, to the extent that our efforts are delayed or we are unable to achieve the desired improvements, the initial business
combination may not be as successful as we anticipate.
To the extent we complete
our initial business combination with a large complex business or entity with a complex operating structure, we may also be affected by
numerous risks inherent in the operations of the business with which we combine, which could delay or prevent us from implementing our
strategy. Although our management team will endeavor to evaluate the risks inherent in a particular target business and its operations,
we may not be able to properly ascertain or assess all of the significant risk factors until we complete our initial business combination.
If we are not able to achieve our desired operational improvements, or the improvements take longer to implement than anticipated, we
may not achieve the gains that we anticipate. Furthermore, some of these risks and complexities may be outside of our control and leave
us with no ability to control or reduce the chances that those risks and complexities will adversely impact a target business. Such combination
may not be as successful as a combination with a smaller, less complex organization.
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Any failure to meet the initial listing requirements of Nasdaq
could result in an inability to list our common stock and warrants on Nasdaq and the obligation to comply with the “penny stock”
rules and could affect the combined company’s cash position following the closing of an initial business combination.
Prior to March 21, 2025, our charter prevented us from redeeming public
shares to the extent that it would cause our net tangible assets to be less than $5,000,001 (the “NTA Requirement”). The NTA
Requirement has been waived by our stockholders, and our charter was amended on March 21, 2025. The initial purpose of the NTA Requirement
in the charter was to ensure that we would not be subject to the “penny stock” rules of the SEC, and to therefore not be deemed
a “blank check company” as defined under Rule 419 of the Securities Act, because it complied with the NTA Requirement.
However, if our net tangible assets less than $5,000,001 upon closing
of the business combination with Profusa, the combined company’s failure to meet the initial listing requirements of Nasdaq could
result in (i) the inability of the combined company to list the common stock and warrants on Nasdaq and (ii) the obligation to comply
with the “penny stock” trading rules.
If an initial business combination is consummated but the combined
company is not able to list its common stock and warrants on Nasdaq, such securities would likely then trade only in the over-the-counter
market and the market liquidity of such securities could be adversely affected and their market price could decrease. If the common stock
and warrants were to trade on the over-the-counter market, selling such securities could be more difficult because smaller quantities
of such securities would likely be bought and sold, transactions could be delayed, and the combined company could face significant material
adverse consequences, including: (i) a limited availability of market quotations for its securities, (ii) reduced liquidity for its securities,
(iii) a determination that the common stock are a “penny stock” which will require brokers trading in such shares to adhere
to more stringent rules, including being subject to the depository requirements of Rule 419 of the Securities Act, and possibly result
in a reduced level of trading activity in the secondary trading market for the securities, (iv) limited or no news or analyst coverage,
and (v) a decreased ability to issue additional securities or obtain additional financing in the future. These factors could result in
lower prices and larger spreads in the bid and ask prices for the common stock and/or warrants, could substantially impair the combined
company’s ability to raise additional funds, and could result in a loss of institutional investor interest and fewer development
opportunities for the combined company. However, we note that the ability to meet Nasdaq listing requirements is currently a condition
to closing the business combination with Profusa.
We do not have a specified maximum redemption
threshold. The absence of such a redemption threshold may make it possible for us to complete our initial business combination with which
a substantial majority of our stockholders do not agree.
Our amended and restated certificate
of incorporation does not provide a specified maximum redemption threshold. As a result, we may be able to complete our initial business
combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares
or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial
business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our
initial stockholders, including our officers or directors, or their advisors or their affiliates. In the event the aggregate cash consideration
we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy
cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will
not complete the business combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the
holders thereof, and we instead may search for an alternate business combination.
We may be unable to obtain additional financing
to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure
or abandon a particular business combination.
Although we believe that the
net proceeds of our initial public offering and the sale of the private placement warrants will be sufficient to allow us to complete
our initial business combination, because we have not yet identified any prospective target business we cannot ascertain the capital requirements
for any particular transaction. If the net proceeds of our initial public offering and the sale of the private placement warrants prove
to be insufficient, either because of the size of our initial business combination, the depletion of the available net proceeds in search
of a target business, the obligation to repurchase for cash a significant number of shares from stockholders who elect redemption in connection
with our initial business combination or the terms of negotiated transactions to purchase shares in connection with our initial business
combination, we may be required to seek additional financing or to abandon the proposed business combination. We cannot assure you that
such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when
needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular
business combination and seek an alternative target business candidate. In addition, even if we do not need additional financing to complete
our business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure
additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers,
directors or stockholders is required to provide any financing to us in connection with or after our business combination. If we are unable
to complete our initial business combination, our public stockholders may only receive approximately $10.10 per share on the liquidation
of our trust account, and our rights and warrants will expire worthless.
22
Because we must furnish our stockholders with
target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with
some prospective target businesses.
The federal proxy rules require
that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include historical
and/or pro forma financial statement disclosure. We will include the same financial statement disclosure in connection with our tender
offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared
in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international
financial reporting standards depending on the circumstances and the historical financial statements may be required to be audited in
accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements
may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements
in time for us to disclose such financial statements in accordance with federal proxy rules and complete our initial business combination
within the prescribed time frame.
Our securities were suspended from trading
and delisted from Nasdaq on December 27, 2024, following receipt of a delisting determination letter from Nasdaq on December 20,
2024. This could have significant material adverse consequences on us and our securities, including that it will negatively impact our
ability to complete a Business Combination, will limit investors’ ability to make transactions in our securities and could subject
us to additional trading restrictions.
We currently have up until
as late as June 22, 2025 to complete an initial business combination. Nasdaq Listing Rule 5815, which was amended effective October 7,
2024, provides for the immediate suspension and delisting upon issuance of a listing determination letter for failure to meet the requirement
in Nasdaq Listing Rule IM 5101-2(b), curtailing the ability of the Nasdaq hearings panel to give special purpose acquisition companies
(SPACs) more time to complete an initial business combination beyond 36 months. Nasdaq Listing Rule IM 5101-2(b) requires a SPAC such
as us to complete its initial business combination within 36 months of the effectiveness of its IPO registration statement, which, in
our case, was December 20, 2024.
As such, following December 20, 2024 (our 36-month anniversary), we
are no longer in compliance with Nasdaq listing rules. On December 20, 2024, we received a delisting determination letter from Nasdaq.
As a result, our securities were immediately suspended from trading and delisted from Nasdaq on December 27, 2024. Our securities are
currently traded on OTC Pink.
In addition, in connection with any initial business combination, we
would be required to demonstrate compliance with the applicable exchange’s initial listing requirements, which are more rigorous
than the continued listing requirements, in order to continue to maintain the listing of our securities. We cannot assure you that we
will be able to meet those initial listing requirements at that time, particularly if we are no longer listed on a stock exchange.
Following the suspension and delisting of our securities from Nasdaq,
we and our securities are currently facing significant material adverse consequences, including:
● reduced liquidity and demand for our securities;
● a limited amount of news and analyst coverage.
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Additionally, under the Merger
Agreement, one of the conditions to Closing is the listing by Nasdaq of the New Profusa common stock and securities and satisfaction of
initial and continued listing requirement. Following the delisting of our securities from the Nasdaq, New Profusa may face increased difficulties
and uncertainties in meeting the initial and continued listing requirement of Nasdaq, such as the requirements as to the market value
of unrestricted publicly held shares and market value of listed securities, and therefore face increased uncertainties as to its ability
to successfully consummate the Business Combination.
Risks Relating to the Post-Business Combination
Company
Subsequent to the completion of our initial
business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have
a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some
or all of your investment.
Even if we conduct extensive
due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all material issues that
may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount
of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these
factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that
could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and
previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be
non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative
market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants
to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination
debt financing. Accordingly, any stockholders who choose to remain stockholders following the business combination could suffer a reduction
in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully
claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or
if they are able to successfully bring a private claim under securities laws that the tender offer materials or proxy statement relating
to the business combination contained an actionable material misstatement or material omission.
Because we are not limited to a particular
industry or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the
merits or risks of any particular target business’ operations.
Although we expect to focus
our search for a target business on entities in the healthcare industry, we may seek to complete a business combination with an operating
company in any industry or sector. However, we are not, under our amended and restated certificate of incorporation, permitted to effectuate
our business combination with another blank check company or similar company with nominal operations. To the extent we complete our business
combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine
with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks
inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will
endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess
all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may
be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target
business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct
investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders
following the business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy
for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors
of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws
that the tender offer materials or proxy statement relating to the business combination contained an actionable material misstatement
or material omission.
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We may issue notes or other debt securities,
or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition
and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments
as of the date of this Report to issue any notes or other debt securities, or to otherwise incur outstanding debt following our initial
public offering, we may choose to incur substantial debt to complete our initial business combination. We have agreed that we will not
incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the
monies held in the trust account. As such, no issuance of debt will affect the per-share amount available for redemption from the trust
account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
● our inability to pay dividends on our common stock;
If we effect our initial business combination
with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional risks that
may negatively impact our operations.
If we effect our initial business
combination with a company with operations or opportunities outside of the United States, we would be subject to any special considerations
or risks associated with companies operating in an international setting, including any of the following:
● rules and regulations regarding currency redemption;
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● tariffs and trade barriers;
● regulations related to customs and import/export matters;
● local or regional economic policies and market conditions;