10-K
1
f10k2020_bullhornhold.htm
ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal
year ended December 31, 2020
☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition
period from to
Commission file
number: 001-39669
BULL HORN HOLDINGS
CORP.
(Exact name of
registrant as specified in its charter)
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number,
including area code: (305) 671-3341
Securities registered pursuant to Section 12(b)
of the Act:
Ordinary Shares, par value $0.0001 per share BHSE 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 Section 15(d) of the Exchange Act. Yes ☐
No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer, “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
The registrant’s shares were not
listed on any exchange and had no value as of the last business day of the second fiscal quarter of 2020. The registrant’s
units begin trading on The Nasdaq Capital Market on October 30, 2020 and the registrant’s ordinary shares and warrants began
trading on The Nasdaq Capital Market on December 17, 2020. The aggregate market value of the units outstanding, other than shares
held by persons who may be deemed affiliates of the registrant, computed by reference to the closing price for the units on December
31, 2020, as reported on The Nasdaq Capital Market was $85,350,000.
As of March 30, 2021, there were 9,375,000 ordinary
shares, par value $0.0001 per share, of the registrant issued and outstanding.
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 1
Item 1A. Risk Factors 15
Item 1B. Unresolved Staff Comments 15
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Mine Safety Disclosures 15
PART II
Item 6. Selected Financial Data 17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 19
Item 8. Financial Statements and Supplementary Data 19
Item 9A. Controls and Procedure 20
Item 9B. Other Information 20
PART III
Item 10. Directors, Executive Officers and Corporate Governance 21
Item 11. Executive Compensation 25
Item 14. Principal Accounting Fees and Services 28
PART IV
Item 15. Exhibits and Financial Statement Schedules 29
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This 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
of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended
(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;
● our pool of prospective target businesses;
● our public securities’ potential liquidity and trading;
● the lack of a market for our securities;
● our financial performance.
The forward-looking
statements contained in this report are based on our current expectations and beliefs concerning future developments and their
potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results
or performance to be materially different from those expressed or implied by these forward-looking statements. 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.
ii
Certain Terms Used In This Report
Unless otherwise stated in this Annual
Report on Form 10-K, references to:
● “BVI” refer to the British Virgin Islands;
● “management” or “management team” refer to our officers and directors;
● “ordinary shares” refer to the ordinary shares of no par value in the company;
iii
PART I
Item 1. Business
Overview
We are blank check
company formed for the purpose of effecting an initial business combination. Since our initial public offering, we have focused
our search for an initial business combination on businesses that may provide significant opportunities for attractive investor
returns.
Initial Public Offering and Concurrent
Private Placement
On November 3, 2020,
we consummated our initial public offering of 7,500,000 units (the “units”). Each unit consists of one ordinary
share of our company, and one redeemable warrant of our company, with each whole warrant entitling the holder thereof to purchase
one-half of one ordinary share for $11.50 per whole share. The units were sold at a price of $10.00 per unit, generating gross
proceeds to our company of $75,000,000.
Simultaneously with
the closing of the initial public offering, we completed the private sale of an aggregate of 3,750,000 private warrants to our
sponsor and the underwriters of the initial public offering at a purchase price of $1.00 per private warrant, generating gross
proceeds of $3,750,000. Effective December 10, 2020, by agreement between our sponsor and the underwriters, an aggregate of 375,000
private warrants were assigned by the underwriters to our sponsor.
A total of $75,750,000,
comprised of $72,000,000 of the proceeds from the initial public offering and $3,750,000 of the proceeds of the sale of the private
warrants, was placed in a U.S.-based trust account at Morgan Stanley, N.A. (the “trust account”) maintained by Continental
Stock Transfer & Trust Company, acting as trustee.
It is the job of our
sponsor and management team to complete our initial business combination. Our management team is led by Robert Striar, our Chief
Executive Officer and a Director, and Christopher Calise, our Chief Financial Officer and a director, who have many years of experience
in the sports, entertainment, financial and insurance industries. We must complete our initial business combination by May 3,
2022, 18 months from the closing of initial public offering. If our initial business combination is not consummated by May
3, 2022, then our existence will terminate, and we will distribute all amounts in the trust account.
Our Business
While our efforts
to identify a prospective target business will not necessarily be limited to a particular industry, sector or region, since our
initial public offering, we have capitalized on the expertise of our management team in the sports (including sports franchises
or assets related to sports franchises, and sports technology), entertainment and brands sectors. Our business combination focus
is on leading sports, entertainment and brand companies that have potential for brand and commercial growth.
Our objective is to
generate attractive returns and create value for our shareholders by applying our strategy of identifying opportunities and capitalizing
on the experience of our management team to acquire and manage a business that can benefit from our management team’s global
experience with teams, leagues, brands and investments. Our approach is focused on industries or sectors in which our management
team has considerable knowledge and emphasizes downside protection and the preservation of capital by opportunistically pursuing
transactions where we believe we have the ability to make an economic impact that drives revenue growth.
Business Strategy
Professional sports
leagues and teams and their brands are widely recognized with an economic reach that goes far beyond the field and city of play.
For example, in the United States, the National Football League, the National Hockey League, the National Basketball League, Major
League Baseball and Major League Soccer, and their teams, have been transformed into economic platforms by implementing business
practices and operations to optimize profit across a variety of platforms. Professional teams have established comprehensive commercial
practices for strategy, marketing, branding, licensing and sponsorship and have diversified the revenue streams to include real
estate and content development, in addition to the more traditional revenue streams like advertising dollars, sponsorship revenues,
royalties, ticket sales and endorsements. Additionally, league organizations have created structured, rule-driven platforms
to ensure compliance with best practices and the maintenance of league brand value. This ability to manage a professional sports
team as a business has taken sports teams and brands from localized support to global fandoms with worldwide revenue bases, and
has in turn made sports properties very low risk, secure asset classes that should accrete in value, regardless of the on-field success
of the sports franchise.
In addition to changes
in revenue streams and marketing and licensing practices, the sports media landscape is evolving in the way in which sports content
is created and consumed. New distribution channels, including free-to-air broadcasters, digital channels with native content,
unofficial live streams and pure OTT offerings, are increasing their reach positioning the media space for further disruption.
Further, new types of sports content including live video content, fan-generated content, sponsor-generated content
and digital audio content has transformed the way the public interacts with sports franchises. This proliferation of new consumption
channels and content offers high-growth opportunities. Additionally, the global e-sports market has grown, and is expecting
to generate a revenue of $1.5 billion in 2020. This, along with newly legalized betting markets across the States, has brought
large new audiences to the sports media markets, and has created opportunities for new marketing and broadcasting revenue streams.
Team management and
success in Europe and North America are varied among the leagues with diverse levels of development in commercial practices. For
example, the market for sports media and digital rights in America has grown more significantly than in Europe. As more teams
understand the necessity of building global brands in order to compete for revenue and brand recognition across fan bases, advanced
departments, experiences and expertise are required to enhance visibility and profitability. We believe that our management team
can provide this.
With a process focused
on commercial success and profit both on and off the field, our management team has experience developing marketing and licensing
programs for teams, brands and other sports or entertainment companies that extend such company’s brand and economics. Our
team brings specific managerial and brand experience in assisting teams in achieving their global business goals. Our management
team’s sector expertise centers around Mr. Striar, who has advised sports federations, leagues, teams and commercial
partners on how to elevate their brands, manage business units and improve the areas of strategy, marketing and revenue. He has
directly worked on five CONCACAF Gold Cups, the development of the CONCACAF Champions League and certain teams therein, the NHL
Winter Classic, NHL China and the World Cup of Hockey. Mr. Striar’s work has merged the strategic goals of the sports
business with the execution of comprehensive programs that have driven sponsorship, ticket sales, attendance and licensing.
Our investment thesis
and competitive edge is grounded in the following three pillars:
Our acquisition and
value creation strategy is identifying, acquiring and, after our initial business combination, building a company in the public
market. We are seeking a company in the sports and entertainment industries that complements the experience and operational expertise
of our management team and is a business that we think our management team’s experience and operational expertise can help
improve. Our selection process leverages our team’s network of industry relationships, managerial expertise, private banking
and investment opportunities and unique industry specific expertise which we believe should provide us with a number of business
combination opportunities.
In addition, we utilize
the established global relationships and industry experience of our directors in seeking an initial business combination. Over
the course of their careers, the members of our management team and board of directors have developed a broad network of contacts
and corporate relationships that we believe will serve as a useful source of acquisition opportunities.
This group has experience
in:
● Managing global brands and sports entities;
● Identifying, mentoring and recruiting world-class talent.
Acquisition Criteria
Consistent with this
strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective
target businesses. We use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into
our initial business combination with a target business that does not meet any of these criteria and guidelines.
We are seeking to
acquire companies, brands and/or teams that we believe meet certain of the following criteria:
● Enterprise values of between $300 million and $900 million;
● Have attractive growth prospects;
● Have a competitive advantage;
● Have an identifiable revenue of over $100 million;
● Exhibit industry leadership;
● Demonstrate attractive valuation;
● Demonstrate potential for free cash flow generation; and
● Have secondary potential revenue streams.
These criteria are
not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based,
to the extent relevant, on these general guidelines, as well as other considerations, factors and criteria deemed relevant by
our management in effecting our initial business combination consistent with our business objectives. In the event that we decide
to enter into our initial business combination with a target business that only meets some but not all of the above criteria and
guidelines, we will disclose that the target business does not meet the above criteria in our shareholder communications related
to our initial business combination, which, as discussed in this report, would be in the form of tender offer documents or proxy
solicitation materials that we would file with the SEC.
Sourcing of Potential Initial Business
Combination Targets
While we have not
yet identified any acquisition candidates, we believe based on our management’s business knowledge and past experience that
there are numerous acquisition candidates available. Target business candidates are 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 are brought to our attention by such unaffiliated sources
as a result of being solicited by us through calls or mailings that did not commence until after the completion of our initial
public offering. These sources introduce us to target businesses they think we may be interested in on an unsolicited basis, since
many of these sources will have read the prospectus of our initial public offering and know what types of businesses we are targeting.
Our officers and directors,
as well as their respective 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. While we have not and do not anticipate engaging the services of professional firms or other individuals that
specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which
event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation
based on the terms of the transaction. In no event, however, will any of our existing officers, directors, or any entity with
which they are affiliated, be paid any finder’s fee, consulting fee or other compensation prior to, or for any services
they render in order to effectuate, the consummation of a business combination (regardless of the type of transaction).
We are not prohibited
from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors, or completing
the business combination through a joint venture or other form of shared ownership with our sponsor, officers or directors. In
the event we seek to complete our initial business combination with a target that is affiliated with our sponsor, officers or
directors, we, or a committee of independent directors, would obtain an opinion from an independent accounting firm, or independent
investment banking firm that our initial business combination is fair to our company from a financial point of view. We are not
required to obtain such an opinion in any other context. Additionally, pursuant to Nasdaq rules, any initial business combination
must be approved by a majority of our independent directors.
If any of our officers
or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which
he or she has then-existing fiduciary or contractual obligations, he or she may be required to present such business combination
opportunity to such entity prior to presenting such business combination opportunity to us.
Our officers have
agreed not to become involved with another publicly listed blank check company with a class of securities registered under the
Exchange Act prior to us announcing an agreement to acquire our initial business combination, or the expiration of the period
for us to announce and/or complete our initial business combination.
Status as a Publicly Listed Company
We believe our structure
as a public company makes us an attractive business combination partner to prospective target businesses. As a publicly listed
company, we offer a target business an alternative to the traditional initial public offering. We believe that target businesses
will favor this alternative, which we believe is less expensive, while offering greater certainty of execution than the traditional
initial public offering. During an initial public offering, there are typically expenses incurred in marketing, which would be
costlier than a business combination with us. Furthermore, once a proposed business combination is approved by our shareholders
(if applicable) and the transaction is consummated, the target business will have effectively become public, whereas an initial
public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions
that could prevent the offering from occurring. Once public, we believe the target business would have greater access to capital
and additional means of creating management incentives that are better aligned with shareholders’ interests than it would
as a private company. It can offer further benefits by augmenting a company’s profile among potential new customers and
vendors and aid in attracting talented management staffs.
Strong Financial Position and Flexibility
With a trust account
initially in the amount of $75,751,204, as of December 31, 2020, we can offer a target business a variety of options to facilitate
a business combination and fund future expansion and growth of its business. This amount assumes no redemptions, and includes
up to $2,250,000 of deferred underwriting fees, subject to adjustment as described elsewhere herein. Because we are able to consummate
a business combination using the cash proceeds from our initial public offering, our share capital, debt or a combination of the
foregoing, we have the flexibility to use an efficient structure allowing us to tailor the consideration to be paid to the target
business to address the needs of the parties. However, if a business combination requires us to use substantially all of our cash
to pay for the purchase price, we may need to arrange third party financing to help fund our business combination. Since we have
no specific business combination under consideration, we have not taken any steps to secure third party financing. Accordingly,
our flexibility in structuring a business combination may be subject to these constraints.
Effecting our initial business combination
We are not presently
engaged in, and we will not engage in, any operations until we consummate our initial business combination. We will effectuate
our initial business combination using cash from the proceeds of our initial public offering and the private placement of the
private warrants, our shares, new debt, or a combination of these, as the consideration to be paid in our initial business combination.
We may seek to consummate our initial business combination with a company or business that may be financially unstable or in its
early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses,
although we will not be permitted to effectuate our initial business combination with another blank check company or a similar
company with nominal operations.
If our initial business
combination is paid for using shares or debt securities, or not all of the funds released from the trust account are used for
payment of the purchase price in connection with our business combination or used for redemptions of purchases of our ordinary
shares, we may apply the cash released to us from the trust account that is not applied to the purchase price for general corporate
purposes, including for maintenance or expansion of operations of acquired businesses, the payment of principal or interest due
on indebtedness incurred in consummating our initial business combination, to fund the purchase of other companies or for working
capital.
We may seek to raise
additional funds through a private offering of debt or equity securities in connection with the consummation of our initial business
combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the
amounts raised in our initial public offering and held in the trust account. Subject to compliance with applicable securities
laws, we would consummate such financing only simultaneously with the consummation of our business combination. In the case of
an initial business combination funded with assets other than the trust account assets, our tender offer documents or proxy materials
disclosing the business combination would disclose the terms of the financing and, only if required by law or the rules of Nasdaq,
we would seek shareholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through
loans in connection with our initial business combination. At this time, we are not a party to any arrangement or understanding
with any third party with respect to raising any additional funds through the sale of securities or otherwise.
Selection of a Target Business and
Structuring of a Business Combination
Subject to the requirement
that, so long as our securities are listed on Nasdaq, our initial business combination must be with one or more target businesses
or assets having an aggregate fair market value of at least 80% of the value of the trust account (less any deferred underwriting
commissions and taxes payable on interest earned and less any interest earned thereon that is released to us for taxes) at the
time of the agreement to enter into such initial business combination, our management will have virtually unrestricted flexibility
in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial
business combination with another blank check company or a similar company with nominal operations. In any case, we will only
consummate an initial business combination in which we become the majority shareholder of the target (or control the target through
contractual arrangements in limited circumstances for regulatory compliance purposes as discussed below) or are otherwise not
required to register as an investment company under the Investment Company Act. To the extent we effect our initial business combination
with a company or business that may be financially unstable or in its early stages of development or growth, we may be affected
by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in
a particular target business, we may not properly ascertain or assess all significant risk factors.
In evaluating a prospective
target business, we conduct an extensive due diligence review which encompasses, 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 is conducted either by our management or by unaffiliated third parties we have engaged or may engage in the future.
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.
Fair market value of target business
or businesses
So long as our securities
are listed on Nasdaq, the target business or businesses or assets with which we effect our initial business combination must have
a collective fair market value equal to at least 80% of the value of the trust account (less any deferred underwriting commissions
and taxes payable on interest earned and less any interest earned thereon that is released to us for taxes) at the time of the
agreement to enter into such initial business combination. So long as our securities are listed on Nasdaq, if we acquire less
than 100% of one or more target businesses in our initial business combination, the aggregate fair market value of the portion
or portions we acquire must equal at least 80% of the value of the trust account (less any deferred underwriting commissions and
taxes payable on interest earned and less any interest earned thereon that is released to us for taxes) at the time of the agreement
to enter into such initial business combination. However, we will always acquire at least a controlling interest in a target business.
The fair market value of a portion of a target business or assets will likely be calculated by multiplying the fair market value
of the entire business by the percentage of the target we acquire. We may seek to consummate our initial business combination
with an initial target business or businesses with a collective fair market value in excess of the balance in the trust account.
In order to consummate such an initial business combination, we may issue a significant amount of debt, equity or other securities
to the sellers of such business and/or seek to raise additional funds through a private offering of debt, equity or other securities
(although our memorandum and articles of association will provide that we may not issue securities that can vote with ordinary
shareholders on matters related to our pre-initial business combination activity). If we issue securities in order to consummate
such an initial business combination, our shareholders could end up owning a minority of the combined company’s voting securities
as there is no requirement that our shareholders own a certain percentage of our company (or, depending on the structure of the
initial business combination, an ultimate parent company that may be formed) after our business combination. Since we have no
specific business combination under consideration, we have not entered into any such arrangement to issue our debt or equity securities
and have no current intention of doing so.
We anticipate structuring
our initial business combination to acquire 100% of the equity interest or assets of the target business or businesses. We may,
however, structure our initial business combination to acquire less than 100% of such interests or assets of the target business,
but we will only consummate such business combination if we will become the majority shareholder of the target (or control the
target through contractual arrangements in limited circumstances for regulatory compliance purposes) or are otherwise not required
to register as an “investment company” under the Investment Company Act of 1940, as amended, or the Investment Company
Act. Even though we will own a majority interest in the target, our shareholders 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
in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in
the target. However, as a result of the issuance of a substantial number of new shares, our shareholders immediately prior to
our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination.
The fair market value
of a target business or businesses or assets will be determined by our board of directors based upon standards generally accepted
by the financial community, such as actual and potential gross margins, the values of comparable businesses, earnings and cash
flow, book value and, where appropriate, upon the advice of appraisers or other professional consultants. If our board of directors
is not able to independently determine that the target business or assets has a sufficient fair market value to meet the threshold
criterion, we will obtain an opinion from an unaffiliated, independent investment banking firm or an independent accounting firm
with respect to the satisfaction of such criterion. Notwithstanding the foregoing, unless we consummate a business combination
with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm or an independent
accounting firm that the price we are paying is fair to our shareholders.
Lack of business diversification
For an indefinite
period of time after consummation of our initial business combination, the prospects for our success may depend entirely on the
future performance of a single business. Unlike other entities that have the resources to complete business combinations with
multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations
and mitigate the risks of being in a single line of business. By consummating our initial business combination with only a single
entity, our lack of diversification may:
Limited ability to evaluate the target’s
management team
Although we closely
scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business
combination with that business, our assessment of the target business’ management may not prove to be correct. The future
role of members of our management team, if any, in the target business cannot presently be stated with any certainty. Consequently,
members of our management team may not become a part of the target’s management team, and the future management may not
have the necessary skills, qualifications or abilities to manage a public company. Further, it is also not certain whether one
or more of our directors will remain associated in some capacity with us following our initial business combination. Moreover,
members of our management team may not have significant experience or knowledge relating to the operations of the particular target
business. Our key personnel may not remain in senior management or advisory positions with the combined company. The determination
as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business
combination.
Following our initial
business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business.
We may not have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge
or experience necessary to enhance the incumbent management.
Shareholders may not have the ability
to approve our initial business combination
Although we may seek
shareholder approval before we effect our initial business combination, we may not do so for business or legal reasons (so long
as such transaction does not require shareholder approval under the Companies Act or the rules of Nasdaq). Presented in the table
below is a graphic explanation of the types of initial business combinations we may consider and whether we expect shareholder
approval would be required under the Companies Act for each such transaction.
Type of Transaction Whether Shareholder Approval is Required
Purchase of assets No
Purchase of stock of target not involving a merger with the company No
Merger of target with a subsidiary of the company No
Merger of the company with a target Yes
Entering into contractual agreements with a target to obtain control No
Additionally, under
Nasdaq’s listing rules, shareholder approval would be required for our initial business combination if, for example:
We also may be required
to obtain shareholder approval if we wish to take certain actions in connection with our initial business combination such as
adopting an incentive stock plan or amending our memorandum and articles of association. So long as we obtain and maintain a listing
of our securities on Nasdaq, we will be required to comply with such rules.
Redemption rights for public shareholders
upon consummation of our initial business combination
We will provide our
public shareholders with the opportunity to redeem all or a portion their shares upon the consummation of our initial business
combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including
interest (net of taxes payable), divided by the number of then outstanding public shares, subject to the limitations described
herein. The amount in the trust account was initially $10.00 per share. The per-share amount we will distribute to investors
who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters.
Our initial shareholders have agreed to waive their right to receive liquidating distributions if we fail to consummate our initial
business combination within the requisite time period. However, if our initial shareholders or any of our officers, directors
or affiliates acquires public shares in or after our initial public offering, they will be entitled to receive liquidating distributions
with respect to such public shares if we fail to consummate our initial business combination within the required time period.
Manner of Conducting Redemptions
We provide our public
shareholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business
combination either (i) in connection with a shareholder meeting called to approve the business combination or (ii) by means of
a tender offer.
We intend to hold
a shareholder vote in connection with our business combination. In such case, we will:
● file proxy materials with the SEC.
In the event that
we seek shareholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith,
provide our public shareholders with the redemption rights described above upon consummation of the initial business combination.
If we seek shareholder
approval, we will consummate our initial business combination only if a majority of the outstanding ordinary shares voted are
voted in favor of the business combination. In such case, our initial shareholders have agreed to vote their founder shares and
any public shares purchased during or after our initial public offering in favor of our initial business combination and our officers
and directors have also agreed to vote any public shares purchased during or after our initial public offering in favor of our
initial business combination. As a result, we would need only 2,812,501 of the 7,500,000 public shares, or approximately 37.5%,
sold in our initial public offering to be voted in favor of a transaction in order to have our initial business combination approved
(assuming they do not purchase shares in the open market). Each public shareholder may elect to redeem their public shares irrespective
of whether they vote for or against the proposed transaction. In addition, our initial shareholders have agreed to waive their
redemption rights with respect to their founder shares and public shares in connection with the consummation of our initial business
combination. Furthermore, if one or more of the anchor investors hold a significant number of ordinary shares at the time of the
business combination, they could have significant influence over the outcome of our business combination process.
We will only redeem
our public shares so long as (after such redemption) our net tangible assets will be at least $5,000,001 either immediately prior
to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions. Furthermore,
the redemption threshold may be further limited by the terms and conditions of our initial business combination. If too many public
shareholders exercise their redemption rights so that we cannot satisfy the net tangible asset requirement or any net worth or
cash requirements, we would not proceed with the redemption of our public shares and the related business combination, and instead
may search for an alternate business combination.
Notwithstanding the
foregoing, if we do not decide to hold a shareholder vote in conjunction with our initial business combination for business or
other legal reasons (so long as shareholder approval is not required by the Companies Act or the rules of Nasdaq), we will conduct
redemptions pursuant to the tender offer rules of the SEC and our memorandum and articles of association. In such case, we will:
In the event we conduct
redemptions pursuant to the tender offer rules, our offer to redeem shall remain open for at least 20 business days, in accordance
with Rule 14e-1(a) under the Exchange Act.
In connection with
the successful consummation of our business combination, we will only redeem our public shares so long as (after such redemption)
our net tangible assets will be at least $5,000,001 either immediately prior to or upon the consummation of our initial business
combination. However, the redemption threshold may be further limited by the terms and conditions of our proposed initial business
combination. For example, the proposed business combination may require: (i) cash consideration to be paid to the target or members
of its management team, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii)
the allocation of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event
the aggregate cash consideration we would be required to pay for all shares that are validly tendered 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 consummate the business combination, we will not purchase any shares pursuant to the tender offer and all shares
will be returned to the holders thereof following the expiration of the tender offer. Additionally, since we are required to maintain
net tangible assets of at least $5,000,001 either immediately prior to or upon the consummation of our initial business combination
(which may be substantially higher depending on the terms of our potential business combination), the chance that the holders
of our ordinary shares electing to redeem in connection with a redemption conducted pursuant to the proxy rules will cause us
to fall below such minimum requirement is increased.
When we conduct a
tender offer to redeem our public shares upon consummation of our initial business combination, in order to comply with the tender
offer rules, the offer will be made to all of our shareholders, not just our public shareholders. Our initial shareholders have
agreed to waive their redemption rights with respect to their founder shares and public shares in connection with any such tender
offer.
Limitation on redemption rights upon
consummation of our initial business combination if we seek shareholder approval.
If we seek shareholder
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 memorandum and articles of association provides that a public shareholder, individually or together
with any affiliate of such shareholder or any other person with whom such shareholder 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 more than
an aggregate of 15% of the shares sold in our initial public offering. We believe this restriction will discourage shareholders
from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption
rights as a means to force us or our management to purchase their shares at a significant premium to the then-current market
price or on other undesirable terms. Absent this provision, a public shareholder holding more than an aggregate of 15% of the
shares sold in our initial public offering could threaten to exercise its redemption rights if such holder’s shares are
not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting
our shareholders’ ability to redeem no more than 15% of the shares sold in our initial public offering, we believe we will
limit the ability of a small group of shareholders to unreasonably attempt to block our ability to consummate our initial business
combination, particularly in connection with our initial business combination with a target that requires as a closing condition
that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our shareholders’ ability
to vote all of their shares (including all shares held by those shareholders that hold more than 15% of the shares sold in our
initial public offering) for or against our initial business combination. We will resolve any disputes relating to whether a public
shareholder is acting in concert or as a “group” either by requiring certifications under the penalty of perjury to
such effect by public shareholders or via adjudication in court.
Permitted purchases of our securities
by our affiliates
If we seek shareholder
approval of our business combination and we do not conduct redemptions in connection with our business combination pursuant to
the tender offer rules, our sponsor, directors, officers or their affiliates may purchase shares in privately negotiated transactions
or in the open market either prior to or following the consummation of our initial business combination. Such a purchase would
include a contractual acknowledgement that such shareholder, 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 sponsor, directors, officers or
their affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise
their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares.
Although very unlikely, our initial shareholders, officers, directors and their affiliates could purchase sufficient shares so
that the initial business combination may be approved without the majority vote of public shares held by non-affiliates. It is
intended that purchases will comply with Rule 10b-18 under the Exchange Act, which provides a safe harbor for purchases made
under certain conditions, including with respect to timing, pricing and volume of purchases.
The purpose of such
purchases would be to (1) increase the likelihood of obtaining shareholder approval of the business combination or (2) 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 the business combination, where it appears that such requirement would otherwise not be met. This may result in
the consummation of an initial business combination that may not otherwise have been possible.
As a consequence of
any such purchases, the public “float” of our ordinary shares may be reduced and the number of beneficial holders
of our securities may be reduced, which may make it difficult to maintain the listing or trading of our securities on a national
securities exchange following consummation of a business combination.
Tendering share certificates in connection
with a tender offer or redemption rights
We require our public
shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street
name,” to either tender their certificates to our transfer agent prior to the expiration date set forth in the tender offer
documents mailed to such holders, or in the event we distribute proxy materials, up to two business days prior to the vote on
the proposal to approve the business combination, or to deliver their shares to the transfer agent electronically using The Depository
Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. Accordingly, a public shareholder
would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two days
prior to the vote on the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes
to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for shareholders to use
electronic delivery of their public shares.
There is a nominal
cost associated with the above-referenced tendering 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 redeeming holder. However, this fee would be incurred regardless of whether or not we require
holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising
redemption rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different
from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business
combinations, many blank check companies would distribute proxy materials for the shareholders’ vote on our 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 redemption rights. After the business combination was approved, the company would contact
such shareholder to arrange for him to deliver his certificate to verify ownership. As a result, the shareholder then had an “option
window” after the consummation of the business combination during which he could monitor the price of the company’s
shares in the market. If the price rose above the redemption price, he could sell his shares in the open market before actually
delivering his shares to the company for cancellation. As a result, the redemption rights, to which shareholders were aware they
needed to commit before the shareholder meeting, would become “option” rights surviving past the consummation of the
business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery
at or prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the business combination
is approved.
Any request to redeem
such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the
shareholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered its
certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect
to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically).
It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed
promptly after the completion of our initial business combination.
If the initial business
combination is not approved or completed for any reason, then our public shareholders who elected to exercise their redemption
rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will
promptly return any certificates delivered by public holders who elected to redeem their shares.
If our initial proposed
business combination is not consummated, we may continue to try to consummate our initial business combination with a different
target until 18 months from the closing of our initial public offering.