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, 2021
☐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: 001-41184
LARKSPUR
HEALTH Acquisition Corp.
(Exact
name of registrant as specified in its charter)
100 Somerset Corporate Blvd., 2nd Floor Bridgewater, New Jersey 08807
(Address of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (609)310-0722
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
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 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
2021. The registrant’s units begin trading on the Nasdaq Stock Market on December 21, 2021 and the registrant’s shares of
Class A common stock, rights, and warrants began trading on February 8, 2022.
As of April 14, 2022 there were 8,087,431 shares of Class A common
stock, par value $0.0001 per share and 1,941,790 shares of the Company’s Class B common stock, par value $0.0001 per share,
of the registrant issued and outstanding.
TABLE
OF CONTENTS
PAGE
Item 1. Business 1
Item 1A. Risk Factors 21
Item 1B. Unresolved Staff Comments 22
Item 2. Properties 22
Item 3. Legal Proceedings 22
Item 4. Mine Safety Disclosures 22
PART II
Item 6. Reserved 24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 29
Item 8. Financial Statements and Supplementary Data 29
Item 9A. Controls and Procedure 30
Item 9B. Other Information 31
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 31
PART III
Item 10. Directors, Executive Officers and Corporate Governance 32
Item 11. Executive Compensation 36
Item 14. Principal Accounting Fees and Services 40
PART IV
Item 15. Exhibits and Financial Statement Schedules 41
i
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements in this Report may constitute “forward-looking statements” for purposes of the federal securities laws. Our
forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations,
hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other
characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions may identify forward-looking statements,
but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Report
may include, for example, statements about:
● our pool of prospective target businesses in the biotechnology industry;
● our public securities’ potential liquidity and trading;
● the lack of a market for our securities;
● the trust account not being subject to claims of third parties; or
● 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. There can be no assurance that future developments affecting us will 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 section of this Report entitled “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.
Unless
otherwise stated in this Report, or the context otherwise requires, references to:
ii
● “management” or our “management team” are to our officers and directors;
iii
PART I
Item 1. Business.
General
We
are a newly-organized blank check company incorporated in March 2021, as a Delaware corporation whose business purpose is to effect
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more
businesses, which we refer to as our initial business combination. To date, our efforts have been limited to organizational activities
as well as activities related to the IPO. We have not selected any specific business combination target and we have not, nor has anyone
on our behalf, engaged in any substantive discussions, directly or indirectly, with any business combination target with respect to an
initial business combination with us.
We
seek to capitalize on the significant experience and contacts of our management team, led by Daniel J. O’Connor, in consummating
an initial business combination. Although we may pursue an initial business combination opportunity in any business, industry, sector
or geographical location, we intend to focus on companies in the biotechnology sector in the United States.
Larkspur
Health LLC was founded and is managed by Daniel J. O’Connor, our Chairman of the Board and Chief Executive Officer. Larkspur Health
LLC is capitalized by L1 Capital Global Opportunities Master Fund, Ltd., Daniel J. O’Connor, David S. Briones, S.H.N. Financial
Investments Ltd., Mitchell Schiff, Larkspur Holdings LLC, and Jeffry Bernstein.
Initial
Public Offering
On
December 23, 2021, we consummated our initial public offering of 7,500,000 units. Each unit consists of one share of Class A
common stock of the Company, par value $0.0001 per share, and three-fourths of one redeemable warrant of the Company, with each warrant
entitling the holder thereof to purchase one share of Class A common stock for $11.50 per whole share. The units were sold at a
price of $10.00 per unit, generating gross proceeds to the Company of $75,000,000.
Simultaneously
with the closing of the IPO, the Company consummated a private placement with the Sponsors of 317,600 units in the aggregate, each unit
consisting of one Class A common stock of the Company and three-fourths of one redeemable warrant, each at a purchase price of $10.00
per unit, generating gross proceeds to the Company of $3,176,000.
A
total of $75,750,000 of the proceeds from the initial public offering and sale of the placement units was placed in the trust account
maintained by maintained by Continental Stock Transfer and Trust Co., acting as trustee.
On
January 6, 2022, we issued an additional 267,159 units and 2,672 placement units in connection with the exercise of the underwriters’
over-allotment option, generating an additional $2,701,910 of gross proceeds.
It
is the job of our sponsor and management team to complete our initial business combination. Our management team is led by Daniel J. O’Connor,
our Chairman of the Board and Chief Executive Officer, and David S. Briones, our Chief Financial Officer, Treasurer, Secretary, and Director.
We must complete our initial business combination by December 23, 2022 (or by May 23, 2023 if the deadline is fully extended by the Company
by two separate three month extensions subject to satisfaction of certain conditions, including the deposit of $776,716 into the trust
account ($0.10 per unit) for each three month extension). If our initial business combination is not consummated by December 23, 2022
(or by May 23, 2023 if fully extended), then our existence will terminate, and we will distribute all amounts in the trust account.
Business
Strategy
Our
business strategy is to target, identify and complete our initial business combination with one or more companies in the biotechnology
sector in the United States. We believe the biotechnology sector represents an enormous and growing target market with a large number
of potential target acquisition opportunities.
1
Competitive
Strengths
We
intend to capitalize on the following competitive advantages in our pursuit of a target company:
Leadership
of an Experienced Management Team.
We
believe our management team provides us with a significant pipeline of opportunities from which to evaluate potential business combinations.
Our management team provides a combination of a proprietary sourcing network and deep industry, mergers and acquisition, and capital
markets expertise.
Our
management team is led by Daniel J. O’Connor, our Chairman of the Board and Chief Executive Officer and the manager of Larkspur
Health LLC. Mr. O’Connor is a founding member of the Board of Directors for Seelos Therapeutics (NASDAQ: SEEL). Mr. O’Connor was also on the Board of Trustees of BioNJ from 2015 to 2021. We believe that
Mr. O’Connor’s business acumen and experience, which demonstrate his ability to identify opportunities and enhance value,
will help facilitate our business acquisition strategy.
Our
Chief Financial Officer, Treasurer, Secretary, and Director, David S. Briones, is the founder and manager member of the Brio Financial
Group, a full-service financial consulting firm that has served over 75 companies as well as numerous banks, hedge funds, venture
capital funds, and private equity firms. Mr. Briones was previously an auditor at PricewaterhouseCoopers LLP where he specialized
in the financial services group. We believe that Mr. Briones brings a unique experience to oversee the Company’s accounting
and financial reporting matters, which will provide accurate and reliable financial and operations reporting and internal control structures
for successfully acquired domestic and international acquisition targets.
Established
Deal Sourcing Network. We believe the strong track record of our management team provides access to quality initial business
combination partners. In addition, through our management team, we believe we have contacts and sources from which to generate acquisition
opportunities and possibly seek complementary follow-on business arrangements. These contacts and sources include those in government,
private and public companies, private equity and venture capital funds, investment bankers, attorneys and accountants.
A.G.P.
is a Leading Shareholder that Brings Deal Flow and Extensive Understanding of Capital Markets and Public Market Investors. We
are supported by A.G.P. and its team of investment banking professionals, each of whom have meaningful transaction experience, including
corporate finance, mergers and acquisitions, equity and debt capital markets, strategic consulting, and operations. A.G.P. has developed
an extensive network of contacts and corporate relationships which we believe will provide us with an important source of initial business
combination opportunities. A.G.P. is a leading advisor to public company boards of directors and executives, including biotechnology
companies, on matters of public markets capital raising, corporate strategy, and M&A. We believe that the significant knowhow of
A.G.P. allows us to effectively gauge target companies that possess a readiness for being public, as well as to support their executives
in the process of going public.
Status
as a Publicly Listed Acquisition Company. We believe our structure 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
process. We believe that some target businesses favor this alternative, which we believe is less expensive, while offering greater certainty
of execution, than the traditional initial public offering process. During an initial public offering, there are typically underwriting
fees and marketing expenses, which would be costlier than a business combination with us. Furthermore, once a proposed business combination
is approved by our stockholders 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. We believe our target business would have greater access to capital and additional means
of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. This
can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented
management staffs.
2
Industry
Opportunity
While
we may acquire a business in any industry, our focus is on companies in the biotechnology sector in the United States. We believe
that our target industry is attractive for a number of reasons, including the follow:
Acquisition
Criteria
Our
primary focus is on the biotechnology industry in the United States. We believe the biotechnology sector represents an enormous
and growing target market with a large number of potential target acquisition opportunities.
Prospective
target companies will need to pass rigorous due diligence criteria, which may include, but are not limited to:
● Compelling risk/reward proposition;
● Potential market leading product;
● Addressing unmet medical need;
● Premier scientific and clinical leadership.
Our
Acquisition and Diligence Process includes:
● Reimbursement review;
● Full review of proprietary technology content and intellectual property;
3
Initial
Business Combination
Nasdaq
rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value
of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on
the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of
directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not
able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent
investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such
criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair
market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of
a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. Additionally,
pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent directors. If we are no
longer listed on Nasdaq, we would not be required to satisfy the above referenced fair market value test.
We
anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own
shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our
initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets
of the target business in order to meet certain objectives of the prior owners of the target business, the target management team or
stockholders 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 of 1940, as amended (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, shares or other equity interests 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 stockholders immediately prior to our initial business combination could own less than a majority of our issued
and 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% fair market value test. If the business combination involves more than
one target business, the 80% fair market value test will be based on the aggregate value of all of the target businesses and we will
treat the target businesses together as our initial business combination for purposes of a tender offer or for seeking stockholder approval,
as applicable.
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 cannot assure you that we will properly ascertain or assess all significant
risk factors.
4
In
evaluating a prospective target business, we conduct a thorough due diligence review which encompasses, among other things, meetings
with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal
and other information which will be made available to us.
The
time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs
associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification
and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in
our incurring losses and will reduce the funds we can use to complete another business combination.
Our
Initial Business Combination Process
In
evaluating prospective business combinations, we expect to conduct a thorough due diligence review process that will encompass, among
other things, meetings with incumbent management and employees, document reviews and inspection of facilities, as applicable, as well
as a review of financial and other information that will be made available to us.
We
are not prohibited from pursuing an initial business combination with a company that is affiliated with Larkspur Health LLC, or any of
our officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our
sponsors, or any of our officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent
investment banking firm which is a member of FINRA or an independent accounting firm that our initial business combination is fair to
our company from a financial point of view.
Members
of our management team directly or indirectly own founder shares, private shares, and/or private warrants following the IPO and, accordingly,
may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate
our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating
a particular business combination if the retention or resignation of any such officers and directors were to be included by a target
business as a condition to any agreement with respect to our initial business combination. However, subject to any pre-existing contractual
or fiduciary obligations, our sponsors and officers and directors will offer all suitable business combination opportunities within the
biotechnology industry (and other related sectors, as discussed elsewhere in this Report) to us before any other person or company until
we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business
combination within 12 months from the closing of the IPO (or up to 18 months from the closing of the IPO at the election of
the Company in two separate three month extensions subject to satisfaction of certain conditions, including the deposit of $776,716 ($0.10
per unit) for each three month extension, into the trust account, or as extended by the Company’s stockholders in accordance with
our amended and restated certificate of incorporation).
Our
sponsors are continuously made aware of potential business opportunities, one or more of which we may desire to pursue for an initial
business combination; we have not, however, selected any specific business combination target and we have not, nor has anyone on our
behalf, initiated any substantive discussions, directly or indirectly, with any business combination target.
Larkspur
Health LLC, and each of our officers and directors presently have, and any of them in the future may have additional, fiduciary or contractual
obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity.
Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity
to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual
obligations to present such business combination opportunity to such other entity. We do not believe, however, that any fiduciary duties
or contractual obligations of our sponsors and our officers or directors will materially affect our ability to complete our initial business
combination. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity
offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director
or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be
reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating
another legal obligation.
5
Sourcing
of Potential Initial Business Combination Targets
Certain
members of our management team have spent significant portions of their careers working with businesses in the biotechnology industry
and have developed a wide network of professional services contacts and business relationships in that industry. The members of our board
of directors also have significant executive management and public company experience in the biotechnology industry and bring additional
relationships that further broaden our industry network.
This
network has provided our management team with a flow of referrals that have resulted in numerous transactions. We believe that the network
of contacts and relationships of our management team provides us with an important source of acquisition opportunities. In addition,
target business candidates are brought to our attention from various unaffiliated sources, including investment market participants,
private equity groups, investment banks, consultants, accounting firms and large business enterprises.
Members
of our management team and our independent directors directly or indirectly own founder shares, private shares, and/or private warrants
following the IPO and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate
business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of
interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors
was included by a target business as a condition to any agreement with respect to our initial business combination.
In
addition, each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual
obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity
to such entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially
affect our ability to complete our initial business combination.
In
addition, our sponsors and our officers and directors may sponsor or form other special purpose acquisition companies similar to ours
or may pursue other business or investment ventures during the period in which we are seeking an initial business combination. Any such
companies, businesses or investments may present additional conflicts of interest in pursuing an initial business combination. However,
we do not believe that any such potential conflicts would materially affect our ability to complete our initial business combination.
Status
as a Public Company
We
believe our structure makes us an attractive business combination partner to target businesses. As a public company, we offer a target
business an alternative to the traditional initial public offering through a merger or other business combination with us. Following
an initial business combination, we believe the target business would have greater access to capital and additional means of creating
management incentives that are better aligned with stockholders’ interests than it would as a private company. A target business
can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In
a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the
target business for our shares of Class A common stock (or shares of a new holding company) or for a combination of our shares of
Class A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers.
Although
there are various costs and obligations associated with being a public company, we believe target businesses will find this method a
more expeditious and cost effective method to becoming a public company than the typical initial public offering. The typical initial
public offering process takes a significantly longer period of time than the typical business combination transaction process, and there
are significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road
show efforts that may not be present to the same extent in connection with an initial business combination with us.
Furthermore,
once a proposed initial business combination is completed, 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,
which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business
combination, we believe the target business would then have greater access to capital and an additional means of providing management
incentives consistent with stockholders’ interests and the ability to use its shares as currency for acquisitions. Being a public
company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting
talented employees.
6
While
we believe that our structure and our management team’s backgrounds makes us an attractive business partner, some potential target
businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder
approval of any proposed initial business combination, negatively.
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As
such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public
companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the independent
registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find
our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities
may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In
other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We
will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) December 23, 2026 (b) in
which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated
filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as
of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt
securities during the prior three-year period.
Additionally,
we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may
take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial
statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our
common stock held by non-affiliates equals or exceeds $250 million as of the end of the prior June 30th, or (2) our
annual revenues equaled or exceeded $100 million during such completed fiscal year and the market value of our common stock held
by non-affiliates exceeds $700 million as of the prior June 30th.
Financial
Position
With funds available for an initial business combination initially
in the amount of $77,010,910 gross of the business combination fee payable to A.G.P., in each case before fees and expenses associated
with our initial business combination, we offer a target business a variety of options such as creating a liquidity event for its owners,
providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or
leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination
of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid
to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can
be no assurance it will be available to us.
Effecting
Our Initial Business Combination
We
are not presently engaged in, and we will not engage in, any operations other than the pursuit of our business combination until we consummate
our initial business combination. We intend to effectuate our initial business combination using cash from the proceeds of the IPO and
the sale of the private units, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to
backstop agreements we may enter into following the consummation of the IPO or otherwise), shares issued to the owners of the target,
debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We may seek to complete 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.
7
If
our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account
are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A
common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for
maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness
incurred in completing 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 completion of our initial
business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the
amounts held in the trust account. In addition, we are targeting businesses larger than we could acquire with the net proceeds of the
IPO and the sale of the private units, and may as a result be required to seek additional financing to complete such proposed initial
business combination. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously
with the completion of our initial business combination. In the case of an initial business combination funded with assets other than
the trust account assets, our proxy materials or tender offer documents disclosing the initial business combination would disclose the
terms of the financing and, only if required by applicable law or stock exchange requirements, we would seek stockholder 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.
We
have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination
target. From the period commencing with our formation through the date of this Report, there have been no communications or discussions
between any of our officers, directors or our sponsors and any of their potential contacts or relationships regarding a potential initial
business combination. Additionally, we have not engaged or retained any agent or other representative to identify or locate any suitable
acquisition candidate, to conduct any research or take any measures, directly or indirectly, to locate or contact a target business.
Accordingly, there is no current basis for investors in the IPO to evaluate the possible merits or risks of the target business with
which we may ultimately complete our initial business combination. Although our management will assess the risks inherent in a particular
target business with which we may combine, we cannot assure you that this assessment will result in our identifying all risks that a
target business may encounter. Furthermore, some of those risks may be outside of our control, meaning that we can do nothing to control
or reduce the chances that those risks will adversely impact a target business.
Sources
of Target Businesses
Target
business candidates are brought to our attention from various unaffiliated sources, including investment bankers and investment professionals,
as a result of being solicited by us by calls or mailings. These sources may also introduce us to target businesses in which they think
we may be interested on an unsolicited basis, since many of these sources will have read this Report and know what types of businesses
we are targeting. Our officers and directors, as well as our sponsors and 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. In addition, we expect to receive a number of deal flow opportunities that
would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors and our sponsors
and their affiliates. While we do not presently 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, advisory fee or other compensation to be determined in an arm’s length negotiation based
on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring
opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction
that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of
a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsors
or any of our existing officers or directors be paid any finder’s fee, reimbursement, consulting fee, monies in respect of any
payment of a loan or other compensation by the company prior to, or in connection with any services rendered for any services they render
in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). None of
our sponsors, executive officers or directors, or any of their respective affiliates, will be allowed to receive any compensation, finder’s
fees or consulting fees from a prospective business combination target in connection with a contemplated initial business combination
except as set forth herein. We have agreed to reimburse our sponsors for any out-of-pocket expenses related to identifying, investigating
and completing an initial business combination. Some of our officers and directors may enter into employment or consulting agreements
with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements
will not be used as a criterion in our selection process of an initial business combination candidate.
8
We
are not prohibited from pursuing an initial business combination with an initial business combination target that is affiliated with
our sponsors, officers or directors or making the initial business combination through a joint venture or other form of shared ownership
with our sponsors, officers or directors. In the event we seek to complete our initial business combination with an initial business
combination target that is affiliated with our sponsors, officers or directors, we, or a committee of independent directors, would obtain
an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that such
an 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.
As
more fully discussed in the section of this Report entitled “Management — Conflicts of Interest,” if any of our
officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity
to which he or she has pre-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 and directors currently have
certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
Selection
of a Target Business and Structuring of our Initial Business Combination
Nasdaq
rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value
of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on
the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market
value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted
by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses
or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able
to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment
banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria.
While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value
of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular
target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to
purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement,
our management will virtually have 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 complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities
of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business
or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will
be taken into account for purposes of Nasdaq’s 80% fair market value test. There is no basis for investors in the IPO to evaluate
the possible merits or risks of any target business with which we may ultimately complete our initial business combination.
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 cannot assure you that we will properly ascertain or assess all significant
risk factors.
In
evaluating a prospective business target, we expect to conduct a thorough due diligence review, which may encompass, among other things,
meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities,
as well as a review of financial and other information that will be made available to us.
The
time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs
associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification
and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in
our incurring losses and will reduce the funds we can use to complete another business combination.
9
Lack
of Business Diversification
For
an indefinite period of time after the completion 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. In addition, we are focusing our search for an initial business combination in a single
industry. By completing 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. In addition, the
future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future
role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination
as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial
business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following
our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial
business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge
relating to the operations of the particular target business.
We
cannot assure you that any of our key personnel will 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
an initial 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 additional managers will have the requisite
skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders
May Not Have the Ability to Approve Our Initial Business Combination
We
may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval
if it is required by applicable law or applicable stock exchange listing requirements, or we may decide to seek stockholder approval
for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations
we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
Type of Transaction Whether Stockholder Approval is Required
Purchase of assets No
Purchase of stock of target not involving a merger with the company No
Merger of target into a subsidiary of the company No
Merger of the company with a target Yes
10
Under
Nasdaq’s listing rules, stockholder approval would be required for our initial business combination if, for example:
Permitted
Purchases of our Securities
If
we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business
combination pursuant to the tender offer rules, our sponsors, initial stockholders, directors, officers, advisors or their affiliates
may purchase public shares or public warrants in privately negotiated transactions or in the open market either prior to or following
the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers