10-K
1
f10k2020_petraacquisition.htm
ANNUAL REPORT
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For
the year ended December 31, 2020
Commission
File Number 001-39603
PETRA
ACQUISITION INC.
(Exact
name of registrant as specified in its charter)
(Address of principal executive offices) (zip code)
(971)
622-5800
(Issuer’s
Telephone Number, Including Area Code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common stock, par value $0.001 per share PAIC The Nasdaq Stock Market LLC
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirement for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☐ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
As
of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant’s
common stock was not publicly traded. Accordingly, there was no market value for the registrant’s common stock on such date.
As
of March 31, 2021, 9,097,689 shares of common stock, par value $0.001 per share, were issued and outstanding.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
annual report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. These forward-looking statements can be identified by the use of forward-looking
terminology, including the words “believes,” “estimates,” “anticipates,” “expects,”
“intends,” “plans,” “may,” “will,” “potential,” “projects,”
“predicts,” “continue,” or “should,” or, in each case, their negative or other variations
or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements
include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination
and any other statements that are not statements of current or historical facts. These statements are based on management’s
current expectations, but actual results may differ materially due to various factors, including, but not limited to our:
● ability to complete our initial business combination;
● pool of prospective target businesses;
● public securities’ potential liquidity and trading;
● lack of a market for our securities;
● our financial performance.
The
forward-looking statements contained in this annual report are based on our current expectations and beliefs concerning future
developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions
that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking
statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk
Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect,
actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation
to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except
as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not
be exhaustive.
By
their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances
that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance
and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate
may differ materially from those made in or suggested by the forward-looking statements contained in this annual report. In addition,
even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are
consistent with the forward-looking statements contained in this annual report, those results or developments may not be indicative
of results or developments in subsequent periods.
i
PETRA
ACQUISITION INC.
FORM
10-K
TABLE
OF CONTENTS
PART I
Item 1. Business. 1
Item 1A. Risk Factors. 11
Item 1B. Unresolved Staff Comments. 27
Item 2. Properties. 27
Item 3. Legal Proceedings. 27
Item 4. Mine Safety Disclosures. 27
PART II
Item 6. Selected Financial Data. 29
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 33
Item 8. Financial Statements and Supplementary Data. 33
Item 9A. Controls and Procedures. 33
Item 9B. Other Information.
PART III
Item 10. Directors, Executive Officers and Corporate Governance. 35
Item 11. Executive Compensation. 39
Item 14. Principal Accounting Fees and Services. 43
PART IV
Item 15. Exhibits, Financial Statement Schedules. 44
ii
PART
I
ITEM
1. BUSINESS
In
this Annual Report on Form 10-K (the “Form 10-K”), references to the “Company” and to “we,”
“us,” and “our” refer to Petra Acquisition Inc.
We
are a blank check company formed under the laws of the State of Delaware on November 20, 2019. We were formed for the purpose
of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar
business combination with one or more businesses or entities. Our efforts to identify a prospective target business will not be
limited to a particular industry or geographic location, although we intend to focus our search for target businesses in the healthcare
or a healthcare-related industry. However, we are not limited to this industry and we may pursue a business combination opportunity
in any business or industry we choose and we may pursue a company with operations or opportunities outside of the United States.
On
January 21, 2020, we issued an aggregate of 3,593,750 shares of our common stock (“founders’ shares”)
for an aggregate purchase price of $25,000, or approximately $0.007 per share, to Petra Investment Holdings, LLC (the “Sponsor).
On August 24, 2020, pursuant to amendment to the terms of the Company’s offering our sponsor agreed to cancel 1,437,500
shares, resulting in an aggregate amount of 2,156,250 founders shares outstanding.
In
May 2020, our sponsor agreed to transfer 25,000 founder shares to each of Messrs. Dobkin, Hayes, and Nicholson, our director nominees,
and in August 2020 our sponsor transferred 25,000 founder shares to director nominee, Barry Dennis. However, on September 9, 2020,
in connection with the amendment to the Company’s offering terms, each of our existing directors and nominees at the time
agreed to have the number of shares assigned to them reduced to 10,000 shares and, concurrently, the Sponsor agreed to transfer
10,000 shares to director nominee, Kimon Angelides.
On October 13, 2020, we
consummated an initial public offering (“IPO”) of 7,000,000 units (“Units”). Each Unit consists of one
share of common stock of the Company, par value $0.001 per share (“Common Stock”), and one redeemable warrant of the
Company (“Warrant”), with each Warrant entitling the holder thereof to purchase one share of Common Stock for $11.50
per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $70,000,000.
Simultaneously
with the consummation of the IPO, the Company completed the private sale of an aggregate of 3,150,000 private warrants (the “Private
Warrants”) to the Sponsor at a purchase price of $1.00 per Private Warrant, generating gross proceeds to the Company of
$3,150,000.
The
Private Warrants are identical to the units and warrants sold in the IPO, except that the Private Warrants: (i) will not be redeemable
by us and (ii) may be exercised for cash or on a cashless basis, as described in this prospectus, in each case so long as they
are held by the initial purchasers or any of their permitted transferees. If the private warrants are held by holders other than
the initial purchasers or any of their permitted transferees, the private warrants will be redeemable by us and exercisable by
the holders on the same basis as the warrants included in the units being sold in this offering. Our initial stockholders have
agreed not to transfer, assign or sell any of the private warrants and underlying securities (except to certain permitted transferees)
until after the completion of our initial business combination. Furthermore, they have agreed (A) to vote the shares in favor
of any proposed business combination, (B) not to convert any shares in connection with a stockholder vote to approve a proposed
initial business combination or sell any shares to us in a tender offer in connection with a proposed initial business combination
and (C) that the private warrants shall not participate in any liquidating distribution from our trust account upon winding up
if a business combination is not consummated. In the event of a liquidation prior to our initial business combination, the private
warrants will likely be worthless.
Additionally,
the purchasers of Private Warrants have agreed not to transfer, assign or sell any of the securities purchased in the Private
Placement, including the underlying common stock and warrants (except to certain permitted transferees), for certain periods of
time.
1
On
October 16, 2020, we consummated the sale of an additional 278,151 Units (the “Over-Allotment Option Units”) at $10.00
per Unit, generating gross proceeds of $2,781,510. Simultaneously with the closing of the sale of additional units, the Company
consummated the sale of an additional 83,446 Private Warrants at a price of $1.00 per Private Warrant, generating total proceeds
of $83,446. Following the closing of the over-allotment option and sale of additional Private Warrants, an aggregate amount of
$73,509,325 was placed in the Company’s trust account established in connection with the IPO.
In
addition, the shares of common stock of the Company (the “Founder Shares”) held by the Sponsor (prior to the
exercise of the over-allotment) included an aggregate of up to 262,500 Founder Shares subject to forfeiture by the Sponsor to
the extent that the underwriters’ over-allotment option was not exercised in full. Since the underwriters exercised the
over-allotment option in part, 192,962 Founder Shares were subject to forfeiture and were cancelled by our Sponsor on December
30, 2020.
Effecting
a Business Combination
General
We
are not presently engaged in, and we will not engage in, any substantive commercial business for an indefinite period of time.
We intend to utilize cash derived from the proceeds of our IPO and the Private Placement, our capital stock, debt or a combination
of these in effecting a business combination which has not yet been identified. Accordingly, investors in our securities are investing
without first having an opportunity to evaluate the specific merits or risks of any one or more business combinations. A business
combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital but which
desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking
a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various federal
and state securities laws. In the alternative, we may seek to consummate a business combination with a company that may be financially
unstable or in its early stages of development or growth. While we may seek to effect simultaneous business combinations with
more than one target business, we will probably have the ability, as a result of our limited resources, to effect only a single
business combination.
Sources
of Target Businesses
We
expect that our principal means of identifying potential target businesses will be through the extensive contacts and relationships
of our Sponsor, initial stockholders, officers and directors. While our officers and directors are not required to commit any
specific amount of time in identifying or performing due diligence on potential target businesses, our officers and directors
believe that the relationships they have developed over their careers and their access to our Sponsor’s contacts and resources
will generate a number of potential business combination opportunities that will warrant further investigation. We also anticipate
that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers,
venture capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial
community. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us
through calls or mailings. These sources may also introduce us to target businesses they think we may be interested in on an unsolicited
basis, since many of these sources will have read our prospectus and know what types of businesses we are targeting. Our Sponsor,
initial stockholders, officers and directors, as well as their affiliates, may also bring to our attention target business candidates
that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may
have, as well as attending trade shows or conventions. Our officers and directors must present to us all target business opportunities
that have a fair market value of at least 80% of the assets held in the trust account (excluding deferred underwriting commissions
and taxes payable on the income accrued in the trust account) at the time of the agreement to enter into the initial business
combination, subject to any pre-existing fiduciary or contractual obligations. We may also engage the services of professional
firms or other individuals that specialize in business acquisitions in which case we may pay a finder’s fee, consulting
fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction.
2
Selection
of Target Business and Structuring of a Business Combination
Subject
to the limitations that a target business have a fair market value of at least 80% of the balance in the trust account (excluding
taxes payable on the income earned on the trust account) at the time of the execution of a definitive agreement for our initial
business combination, as described below in more detail, and that we must acquire a controlling interest in the target business,
our management has virtually unrestricted flexibility in identifying and selecting a prospective target business. We have not
established any specific attributes or criteria (financial or otherwise) for prospective target businesses. In evaluating a prospective
target business, our management may consider a variety of factors, including one or more of the following:
● financial condition and results of operation;
● growth potential;
● brand recognition and potential;
● experience and skill of management and availability of additional personnel;
● capital requirements;
● competitive position;
● barriers to entry;
● stage of development of the products, processes or services;
● existing distribution and potential for expansion;
● impact of regulation on the business;
● regulatory environment of the industry;
● the target business’s compliance with U.S. Federal laws and regulations;
● costs associated with effecting the business combination;
● macro competitive dynamics in the industry within which the company competes.
These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be
based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting
a business combination consistent with our business objective. In evaluating a prospective target business, we will conduct an
extensive due diligence review which will encompass, among other things, meetings with incumbent management and inspection of
facilities, as well as review of financial and other information which is made available to us. This due diligence review will
be conducted either by our management or by unaffiliated third parties we may engage, although we have no current intention to
engage any such third parties.
3
The
time and costs required to select and evaluate a target business and to structure and complete the business combination cannot
presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of
a prospective target business with which a business combination is not ultimately completed will result in a loss to us and reduce
the amount of capital available to otherwise complete a business combination.
We
may enter into a business combination with a target business that is affiliated with any of our officers, directors or Sponsor.
However, we would only do so if (i) such transaction is approved by a majority of our disinterested independent directors and
(ii) we obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation
opinions, that the business combination is fair to our unaffiliated stockholders from a financial point of view.
Fair
Market Value of Target Business
Nasdaq
listing rules require that the target business or businesses that we acquire must collectively have a fair market value equal
to at least 80% of the balance of the funds in the trust account (excluding taxes payable on the income earned on the trust account)
at the time of the execution of a definitive agreement for our initial business combination, although we may acquire a target
business whose fair market value significantly exceeds 80% of the trust account balance.
We
currently anticipate structuring a business combination to acquire 100% of the equity interests or assets of the target business
or businesses. We may, however, structure our initial business combination where we merge directly with the target business or
where we acquire less than 100% of such interests or assets of the target business in order to meet certain objectives of the
target management team or shareholders or for other reasons, 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 it not to be required to register as an investment company under the Investment Company Act. Even if
the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior
to the business combination may collectively own a minority interest in the post-transaction 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 in exchange for all of the outstanding capital stock of a target. In this case, we could
acquire a 100% controlling interest in the target; however, as a result of the issuance of a substantial number of new shares,
our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares
subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses
are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired
is what will be valued for purposes of the 80% of trust account balance test. Notwithstanding the foregoing, if we are not then
listed on Nasdaq for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.
In
order to consummate such an acquisition, we may issue a significant amount of our debt or equity securities to the sellers of
such businesses and/or seek to raise additional funds through a private offering of debt or equity securities. Since we have no
specific business combination under consideration, we have not entered into any such fund raising arrangement and have no current
intention of doing so. The fair market value of the target will be determined by our board of directors based upon one or more
standards generally accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book value).
The proxy solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide
public stockholders with our analysis of the fair market value of the target business, as well as the basis for our determinations.
If our board is not able to independently determine that the target business has a sufficient fair market value, we will obtain
an opinion from an unaffiliated, independent investment banking firm, or another independent entity that commonly renders valuation
opinions, with respect to the satisfaction of such criteria.
4
We
will not be required to obtain an opinion from an investment banking firm as to the fair market value if our board of directors
independently determines that the target business complies with the 80% threshold.
Lack
of Business Diversification
We
may seek to effect a business combination with more than one target business, and there is no required minimum valuation standard
for any single target at the time of such acquisition. We expect to complete only a single business combination, although this
process may entail the simultaneous acquisitions of several operating businesses. Therefore, at least initially, the prospects
for our success may be entirely dependent upon the future performance of a single business operation. Unlike other entities which
may have the resources to complete several business combinations of entities operating in multiple industries or multiple areas
of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from the possible
spreading of risks or offsetting of losses. By consummating a business combination with only a single entity, our lack of diversification
may:
If
we determine to simultaneously acquire several businesses and such businesses 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 acquisitions,
which may make it more difficult for us, and delay our ability, to complete the business combination. With multiple acquisitions,
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.
Limited
Ability to Evaluate the Target Business’ Management
Although
we intend to scrutinize the management of a prospective target business when evaluating the desirability of effecting a business
combination, we cannot assure you that our assessment of the target business’ management will prove to be correct. In addition,
we cannot assure you that the future management will have the necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of our officers and directors, if any, in the target business following a business combination
cannot presently be stated with any certainty. While it is possible that some of our key personnel will remain associated in senior
management or advisory positions with us following a business combination, it is unlikely that they will devote their full time
efforts to our affairs subsequent to a business combination. Moreover, they would only be able to remain with the company after
the consummation of a business combination if they are able to negotiate employment or consulting agreements in connection with
the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and
could provide for them to receive compensation in the form of cash payments and/or our securities for services they would render
to the company after the consummation of the business combination. While the personal and financial interests of our key personnel
may influence their motivation in identifying and selecting a target business, their ability to remain with the company after
the consummation of a business combination will not be the determining factor in our decision as to whether or not we will proceed
with any potential business combination. Additionally, we cannot assure you that our officers and directors will have significant
experience or knowledge relating to the operations of the particular target business.
Following
a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business.
We cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers we do
recruit will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
5
Stockholders
May Not Have the Ability to Approve an Initial Business Combination
In
connection with any proposed business combination, we will either (1) seek stockholder approval of our initial business combination
at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for
or against the proposed business combination or don’t vote at all, into their pro rata share of the aggregate amount then
on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares
to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share
of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described
herein. If we determine to engage in a tender offer, such tender offer will be structured so that each stockholder may tender
all of his, her or its shares rather than some pro rata portion of his, her or its shares. 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. Unlike other blank check companies
which require stockholder votes and conduct proxy solicitations in conjunction with their initial business combinations and related
conversions of public shares for cash upon consummation of such initial business combination even when a vote is not required
by law, we will have the flexibility to avoid such stockholder vote and allow our stockholders to sell their shares pursuant to
Rule 13e-4 and Regulation 14E of the Exchange Act which regulate issuer tender offers. In that case, we will file tender
offer documents with the SEC which will contain substantially the same financial and other information about the initial business
combination as is required under the SEC’s proxy rules. We will consummate our initial business combination only if we have
net tangible assets of at least $5,000,001 upon such consummation and, if we seek stockholder approval, a majority of the outstanding
shares of common stock voted are voted in favor of the business combination.
We
chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under
the Securities Act of 1933, as amended. However, if we seek to consummate an initial business combination with a target business
that imposes any type of working capital closing condition or requires us to have a minimum amount of funds available from the
trust account upon consummation of such initial business combination, we may need to have more than $5,000,001 in net tangible
assets upon consummation and this may force us to seek third party financing which may not be available on terms acceptable to
us or at all. As a result, we may not be able to consummate such initial business combination and we may not be able to locate
another suitable target within the applicable time period, if at all.
Our
Sponsor, initial stockholders, officers and directors have agreed (1) to vote any shares of common stock owned by them in favor
of any proposed business combination, (2) not to convert any shares of common stock in connection with a stockholder vote to approve
a proposed initial business combination and (3) not sell any shares of common stock in any tender in connection with a proposed
initial business combination.
If
we hold a meeting to approve a proposed business combination and a significant number of stockholders vote, or indicate an intention
to vote, against such proposed business combination, our officers, directors, Sponsor, initial stockholders or their affiliates
could make purchases of our securities in the open market or in private transactions in order to influence the vote. Notwithstanding
the foregoing, our officers, directors, Sponsor, initial stockholders and their affiliates will not make purchases of shares of
common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to
stop potential manipulation of a company’s stock.
Conversion
Rights
At
any meeting called to approve an initial business combination, public stockholders may seek to convert their shares, regardless
of whether they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the
aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business
combination, less any taxes then due but not yet paid. Alternatively, we may provide our public stockholders with the opportunity
to sell their shares of our common stock to us through a tender offer (and thereby avoid the need for a stockholder vote) for
an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, less any taxes then due
but not yet paid.
6
Our
sponsor, initial stockholders and our officers and directors will not have conversion rights with respect to any shares of common
stock owned by them, directly or indirectly, whether acquired prior to this offering or purchased by them in this offering or
in the aftermarket.
We
may require public stockholders, whether they are a record holder or hold their shares in “street name,” to either
(i) tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically
using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case
prior to a date set forth in the proxy materials sent in connection with the proposal to approve the business combination.
There
is a nominal cost associated with the above-referenced delivery process and the act of certificating the shares or delivering
them through the DWAC System. The transfer agent will typically charge the tendering broker $45.00 and it would be up to the broker
whether or not to pass this cost on to the holder. However, this fee would be incurred regardless of whether or not we require
holders seeking to exercise conversion rights. The need to deliver shares is a requirement of exercising conversion rights regardless
of the timing of when such delivery must be effectuated. However, in the event we require stockholders seeking to exercise conversion
rights prior to the consummation of the proposed business combination and the proposed business combination is not consummated
this may result in an increased cost to stockholders.
Any
proxy solicitation materials we furnish to stockholders in connection with a vote for any proposed business combination will indicate
whether we are requiring stockholders to satisfy such certification and delivery requirements. Accordingly, a stockholder would
have from the time the stockholder received our proxy statement up until the vote on the proposal to approve the business combination
to deliver his shares if he wishes to seek to exercise his conversion rights. This time period varies depending on the specific
facts of each transaction. However, as the delivery process can be accomplished by the stockholder, whether or not he is a record
holder or his shares are held in “street name,” in a matter of hours by simply contacting the transfer agent or his
broker and requesting delivery of his shares through the DWAC System, we believe this time period is sufficient for an average
investor. However, we cannot assure you of this fact. Please see the risk factor titled “In connection with any stockholder
meeting called to approve a proposed initial business combination, we may require stockholders who wish to convert their shares
in connection with a proposed business combination to comply with specific requirements for conversion that may make it more difficult
for them to exercise their conversion rights prior to the deadline for exercising their rights” for further information
on the risks of failing to comply with these requirements.
The
foregoing is different from the procedures historically used by some blank check companies. Traditionally, in order to perfect
conversion rights in connection with a blank check company’s business combination, the company would distribute proxy materials
for the stockholders’ vote on an initial business combination, and a holder could simply vote against a proposed business
combination and check a box on the proxy card indicating such holder was seeking to exercise his conversion rights. After the
business combination was approved, the company would contact such stockholder to arrange for him to deliver his certificate to
verify ownership. As a result, the stockholder then had an “option window” after the consummation of the business
combination during which he could monitor the price of the company’s stock in the market. If the price rose above the conversion
price, he could sell his shares in the open market before actually delivering his shares to the company for cancellation. As a
result, the conversion rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become
a “continuing” right surviving past the consummation of the business combination until the holder delivered its certificate.
The requirement for physical or electronic delivery prior to the meeting ensures that a holder’s election to convert his
shares is irrevocable once the business combination is approved.
Any
request to convert such shares once made, may be withdrawn at any time up to the vote on the proposed business combination or
the expiration of the tender offer. Furthermore, if a holder of a public share of common stock delivered his certificate in connection
with an election of their conversion and subsequently decides prior to the applicable date not to elect to exercise such rights,
he may simply request that the transfer agent return the certificate (physically or electronically).
If
the initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise
their conversion rights would not be entitled to convert their shares for the applicable pro rata share of the trust account as
of two business days prior to the consummation of the initial business combination. In such case, we will promptly return any
shares delivered by public holders.
7
Liquidation
if No Business Combination
Our
amended and restated certificate of incorporation provides that we will have only until October 13, 2021, to complete an initial
business combination. If we have not completed an initial business combination by such date, we will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter,
redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on
deposit in the trust account, including any interest not previously released to us but net of taxes payable, 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 the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
Our
Sponsor, initial stockholders, officers and directors have agreed that they will not propose any amendment to our amended and
restated certificate of incorporation that would affect our public stockholders’ ability to convert or sell their shares
to us in connection with a business combination as described herein or affect the substance or timing of our obligation to redeem
100% of our public shares if we do not complete a business combination by October 13, 2021 unless we provide our public stockholders
with the opportunity to convert their shares of common stock upon such approval at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the trust account, including interest not previously released to us but net of franchise
and income taxes payable, divided by the number of then outstanding public shares. This redemption right shall apply in the event
of the approval of any such amendment, whether proposed by our Sponsor, initial stockholders, executive officers, directors or
any other person.
Under
the Delaware General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the
extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public
stockholders upon the redemption of 100% of our outstanding public shares in the event we do not complete our initial business
combination within the required time period may be considered a liquidation distribution under Delaware law. If the corporation
complies with certain procedures set forth in Section 280 of the Delaware General Corporation Law intended to ensure that it makes
reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims
can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional
150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with
respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the
amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the
dissolution.
Furthermore,
if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public
shares in the event we do not complete our initial business combination within the required time period is not considered a liquidation
distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the
Delaware General Corporation Law, the statute of limitations for claims of creditors could then be six years after the unlawful
redemption distribution, instead of three years, as in the case of a liquidation distribution. If we are unable to complete a
business combination within the prescribed time frame, 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 100% of the outstanding public
shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including
any interest but net of franchise and income taxes payable, 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 the case of (ii)
and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 12th month,
and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any
claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond
the third anniversary of such date.
8
Because
we will not be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation
Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and
pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a
blank check company, rather than an operating company, and our operations will be limited to searching for prospective target
businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or
prospective target businesses.
We
are required to seek to have all third parties (including any vendors or other entities we engage after this offering) and any
prospective target businesses enter into agreements with us waiving any right, title, interest or claim of any kind they may have
in or to any monies held in the trust account. As a result, the claims that could be made against us will be limited, thereby
lessening the likelihood that any claim would result in any liability extending to the trust. We therefore believe that any necessary
provision for creditors will be reduced and should not have a significant impact on our ability to distribute the funds in the
trust account to our public stockholders. Nevertheless, dbbmckennon, our independent registered public accounting firm,
and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in the trust
account. Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses will execute
such agreements. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse against
the trust account. Our sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced
below $10.10 per share 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, but we cannot assure you that it will be able to satisfy its indemnification
obligations if it is required to do so. We have not asked our sponsor to reserve for such indemnification obligations, nor have
we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s
only assets are securities of our company. Therefore, we believe it is unlikely that our sponsor will be able to satisfy its indemnification
obligations if it is required to do so. Additionally, the agreement our sponsor entered into specifically provides for two exceptions
to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor
or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may have in
or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of this offering
against certain liabilities, including liabilities under the Securities Act. As a result, if we liquidate, the per-share distribution
from the trust account could be less than $10.10 due to claims or potential claims of creditors. We will distribute to all of
our public stockholders, in proportion to their respective equity interests, an aggregate sum equal to the amount in the trust
account, inclusive of any interest (subject to our obligations under Delaware law to provide for claims of creditors as described
below).
We
anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after such date and anticipate
it will take no more than 10 business days to effectuate such distribution. The holders of the founders’ shares and private
shares have waived their rights to participate in any liquidation distribution from the trust account with respect to such shares.
There will be no distribution from the trust account with respect to our warrants, which will expire worthless. We will pay the
costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are insufficient, our
Sponsor has contractually agreed to advance us the funds necessary to complete such liquidation (currently anticipated to be no
more than approximately $15,000) and has contractually agreed not to seek repayment for such expenses.
If
we are unable to complete an initial business combination and expend all of the net proceeds of the IPO, other than the proceeds
deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the initial per-share redemption
price would be $10.10. The proceeds deposited in the trust account could, however, become subject to claims of our creditors that
are in preference to the claims of public stockholders.
Our
public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete a business
combination within the required time period, if the stockholders seek to have us convert or purchase their respective shares upon
a business combination which is actually completed by us or upon certain amendments to our amended and restated certificate of
incorporation prior to consummating an initial business combination. In no other circumstances shall a stockholder have any right
or interest of any kind to or in the trust account.
If
we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds
held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject
to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete
the trust account, we cannot assure you we will be able to return to our public stockholders at least $10.00 per share.
9
If
we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions
received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential
transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received
by our stockholders. Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders
promptly after October 13, 2021, this may be viewed or interpreted as giving preference to our public stockholders over any potential
creditors with respect to access to or distributions from our assets. Furthermore, our board may be viewed as having breached
their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims
of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot
assure you that claims will not be brought against us for these reasons.
Competition
We
may encounter intense competition from other entities having a business objective similar to ours when identifying, evaluating
and selecting a target business. Many of these entities are well established and have extensive experience identifying and effecting
business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources
than us and our financial resources will be relatively limited when contrasted with those of many of these competitors. While
we believe there may be numerous potential target businesses that we could acquire with the net proceeds of this offering, our
ability to compete in acquiring certain sizable target businesses may be limited by our available financial resources. This inherent
limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash
to our public stockholders who exercise their redemption rights may reduce the resources available to us for an initial business
combination. In addition, the number of our outstanding warrants, and the future dilution they potentially represent, may not
be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully
negotiating an initial business combination.
If
we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the
target business. We cannot assure you that, subsequent to a business combination, we will have the resources or ability to compete
effectively.
Employees
We
currently have two executive officers. These individuals are not obligated to devote any specific number of hours to our affairs
but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business
combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected
for our initial business combination and the stage of the business combination process we are in. We do not intend to have any