UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2022
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number 001-41152
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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(zip code) |
Registrant’s telephone number, including area code: (470 ) 355-1944
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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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 ☐ ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ ☒
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. ☒ 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).
☒ 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Small reporting company
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Emerging growth company
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If an emerging growth company, indicate by the 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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 Class A common stock began trading on the New York Stock Exchange on January 21, 2022. The aggregate market value of the
registrant’s Class A common stock outstanding, other than shares held by persons who may be deemed affiliates of the registrant, at June 30, 2022, was approximately $191,506,963 .
As of April 17, 2023, there were 19,246,931 shares of Class A common stock, par value $0.0001 per share, and 4,811,732 shares of
Class B common stock, par value $0.0001 per share, issued and outstanding.
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Documents Incorporated by Reference: None.
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 9C.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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Unless otherwise stated in this Annual Report on Form 10-K (this “Report”), references to:
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“amended and restated certificate of incorporation” are to our amended and restated certificate of incorporation;
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“common stock” are to our Class A common stock and our Class B common stock;
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“company” or “our company” are to Heartland Media Acquisition Corp., a Delaware corporation;
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“founder shares” are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to our initial public offering and the shares of our Class A common stock issued upon the
automatic conversion thereof at the time of our initial business combination as provided herein;
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“initial stockholders” are to our sponsor and the other holders (if any) of our founder shares prior to our initial public offering;
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“management,” our “management team” or our “team” are to our officers and directors, and “directors” are to our current directors;
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“private placement warrants” are to the warrants issued to our sponsor in a private placement simultaneously with the closing of our initial public offering;
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“public shares” are to shares of our Class A common stock sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market);
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“public stockholders” are to the holders of our public shares, including our sponsor, officers and directors to the extent our sponsor, officers or directors purchase public shares, provided that each of their
status as a “public stockholder” shall only exist with respect to such public shares;
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“sponsor” are to Heartland Sponsor LLC, a Delaware limited liability company, which is an affiliate of Heartland Media LLC;
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“warrants” are to our warrants sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market) and the private placement
warrants; and
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“we,” “us” or “our” are to Heartland Media Acquisition Corp., a Delaware corporation, or, where applicable, members of our management team.
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This Report includes, and oral statements made from time to time by representatives of the Company may include, 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”). We have based these forward-looking statements on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels
of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other
statements other than statements of historical fact included in this Report. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”)
filings. Forward-looking statements in this Report may include, for example, statements about:
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our ability to select an appropriate target business or businesses;
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our ability to complete our initial business combination;
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our expectations around the performance of a prospective target business or businesses;
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our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
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our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;
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our potential ability to obtain additional financing to complete our initial business combination;
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our pool of prospective target businesses, including their industry and geographic location;
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our ability to consummate an initial business combination due to the uncertainty resulting from the recent COVID-19 pandemic and other events (such as terrorist attacks, natural disasters or a significant outbreak
of other infectious diseases);
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the ability of our officers and directors to generate a number of potential business combination opportunities;
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our public securities’ potential liquidity and trading;
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the lack of a market for our securities;
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the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;
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the trust account not being subject to claims of third parties; or
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our financial performance.
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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 heading “Item 1A. 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.
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Business.
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Introduction
We are a blank check company incorporated as a Delaware corporation and created for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination, which we refer to throughout this Report as our initial business combination, with one or more businesses or entities. We have generated
no operating revenues to date and we do not expect that we will generate operating revenues until we consummate our initial business combination.
We completed our initial public offering on January 25, 2022 and the proceeds of our initial public offering are held in a trust account for the benefit of our public stockholders. We may use such
amounts to help fund our initial business combination, subject to the right of our public stockholders to have their shares of common stock of our company redeemed in connection with our initial business combination.
While we may pursue an acquisition opportunity in any business, industry, sector or geographical location, we intend to focus on the media, entertainment and sports sectors. Our management team and Board of Directors (our “Board”) has had significant success sourcing, acquiring, growing and monetizing companies across these sectors. We have particular expertise in television broadcasting, and in local media
generally. We believe this experience makes us well suited to identify, source, negotiate and execute an initial business combination with the ultimate goal of pursuing attractive risk-adjusted returns for our stakeholders.
Company History
On January 25, 2022, we consummated our initial public offering (“IPO”) of 17,500,000 units (the “Units”). Each Unit consists of one share of Class A common stock of the Company,
par value $0.0001 per share, and one-half of one redeemable warrant of the Company (“Warrant”), with each whole Warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share, subject to adjustment. The
Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $175,000,000. The Company granted BofA Securities, Inc. and Moelis & Company LLC, the representatives of the several underwriters of the IPO (the
“Representatives”), a 45-day option to purchase up to 2,625,000 additional Units solely to cover over-allotments, if any.
Simultaneously with the closing of the IPO, the Company completed the private sale of an aggregate of 9,875,000 warrants (the “Private Placement Warrants”) to Heartland Sponsor LLC
at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $9,875,000.
The Private Placement Warrants are identical to the Warrants sold in the IPO, except that the Private Placement Warrants, so long as they are held by the purchasers thereof or their
permitted transferees, (i) are not redeemable by the Company, (ii) may not (including the Class A common stock issuable upon exercise of such Private Placement Warrants), subject to certain limited exceptions, be transferred, assigned or sold by
such holders until 30 days after the completion of the Company’s initial business combination, (iii) may be exercised by the holders on a cashless basis and (iv) are entitled to registration rights. No underwriting discounts or commissions were
paid with respect to such sale. The issuance of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
A total of $179,375,000, comprised of $171,500,000 of the proceeds from the IPO (which amount includes $6,125,000 of the underwriters’ deferred discount) and $7,875,000 of the
proceeds from the sale of the Private Placement Warrants, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. Except with respect to interest earned on the funds held in the
trust account that may be released to the Company to pay its taxes, the funds held in the trust account will not be released from the trust account until the earliest of (i) the completion of the Company’s initial business combination, (ii) the
redemption of any shares of Class A common stock included in the Units sold in the IPO (“public shares”) properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the
substance or timing of the Company’s obligation to redeem 100% of the public shares if the Company does not complete its initial business combination within 18 months from the closing of the IPO, or up to 21 months from the closing of the IPO at
the election of the Company, subject to certain conditions as described in the Company’s amended and restated certificate of incorporation, including the deposit of $1,750,000 (or $0.10 per Unit) into the trust account, or with respect to any other
material provisions relating to stockholders’ rights or pre-initial business combination activity and (iii) the redemption of the public shares if the Company is unable to complete an initial business combination within 18 months from the closing
of the IPO, or up to 21 months from the closing of the IPO at the election of the Company, subject to certain conditions as described in the Company’s amended and restated certificate of incorporation, including the deposit of $1,750,000 (or $0.10
per Unit) into the trust account, subject to applicable law.
On February 3, 2022, the Representatives partially exercised the over-allotment option and on February 7, 2022, purchased an additional 1,746,931 Units (the “Over-Allotment Units”),
generating gross proceeds of $17,469,310. In connection with the Representatives’ partial exercise of their over-allotment option, the Sponsor purchased an additional 786,119 Private Placement Warrants, generating gross proceeds to the Company of
$786,119. In connection with the closing and sale of the Over-Allotment Units and 786,119 additional Private Placement Warrants, a total of $17,906,042.75, comprised of $17,119,923.80 of the proceeds from the closing and sale of the Over-Allotment
Units (which amount includes $611,425.85 of the Representatives’ deferred discount) and $786,118.95 of the proceeds from the sale of the additional 786,119 Private Placement Warrants, was placed into the trust account.
On March 7, 2022, we announced that holders of the public Units may elect to separately trade the Class A common stock and Warrants. Those Units not separated will continue to trade on the New York
Stock Exchange (“NYSE”) under the symbol “HMA.U,” and the Class A common stock and redeemable warrants that are separated will trade on the NYSE under the symbols “HMA” and “HMA.WS,” respectively.
Management Team, Sponsor and Board of Directors
We believe our management team and Board are well positioned to identify and evaluate businesses within the media, entertainment and sports industries that would benefit from being
a public company and from access to our expertise. Our team has extensive experience in the industry and has a broad network of contacts in these sectors which can help identify potential opportunities.
Mr. Robert S. Prather Jr., Chief Executive Officer, has extensive experience in the media, entertainment and sports industry. Mr. Prather and a partner acquired control of Gray, a
public company, in late 1993. During his tenure, he helped grow the market capitalization of Gray from approximately $52 million to more than $400 million. He was instrumental in increasing Gray’s EBITDA from approximately $6 million at the
beginning of his tenure to approximately $176 million during his final full year, representing a CAGR of approximately 20%. Through strategic and transformative acquisitions, Mr. Prather helped Gray increase the number of television stations it
owned from three to 30, as well as increase the number of newspapers owned from one to five. Mr. Prather anticipated the eventual decline of the newspaper industry, and in December 2005, Gray spun off five newspapers and one wireless business to a
separate public company. Gray operated 22 number one ranked television stations and stations in 17 college towns and eight state capitals. Mr. Prather also served as CEO and a Director of Bull Run, a sports and affinity marketing management
company, from 1992 until its merger into Triple Crown Media, Inc. in December 2005. During his time at Gray, Mr. Prather and his partner also acquired Host Communications, a college sports marketing business which became a wholly-owned subsidiary
of Bull Run. Host Communications provided sports marketing and productions services to a number of collegiate conferences and universities. After successfully growing Host Communications, the business was sold in 2007 to IMG, led by Ted Forstmann,
for $74 million. Following his tenure at Gray, Mr. Prather formed Heartland Media in 2013 and partnered with MSouth Equity Partners to help grow the business. Under Mr. Prather’s leadership, Heartland Media acquired its first television station in
2013, and from 2014 to 2017 it acquired 10 additional television stations for total consideration of $220 million. Mr. Prather grew Heartland Media’s cash flow to approximately $29 million in 2019. Mr. Prather led the sale of 11 television stations
by Heartland Media in February 2020 for $305 million cash.
Since 2004, Mr. Prather has served on the board of GAMCO Investors, Inc. (NYSE: GBL) where he is the Lead Independent Director. He has also served on the board of Ryman Hospitality
Properties, Inc. (NYSE: RHP), formerly known as Gaylord Entertainment Company, since 2009. Ryman Hospitality Properties, Inc. is a REIT which specializes in group-oriented, destination hotel assets in urban and resort markets. Ryman Hospitality
Properties also owns the Opry Entertainment Group. Previously, Mr. Prather served as a director of Diebold-Nixdorf, Inc. (NYSE: DBD) from April 2013 to April 2018. In 2015, Mr. Prather was actively involved as a board member in Diebold’s $1.9
billion acquisition of Wincor Nixdorf AG, a German ATM maker and financial technology company, which combined the second and third largest ATM / financial technology companies in the world. Mr. Prather was previously the largest shareholder of
Rawlings Sporting Goods Company, Inc. (formerly NASDAQ: RAWL), where he served as Vice-Chairman from 1998 to 2001. He was instrumental in selling Rawlings to K2 Inc. for a 48% premium to the unaffected share price. Mr. Prather was on the Board of
Directors and an Advisory Board member for Swiss Army Brands, Inc. (formerly NASDAQ: SABI) from 1995 to 2011. Mr. Prather received an undergraduate and graduate degree from the Georgia Institute of Technology.
Our Sponsor
Heartland Sponsor LLC, our sponsor, is an affiliate of Heartland Media. Heartland Media is a television broadcasting company formed in 2013. Heartland Media made its first
television station acquisition in 2013 and from 2014 to 2017 it acquired 10 additional television stations for total consideration of $220 million. In February 2020, Heartland Media sold 11 television stations to Allen Media Broadcasting for $305
million cash. Heartland Media currently owns two television stations, KQTV, an ABC affiliate in Saint Joseph, Missouri, and WKTV, a NBC affiliate in Utica, New York. Mr. Prather, our Chief Executive Officer, is the founder and majority owner of
Heartland Media. Mr. Muoio, one of our directors, holds a minority interest in Heartland Media.
Our Directors
Salvatore Muoio, CFA, is the founder of S Muoio & Co. LLC and the manager of several related investment partnerships. Mr. Muoio has significant experience in the public markets
and has been involved in the securities industry since 1985. Prior to establishing SM Investors, L.P. in 1997, Mr. Muoio served in the equity markets group of Lazard Frères & Co. LLC from 1995 to 1996 as Director of Equity Research and as an
equity analyst concentrating in telecommunications and media industries. Mr. Muoio started his career at Gabelli Funds, Inc. from 1985 to 1995 where he served in several capacities, including as a securities analyst for Gabelli & Company, Inc.,
Director of Research for GAMCO Investors, and as Portfolio Manager for the Gabelli Global Telecommunications Fund, Inc. Mr. Muoio also serves on the Board of Directors of LICT Corporation and CIBL, Inc., which are diversified publicly traded
holding companies involved in various telecommunications, media, and service businesses. Mr. Muoio closely follows companies in the media, entertainment and sports industries which will be helpful in sourcing a potential business combination. Mr.
Muoio is a member of the Institute of Chartered Financial Analysts, as well as the New York Society of Securities Analysts. Mr. Muoio received a B.B.A. with a major in finance from the University of Notre Dame in 1981 and an M.B.A. with a
concentration in Finance from Notre Dame in 1985.
Steven T. Shapiro is a founding partner of GoldenTree Asset Management and sits on GoldenTree’s Executive Committee. For many years, he was responsible for the firm’s investments in
media and communications as well its investments in distressed assets. Started in 2000, GoldenTree currently has approximately $47 billion under management and is based in New York, with offices in West Palm Beach, London, Singapore, Sydney, Tokyo
and Dublin. Under Mr. Shapiro’s guidance, GoldenTree made numerous successful investments totaling several billions of dollars in sectors including broadcasting, outdoor, entertainment, publishing, cable and telecom. Prior to GoldenTree, Mr.
Shapiro was a Managing Director in the High Yield Group at CIBC World Markets, where he headed Media and Telecommunications Research. While at CIBC, Mr. Shapiro was involved in several billion dollars of equity and debt financings for media and
communications companies. Prior to its acquisition by CIBC in 1995, Mr. Shapiro was a research analyst with The Argosy Group, a high yield investment-banking boutique in New York. Before joining Argosy, Mr. Shapiro was a bankruptcy attorney with
Stroock & Stroock & Lavan in New York. Mr. Shapiro’s extensive experience will be invaluable in helping assess and evaluate potential business combinations. Mr. Shapiro has served on numerous corporate and not-for-profit boards. He is
currently a member of the Board of Overseers of the University of Pennsylvania Law School, and is a member of the Executive Committee and former President of the Board of Trustees of the Abraham Joshua Heschel School in New York. Mr. Shapiro is a
graduate of The University of Pennsylvania Law School, where he served as Senior Editor of the Labor Law Journal. He graduated with Honors from the University of Pennsylvania College of Arts & Sciences with a major in modern diplomatic history
and was a member of the History Honor Society.
Alan J. Weber is the Chief Executive Office of Weber Group LLC, focusing on investments in the Financial Services and Technology Services industries/sectors. He has vast experience
as a senior executive at financial companies, including large publicly traded companies such as Citibank and Aetna, Inc. Mr. Weber is the former Chairman and CEO of U.S. Trust Co., a 160 year-old firm specializing in trust, investment management,
tax and estate planning and private banking. Prior to joining U.S. Trust in October 2002, Mr. Weber was Vice Chairman and Chief Financial Officer at Aetna, Inc., where he was responsible for corporate strategy, capital management, information
technology, investor relations and financial operations. The cornerstone of Mr. Weber’s career was built at Citicorp, where he worked from 1971 to 1998, holding senior positions in corporate banking, consumer banking and corporate
operations/technology. Mr. Weber was Chairman of Citibank International and an Executive Vice President of Citibank. Mr. Weber is a director of Street Diligence, Inc., a fintech services business. Mr. Weber was a director of Broadridge Financial
Solutions, Inc., a global provider of investor communications, securities processing, wealth management services and outsourcing solutions to the financial services industry, from 2007 until his retirement from the board in November 2021. From 2008
until 2018, he was the Chairman of KGS-Alpha Capital Markets, a fixed income broker-dealer. Previously, Mr. Weber was a director of Diebold-Nixdorf, Inc., and Sandridge Energy, Inc., (NYSE: SD), an oil and gas exploration company. Mr. Weber
received his B.S. in Economics from the Wharton School at the University of Pennsylvania and an MBA from the Kellogg School at Northwestern University.
With respect to the foregoing examples, past performance of our management team and Board and their collective affiliates is not a guarantee either (i) of success with respect to
any business combination we may consummate, or (ii) that we will be able to identify a suitable candidate for our initial business combination. You should not rely on the historical performance record of our management team, our Board or their
affiliates as indicative of our future performance. In addition, for a list of entities to which our officers and directors currently have fiduciary or contractual obligations that may present a conflict of interest, please refer to the table and
subsequent explanatory paragraph under “Management—Conflicts of Interest.”
Market Overview
We plan to pursue business combination opportunities with companies operating in the media, entertainment and sports industries or adjacent sectors. We have particular expertise in
television broadcasting, and in local media generally. The media, entertainment and sports industries are in the midst of an unprecedented level of disruption, initially caused by a shift in the media landscape and then further amplified by the
COVID-19 pandemic. This has resulted in a significant number of companies that would benefit from access to public markets and capital to grow in the current environment.
Additionally, with our management team and Board’s expertise in these sectors, we are well positioned to help companies thrive against the current backdrop. Our management team and
Board have a long history of overseeing and growing market leading media companies in the sectors we are targeting. We believe that our experience, leadership and industry expertise can help stockholders generate excess returns.
The media, entertainment and sports landscape continues to shift dramatically. This shift is resulting in the disruption of traditional business models and many companies are
needing to refine their business plan in order to best serve their customers. The introduction of emerging technologies is creating further dislocation and leading to a shift in how consumers engage with media platforms. The dynamic change in these
industries is resulting in tremendous opportunity for growth and disruption of more traditional businesses. Certain factors contributing to this shifting landscape which have helped create opportunities include:
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Increased bifurcation between local advertising and national advertising
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Rise of OTT platforms which are competing for increased market share
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Proliferation of original media content
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Shift of advertising revenue from traditional media to digital media platforms
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Widespread and continued legalization of sports betting
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Increased use of data and analytics within sports
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We believe there are many potential targets within the media, entertainment and sports industries that could become attractive public companies. These potential targets exhibit a
broad range of business models and financial characteristics that range from very mature businesses with established franchises, recurring revenues and strong cash flow to high growth innovative companies. We are not, however, required to complete
our initial business combination with a media, entertainment or sports business and, as a result, we may pursue a business combination outside of those industries.
Business Strategy
Our management team and Board’s strategy is to create value for our stockholders and generate attractive returns by identifying investment opportunities that could benefit from
additional capital, management expertise and operational excellence. We believe our highly experienced team provides us with a distinct advantage to identify a leading media, entertainment or sports company and execute a successful business
combination.
With significant experience in the media industry, as well as a long history of structuring and executing value creating strategic transactions, our management team and Board are
well positioned to identify business combinations. Our management team, led by our Chief Executive Officer, has long-standing relationships with potential sellers in industries we are targeting and collectively has an excellent reputation as a
counter party. Our management team and Board also have extensive experience in identifying and executing proprietary strategic investments in the sectors we are targeting. Throughout our CEO’s career, he has been involved with a diverse set of
transactions, including buy-side, sell-side, carve outs and spin offs. Many of the transactions were privately sourced through key relationships developed over time. Our management team and Board have significant experience in the media,
entertainment and sports industries which includes executive positions at Gray, Heartland Media, Host Communications, Bull Run, Rawlings Sporting Goods and others. Our management team has a long history and ability to:
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Grow businesses through operational efficiencies
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Identify shifts in consumer behavior
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Pivot businesses in order to help capture significant stockholder value
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Develop and execute complex legal and financial structures to support publicly traded companies
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We intend to leverage our management team’s and Board’s unique and vast experience in:
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Sourcing acquisition opportunities which help generate excess stockholder value
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Executing strategic transactions that enhance a company’s value proposition
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Identifying business trends to help drive organic growth
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Sourcing and leading talented teams to help advance business objectives
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Navigating the capital markets to help maximize value
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Our management team and Board, as well as our advisors, will communicate with their networks of relationships to articulate the parameters for our search for a target business, and
will engage in a disciplined process of pursuing and reviewing promising leads.
Business Combination Criteria
Consistent with our business strategy, we have developed the following general criteria that we believe are important in evaluating prospective initial business combinations. We
will 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 these criteria and guidelines. We intend to evaluate
opportunities using the following attributes as a guide:
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Generates stable revenue and cash flows or potential for significant revenue and earnings growth
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Defensible market position
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Potential for additional synergistic M&A activity
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Strong management team that would benefit from our extensive and diverse expertise
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Ability to benefit from being a publicly traded company with access to the broader capital markets
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Valuation which is in line with the business fundamentals
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These criteria and guidelines 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 criteria and guidelines as well as other considerations, factors, criteria and guidelines that our management may deem relevant. In the event that we decide to enter into our initial business combination with
a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria and guidelines in our stockholder 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.
We may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares
upon completion of our initial business combination. We intend to acquire a company with an enterprise value significantly above the net proceeds of our IPO.
Our Acquisition Process
In evaluating a prospective target business for our initial business combination, we expect to conduct a thorough due diligence review which may encompass, among other things,
meetings with incumbent management, document reviews, as well as a review of financial, operational, legal and other information that will be made available to us. We will also utilize our operational and capital planning experience.
We are not prohibited from pursuing an initial business combination with a business that is affiliated with our sponsor, officers or directors, or any of their respective
affiliates. In the event we seek to complete our initial business combination with a business that is affiliated with our sponsor, officers or directors, or any of their affiliates, we, or a committee of disinterested directors, will obtain an
opinion from an independent investment banking firm which is a member or FINRA or another independent entity that commonly renders valuation opinions that our initial business combination is fair to us from a financial point of view. We do not
anticipate being required to obtain such an opinion in any other context, except as discussed elsewhere in this Report.
Members of our management team directly or indirectly own founder shares and/or Private Placement Warrants 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. In particular, because the founder shares were purchased at approximately $0.003 per share, the holders of our founder shares
(including members of our management team that directly or indirectly own founder shares) could make a substantial profit after our initial business combination even if our public stockholders lose money on their investment as a result of a
decrease in the post-combination value of their shares of common stock (after accounting for any adjustments in connection with an exchange or other transaction contemplated by the 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 is included by a target business as a condition 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 another entity pursuant to
which such officer or director is or will be required to present a business combination opportunity to such entity. 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 these obligations to present such business combination opportunity to such entity, and may determine to only present it to us if such entity rejects the
opportunity. 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 business combination. Our amended and restated certificate of
incorporation provides that, prior to the consummation of our initial business combination, 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 the director or officer is permitted to refer
that opportunity to us without violating any legal obligation. Our officers and directors would continue to be subject to all other fiduciary duties owed to us and our stockholders and no other waivers of their respective fiduciary obligations have
been provided to any such officers and directors. We do not have any plan for any waiver of the fiduciary duties of our officers and directors post-business combination.
Further, our officers and directors are not required to commit any specified amount of time to our affairs, and, accordingly, will have conflicts of interest in allocating
management time among various business activities, including identifying potential business combinations and monitoring the related due diligence.
Sourcing of Potential Initial Business Combination Targets
Our management team and Board have significant transaction experience which we believe will provide us an advantage while sourcing potential initial business combination targets.
Our management team and Board have developed long-standing corporate relationships over their careers and intend to leverage their vast networks during the sourcing phase. Additionally, our management team and Board have gained highly valuable
knowledge of the capital markets throughout their time as executives and directors of public companies. Our management team and Board have been instrumental in consummating a significant amount of acquisitions or dispositions, with examples
including:
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Acquisition of Data South Computer Company in 1993
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Acquiring control of Gray for $14 million in 1993
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| • |
Acquisition of two television stations in Lexington, KY from Kentucky Central Television, Inc. for $38 million in 1994
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Acquisition of Augusta CBS television station from Television Station Partners for $37 million in 1996
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Acquisition of two CBS-affiliated television stations and mobile satellite truck business from First American Media, Inc. for $184 million in 1996
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Acquisition of Busse Broadcasting Corporation and two of its television stations and corresponding disposition of a television station in a transaction valued at over $190 million in 1998
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Acquisition of 15 television stations from Benedek Broadcasting for $500 million in 2002
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Acquisition of one television station from Emmis Communications for $186 million in 2005
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Spun off five newspapers and one wireless business resulting in a separate publicly traded company and a $40 million dividend to Gray in 2005
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| • |
Acquisition of one television station from the University of Notre Dame for approximately $85 million
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Became the largest shareholder of Rawlings Sporting Goods Company, Inc. and named Vice Chairman, which was eventually sold to K2 Inc. for a 48% premium over the public market price
|
| • |
Chairman of the Special Committee for the sale of Swiss Army Brands, Inc. to the Swiss Army Corporation in Ibach, Switzerland
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| • |
Formation of Heartland Media in 2013
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Acquisition of Wincor Nixdorf AG by Diebold for $1.9 billion in 2015
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Acquisition of a television station from GOCOM Media for $40 million in 2015
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Acquisition of five television stations from Nexstar Broadcasting Group, Inc. in 2018 for $115 million
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Sale of 11 television stations to Allen Media Group in 2020 for $305 million
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Initial Business Combination
The rules of the NYSE require that our initial business combination must be with one or more target businesses that together have an aggregate fair market value equal to at least
80% of the assets held in the trust account (excluding the amount of deferred underwriting discounts held in trust and taxes payable on the income earned on the trust account) at the time of our signing a definitive agreement in connection with our
initial business combination. We refer to this as the 80% of net assets test. If our Board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment
banking firm that is a member of FINRA or from an independent entity that commonly renders valuation opinions, with respect to the satisfaction of such criteria. We do not currently intend to purchase multiple businesses in unrelated industries in
conjunction with our initial business combination, although there is no assurance that will be the case. Additionally, pursuant to NYSE rules, any initial business combination must be approved by a majority of our independent directors.
We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own or acquire shares will own or acquire 100% of
the outstanding 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 or businesses in order to meet certain objectives of 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 business 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 our initial business combination may collectively own a minority interest in the
post-transaction company, depending on valuations ascribed to the target business and us in the initial business combination. 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 or issue a substantial number of new shares to third-parties in connection with financing our initial business combination. In such cases, 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 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 by us is what will be taken into account for
purposes of the 80% of net assets test. If our initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses (or the portions of such businesses
we acquire) and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable. Subject to the foregoing, 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.
Corporate Information
We are a blank check company incorporated as a Delaware corporation on February 10, 2021. Our executive offices are located at 3282 Northside Parkway, Suite 275, Atlanta, GA 30327
and our telephone number is (470) 355-1944. Our website address is www.heartlandmediaacquisition.com. Our website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and
is not considered part of, this Report.
Financial Position
With funds held in the trust account available for a business combination in the amount of approximately $200,082,724 as of December 31, 2022, assuming no redemptions and including
up to $6,736,426 of deferred underwriting commissions, before estimated offering and working capital expenses, 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 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 for an indefinite period of time following our IPO. We intend to effectuate our initial business
combination using cash from the proceeds of our IPO and the sale of the private placement warrants, our capital stock, debt or a combination of these as the consideration to be paid in our initial business combination. 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.
If our initial business combination is paid for using equity or debt 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 redemption of our public shares, 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 businesses, 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 have not selected any business combination target and we have not, nor has anyone on our behalf, had any substantive discussions, directly or indirectly, with any business
combination target. Our officers and directors are from time to time made aware of potential business opportunities, one or more of which we may desire to pursue, for a business combination, but we have not (nor has anyone on our behalf) contacted,
or had any substantive discussions, formal or otherwise with, any prospective target business with respect to a business combination transaction with us.
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 offerings rather than using the amounts held in the trust account.
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 applicable law or we decide to do so for business or other reasons, 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.
Sources of Target Businesses
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers and investment professionals. Target
businesses may be brought to our attention by such unaffiliated sources 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 our prospectus and know what types of businesses we are targeting. Our officers and directors, as well as our sponsor 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 proprietary 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 sponsor and their respective industry and business contacts as well as their affiliates. We may
engage the services of professional firms that specialize in business acquisitions, 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 will our sponsor or any of our existing officers or directors, or any entity with which our sponsor or officers are affiliated, 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). Although
none of our sponsor, 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, we do not have a policy that prohibits our sponsor, executive officers or directors, or any of their respective affiliates, from negotiating for the reimbursement of out-of-pocket expenses by a target
business. 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.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors, or their respective affiliates. In the
event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors, or their respective affiliates, we, or a committee of disinterested directors, will obtain an opinion from an
independent investment banking firm which is a member of FINRA or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company and our stockholders from a financial point of view.
In addition, our amended and restated certificate of incorporation provides that an affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a
related party transaction. A majority of the members of the entire audit committee will constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party
transaction.
As more fully discussed in the section of this Report entitled “Item 10. Directors, Executive Officers and Corporate Governance—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
The rules of the NYSE require that our initial business combination must be with one or more target businesses that together have an aggregate fair market value equal to at least
80% of the value of the assets held in the trust account (excluding the amount of deferred underwriting commissions held in trust and taxes payable on the income earned on the trust account) at the time of our signing a definitive agreement in
connection with our initial business combination. We refer to this as the 80% of net assets test. Our Board will make the determination as to the fair market value of our initial business combination. The fair market value of the target or targets
will be determined by our Board based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. Even though our Board will rely on generally accepted
standards, our Board will have discretion to select the standards employed. In addition, the application of the standards generally involves a substantial degree of judgment. Accordingly, investors will be relying on the business judgment of the
Board in evaluating the fair market value of the target business or businesses. The proxy solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide public stockholders with our analysis of
our satisfaction of the 80% of net assets test, as well as the basis for our determinations. If our Board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an
independent investment banking firm that is a member of FINRA or from another entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. Subject to this requirement, 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 solely 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 business 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 the 80% of net assets test.
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 target business, we expect to conduct a thorough due diligence review which may encompass, among other things, meetings with incumbent management,
document reviews, as well as a review of financial, operational, legal 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.
In addition, we have agreed not to enter into a definitive agreement regarding an initial business combination without the prior consent of our sponsor.
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. By completing our initial business combination with only a single entity, our lack of diversification may:
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subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business
combination; and
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cause us to depend on the marketing and sale of a single product or limited number of products or services.
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Limited Ability to Evaluate the Target’s Management Team
Although we intend to 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’s 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 or officers 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 our 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 stock exchange rules, or we may decide to seek stockholder approval for business or other 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.
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Type of transaction
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Whether stockholder
approval is required
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Purchase of assets
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No
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Purchase of stock of target not involving a merger with the company
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No
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Merger of target into a subsidiary of the company
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No
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Merger of the company with a target
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Yes
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Under the rules of the NYSE, stockholder approval would be required for our initial business combination if, for example:
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we issue shares of common stock that will be equal to or in excess of 20% of the number of shares of Class A common stock then outstanding (other than in a public offering);
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any of our directors, officers or substantial stockholders (as defined by the rules of the NYSE) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly,
in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in outstanding shares of common stock or voting power of 5% or more; or
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the issuance or potential issuance of common stock will result in our undergoing a change of control.
|
The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be
based on business and other reasons, which include a variety of factors, including, but not limited to:
| • |
the timing of the transaction, including in the event we determine stockholder approval would require additional time and there is either not enough time to seek stockholder approval or doing so would place the
company at a disadvantage in the transaction or result in other additional burdens on the company;
|
| • |
the expected cost of holding a stockholder vote;
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| • |
the risk that the stockholders would fail to approve the proposed business combination;
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| • |
other time and budget constraints of the company; and
|
| • |
additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.
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Permitted Purchases of our Securities
In the event 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 sponsor, directors, officers, advisors or any of their affiliates may purchase public shares 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 public shares such persons may purchase. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such
transactions. In the event our initial stockholders, directors, officers, advisors or any of their affiliates determine to make any such purchases at the time of a stockholder vote relating to our initial business combination, such purchases could
have the effect of influencing the vote necessary to approve such transaction. None of the funds in the trust account will be used to purchase shares in such transactions. They will be restricted from making any such purchases when they are in
possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such stockholder, although
still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. We have adopted an insider trading policy which requires insiders to (1) refrain from purchasing securities
during certain blackout periods and when they are in possession of any material non-public information and (2) to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such
purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a
Rule 10b5-1 plan or determine that such a plan is not necessary.
In the event that our sponsor, directors, officers, advisors or any of their affiliates purchase public shares in privately negotiated transactions from public stockholders who have
already elected to exercise their redemption rights or submitted a proxy to vote against our initial business combination, such selling stockholders would be required to revoke their prior elections to redeem their shares and any proxy to vote
against our initial business combination. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the
going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will be required to comply with such rules. Any such purchases will be
reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase public shares in such transactions
prior to completion of our initial business combination.
The purpose of such purchases could be to (1) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of our
initial business combination or (2) satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such
requirement would otherwise not be met. This may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our shares of Class A common stock may be reduced and the number of beneficial holders of our securities may be
reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our sponsor, officers, directors, advisors and/or any of their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors, advisors or
any of their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our
initial business combination. To the extent that our sponsor, officers, directors, advisors or any of their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their
election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination. Such persons would select the stockholders from whom to acquire shares based on the number of shares available, the
negotiated price per share and such other factors as any such person may deem relevant at the time of purchase. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it
elected to redeem its shares in connection with our initial business combination. Our sponsor, officers, directors, advisors or any of their affiliates will be restricted from purchasing shares unless such purchases comply with Regulation M under
the Exchange Act and the other federal securities laws.
Any purchases by our sponsor, officers, directors and/or any of their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will be restricted except to
the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must
be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or any of their affiliates will be restricted from making purchases of common stock if the purchases would violate Section 9(a)(2)
or Rule 10b-5 of the Exchange Act.
Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion 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 as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held
in the trust account (net of taxes payable), divided by the number of then outstanding public shares, subject to the limitations described herein. At completion of the business combination, we will be required to purchase any public shares properly
delivered for redemption and not withdrawn. 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. The redemption rights
will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their
redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business
combination either: (1) in connection with a stockholder meeting called to approve the business combination; or (2) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or
conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under
applicable law or stock exchange listing requirements. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more
than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would typically require stockholder approval. We intend to conduct redemptions without a stockholder vote pursuant to the tender offer
rules of the SEC unless stockholder approval is required by applicable law or stock exchange rules or we choose to seek stockholder approval for business or other reasons.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other reasons, we will, pursuant to our amended and restated certificate of
incorporation:
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conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and
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file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the
redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
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Upon the public announcement of our initial business combination, we and our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our
Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under
the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a
specified number of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001, upon consummation of an initial business
combination and after payment of the deferred underwriting commission (so that we do not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to
our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete such initial business combination, and we instead may search for an alternate business
combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange rules, or we decide to obtain stockholder approval for business or other
reasons, we will, pursuant to our amended and restated certificate of incorporation:
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conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and
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file proxy materials with the SEC.
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We expect that a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would
be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Although we are not required to do so, we currently intend to comply
with the substantive and procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our NYSE listing or Exchange Act registration.
In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders
with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the
business combination. In such case, pursuant to the terms of a letter agreement entered into with us, our sponsor, officers and directors have agreed (and their permitted transferees will agree) to vote any founder shares and any public shares held
by them in favor of our initial business combination. We expect that at the time of any stockholder vote relating to our initial business combination, our initial stockholders and their permitted transferees will own at least 20% of our outstanding
shares of common stock entitled to vote thereon. Each public stockholder may elect to redeem its public shares without voting and, if they do vote, irrespective of whether they vote for or against the proposed transaction. In addition, our sponsor,
officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of a
business combination.
Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less
than $5,000,001 upon consummation of our initial business combination and after payment of the deferred underwriting commission (so that we do not then become subject to the SEC’s “penny stock” rules). Redemptions of our public shares may also be
subject to a higher net tangible asset test or cash requirement pursuant to an agreement relating to our initial business combination. For example, the proposed business combination may require: (1) cash consideration to be paid to the target or
its owners; (2) cash to be transferred to the target for working capital or other general corporate purposes; or (3) the retention 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 of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business
combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we
instead may search for an alternate business combination.
Limitation on Redemption upon Completion of our Initial Business Combination if We Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business
combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in
concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to Excess Shares (as defined below), without our prior consent. We believe this restriction will discourage
stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our sponsor or its affiliates
to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the public shares could threaten to exercise its
redemption rights if such holder’s shares are not purchased by us or our sponsor or its affiliates at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the
public shares, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a 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 stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial
business combination.
Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights
We may require our public stockholders 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 date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the vote on the proposal to approve our initial business combination in the
event we distribute proxy materials or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, rather than simply voting against the initial business
combination at the holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public
stockholders to satisfy such delivery requirements, which will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. Accordingly, a public stockholder would have from the time we send out our
tender offer materials until the close of the tender offer period, or up to two business days prior to the scheduled 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. Pursuant to the tender offer rules, the tender offer period will be not less than 20 business days and, in the case of a stockholder vote, a final proxy statement would be mailed to public stockholders at least 10
days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a
proxy solicitation. Given the relatively short exercise period, it is advisable for stockholders 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 Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System. The transfer agent will typically charge the tendering broker fee of approximately $80.00 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.
In order to perfect redemption rights in connection with their initial business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote
on an initial business combination, and a holder could simply vote against the proposed business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the business
combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the business
combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to
the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion of the business combination until
the redeeming holder delivered its certificate. The requirement for physical or electronic delivery 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 two business days prior to the scheduled date of
the stockholder meeting set forth in our proxy materials, as applicable (unless we elect to allow additional redemption rights). 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 our initial business combination is not approved or completed for any reason, then our public stockholders 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 completed, we may continue to try to complete a business combination until 18 months from the closing of our IPO or during any
extended time that we have to consummate a business combination beyond 18 months as a result of either (a) at the election by us, an additional three months, subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit)
into the trust account or (b) a stockholder vote to amend our amended and restated certificate of incorporation (any such additional period, an “Extension Period”).
Redemption of Public Shares and Liquidation if No Initial Business Combination
Our amended and restated certificate of incorporation provides that we will have only 18 months from the closing of our IPO or up to 21 months from the closing of our IPO at the
election of the Company, subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the trust account, to complete our initial business combination. If we have not completed our initial business combination within
such 18-month period or during any Extension Period, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem 100% of the public shares, at
a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares,
which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the prescribed time period.
Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account
with respect to any founder shares held by them if we fail to complete our initial business combination within 18 months from the closing of our IPO or during any Extension Period. However, if our sponsor, officers and directors acquire public
shares after our IPO, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 18-month time period or during any
Extension Period.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of
incorporation (A) to modify the substance or timing of our obligation to allow redemptions in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18
months from the closing of our IPO or up to 21 months from the closing of our IPO at the election of the Company, subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the trust account, or (B) with respect to
any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at
a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares.
However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (a) in the case of our initial business combination, upon consummation of such initial business combination and after
payment of the deferred underwriting commission or (b) in the case of an amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial
business combination or to redeem 100% of our public shares if we have not consummated our initial business combination within 18 months from the closing of our IPO or up to 21 months from the closing of our IPO at the election of the Company,
subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the trust account or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, upon such
amendment (in each case so that we do not then become subject to the SEC’s “penny stock” rules). If this optional redemption right is being exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible
asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining held outside
the trust account, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent
that there is any interest accrued in the trust account not required to pay taxes we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our IPO and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking
into account interest, if any, earned on the trust account and any tax payments or expenses for the dissolution of the trust, the per share redemption amount received by stockholders upon our dissolution would be $10.25. The proceeds deposited in
the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per share redemption amount received by stockholders
will not be substantially less than $10.25. See “Item 1A. Risk Factors—If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than
$10.25 per share” and other risk factors described below. Under Section 281(b) of the Delaware General Corporation Law (the “DGCL”), our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to
be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you
that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with
which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such
agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well
as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving
such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that
such third party’s engagement would be significantly more beneficial to us than any alternative. The underwriters of our IPO have not executed agreements with us waiving such claims to the monies held in the trust account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or
skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are unable to find a service provider willing to execute a waiver. Marcum LLP, our independent
registered public accounting firm, and the underwriters of our IPO have not executed agreements with us waiving such claims to the monies held in the trust account. In addition, there is no guarantee that such entities will agree to waive any
claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. In order to protect the amounts held in the trust account,
our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with
which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (1) $10.25 per public share or (2) such lesser amount per public share held in the trust account as of the date of the
liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, except as to any claims by a third party who executed a waiver of any and all rights to
seek access to the trust account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to
be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnification
obligations. Given that our sponsor’s only assets are securities of our company, our sponsor may not be able to satisfy those indemnification obligations. We have not asked our sponsor to reserve for such obligations. See “Item 1A. Risk Factors—Our
directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.” None of our officers or directors will
indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the trust account are reduced below: (1) $10.25 per public share; or (2) such lesser amount per public share held in the trust account as of the
date of the liquidation of the trust account, due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay our taxes, and our sponsor asserts that it is unable to satisfy its
indemnification obligations or that it has no indemnification obligations related to a particular claim, our disinterested directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While
we currently expect that our disinterested directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our disinterested directors in exercising their business judgment
and subject to their fiduciary duties may choose not to do so in certain instances. For example, the cost of such legal action may be deemed by the disinterested directors to be too high relative to the amount recoverable or the disinterested
directors may determine that a favorable outcome is not likely. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per share redemption price will not be substantially less than $10.25 per share. See “Item 1A.
Risk Factors—If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.25 per share” and other risk factors described below.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers
(other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in
the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata
portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months from the closing of our IPO or during any Extension
Period may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it,
including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating
distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any
liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial
business combination within 18 months from the closing of our IPO or during any Extension Period, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section
174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we have not completed our initial
business combination within 18 months from the closing of our IPO or during any Extension Period, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days
thereafter, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account (net of taxes payable and less
up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further
liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following the end of our acquisition period and, therefore, we
do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third
anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment
of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to
searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained
in our underwriting agreement, we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us
waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. The underwriters of our IPO have not executed agreements with us waiving such claims to the monies held in the trust account.
As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to
the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below: (1) $10.25 per public share; or (2) such lesser amount per public share held in the
trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay our taxes and will not be liable as to any claims under our indemnity
of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent
of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to
applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure
you we will be able to return $10.25 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders.
Furthermore, our Board may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust
account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. See “Item 1A. Risk Factors—If, after we distribute the proceeds in the trust account to our public stockholders,
we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our Board may be viewed as having breached their fiduciary
duties to our creditors, thereby exposing the members of our Board and us to claims of punitive damages.”
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (1) the completion of our initial business combination, and then
only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein; (2) the redemption of any public shares properly submitted in connection with a stockholder
vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not
complete our initial business combination within 18 months from the closing of our IPO or up to 21 months from the closing of our IPO at the election of the Company, subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per
unit) into the trust account, or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (3) the redemption of all of our public shares if we have not completed our initial business
combination within 18 months from the closing of our IPO or up to 21 months from the closing of our IPO at the election of the Company, subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the trust account,
subject to applicable law and as further described herein. Public stockholders who do not exercise their redemption rights in connection with such an amendment to our amended and restated certificate of incorporation would still have redemption
rights in connection with any other applicable amendment to our amended and restated certificate of incorporation and a subsequent business combination to the extent they are then public stockholders. In no other circumstances will a stockholder
have any right or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with our initial business combination alone will
not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights described above. Holders of warrants will not have any rights to
proceeds held in the trust account with respect to the warrants.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation contains certain requirements and restrictions that will apply to us until the consummation of our initial business
combination. If we seek to amend any provisions of our amended and restated certificate of incorporation relating to stockholders’ rights or pre-business combination activity, we will provide public stockholders with the opportunity to redeem their
public shares in connection with any such vote. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
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prior to the consummation of our initial business combination, we shall either: (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek
to redeem their shares, without voting, and, if they do vote, independent of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit in the trust account,
including interest (which interest shall be net of taxes payable); or (2) provide our public stockholders with the opportunity to tender their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for
an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), in each case subject to the limitations described herein;
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we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon consummation of our initial business combination and after payment of the deferred underwriting
commission, and, solely if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination at a duly held stockholders meeting;
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if our initial business combination is not consummated within 18 months from the closing of our IPO, or up to 21 months from the closing of our IPO at the election of the Company, subject to certain conditions,
including the deposit of $1,750,000 (or $0.10 per unit) into the trust account, then our existence will terminate and we will distribute all amounts in the trust account; and
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prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (1) receive funds from the trust account or (2) vote as a class with our
public shares (a) on any initial business combination or (b) to approve an amendment to our amended and restated certificate of incorporation to (x) extend the time we have to consummate a business combination beyond 18 months from the
closing of our IPO or up to 21 months from the closing of our IPO at the election of the Company, subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the trust account, or (y) amend the foregoing
provisions.
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These provisions cannot be amended without the approval of holders of at least 65% of our outstanding common stock. In the event we seek stockholder approval in connection with our
initial business combination, our amended and restated certificate of incorporation provides that we may consummate our initial business combination only if approved by a majority of the shares of common stock voted by our stockholders at a duly
held stockholders meeting.
Comparison of Redemption or Purchase Prices in Connection with our Initial Business Combination and if we Fail to Complete our Initial Business Combination
The following table compares the redemptions and other permitted purchases of public shares that may take place in connection with the completion of our initial business combination
and if we have not completed our initial business combination within 18 months from the closing of our IPO or during any Extension Period.
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Redemptions in connection with
our initial business combination
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Other permitted purchases of
public shares by our affiliates
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Redemptions if we fail to
complete an initial business
combination
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Calculation of redemption price
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Redemptions at the time of our initial business combination may be made pursuant to a tender offer or in connection with a stockholder vote. The redemption price will be the same whether we conduct
redemptions pursuant to a tender offer or in connection with a stockholder vote. In either case, our public stockholders may redeem their public shares for cash equal to the aggregate amount then on deposit in the trust account, as of two
business days prior to the consummation of the initial business combination, including interest earned on the funds held in the trust account (net of taxes payable), divided by the number of then outstanding public shares, subject to the
limitation that we will only redeem public shares so long as (after such redemptions) our net tangible assets will be at least $5,000,001, either prior to or upon consummation of an initial business combination, after payment of the
deferred underwriting commission, and any limitations (including but not limited to cash requirements) agreed to in connection with the negotiation of terms of a proposed business combination.
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If we seek stockholder approval of our initial business combination, our sponsor, directors, officers, advisors or any of their affiliates may purchase shares in privately negotiated transactions or in the
open market either prior to or following the completion of our initial business combination. Such purchases will be restricted except to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor
from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. None of the funds in the trust account will be used to purchase shares in such transactions.
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If we have not completed our initial business combination within 18 months from the closing of our IPO or up to 21 months from the closing of our IPO at the election of the Company, subject to certain
conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the trust account, we will redeem all public shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account,
including interest earned on the funds held in the trust account (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares.
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Impact to remaining stockholders
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The redemptions in connection with our initial business combination will reduce the book value per share for our remaining stockholders, who will bear the burden of the deferred underwriting commissions and
interest withdrawn in order to pay taxes (to the extent not paid from amounts accrued as interest on the funds held in the trust account).
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If the permitted purchases described above are made, there will be no impact to our remaining stockholders because the purchase price would not be paid by us.
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The redemption of our public shares if we fail to complete our initial business combination will reduce the book value per share for the shares held by our initial stockholders, who will be our only remaining
stockholders after such redemptions.
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Competition
In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective
similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, public companies and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive
experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses
will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who
exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target
businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Facilities
We currently utilize office space at 3282 Northside Parkway, Suite 275, Atlanta, GA 30327 from an affiliate of our sponsor. We consider our current office space adequate for our
current operations.
Subsequent to the closing of our IPO, pursuant to an administrative services agreement, we agreed to pay the affiliate of our sponsor a total of $20,000 per month for office space,
administrative and support services. We initially agreed to pay these monthly fees until the earlier of the completion of our initial business combination or our liquidation. On August 1, 2022, the affiliate of our sponsor agreed to waive all
future administrative fees and reimburse all previously paid administrative fees, and on November 10, 2022, we and the affiliate of our sponsor entered into the termination agreement for the administrative services agreement to effect such
agreement and terminate the administrative services agreement.
Employees
We currently have two officers and do not intend to have any full-time employees prior to the completion of our initial business combination. Members of our management team are not
obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that any such person
will devote in any time period to our company will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process.
Periodic Reporting and Financial Information
We have registered our units, Class A common stock and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and
current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports will contain financial statements audited and reported on by our independent registered public accounting firm.
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist
them in assessing the target business. These financial statements may be required to be prepared in accordance with, or be reconciled to, GAAP or IFRS, depending on the circumstances and the historical financial statements may be required to be
audited in accordance with the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such
financial statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. While this may limit the pool of potential business combination candidates, we do not believe that this
limitation will be material.
We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2023 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large
accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public accounting firm attestation requirements on our internal control over financial
reporting. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the
Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
We have filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we are subject to the rules and regulations
promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (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
auditor 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) following the fifth anniversary of the completion of our IPO, (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 equals or exceeds $700 million as of
the end of that fiscal year’s second fiscal quarter, and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Item 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 Class A common stock held by
non-affiliates equals or exceeds $250 million as of the end of that year’s second fiscal quarter, and (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our Class A common stock held by
non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter.
Legal Proceedings
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
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Risk Factors.
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An investment in our securities involves a high degree of risk. In connection with any actual or proposed investment in our securities, you should consider carefully all of the
risks described below, together with the other information contained in this Report. If any of the following risks occur, our business, financial condition or results may be materially and adversely affected. In that event, the trading price of our
securities could decline, and you could lose all or part of your investment. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business.
Summary Risk Factors
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We are a blank check company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
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Past performance of our management team or their respective affiliates may not be indicative of future performance of an investment in us.
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Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our public
stockholders do not support such a combination.
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Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder
approval of such business combination.
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If we seek stockholder approval of our initial business combination, our sponsor has agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.
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The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a
business combination with a target.
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The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital
structure.
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The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business combination and may limit the time
we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would
produce value for our stockholders.
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We have the right to extend the term we have to complete our initial business combination to up to 21 months from the closing of our IPO without providing our public stockholders with a corresponding vote or
redemption right.
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Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the COVID-19 outbreak or any future pandemic and
the status of debt and equity markets.
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As the number of special purpose acquisition companies evaluating targets remains high, attractive targets may become scarcer and
there may be more competition for attractive targets. This could increase the cost of our initial business combination and could result in our inability to find a target or to consummate an initial business combination.
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If we seek stockholder approval of our initial business combination, our sponsor, directors, officers, advisors or any of their affiliates may elect to purchase shares or warrants from public stockholders, which
may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock.
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If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, such shares
may not be redeemed.
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You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or
warrants, potentially at a loss.
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The NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
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You are not entitled to protections normally afforded to investors of many other blank check companies.
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If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.25 per share.
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Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we have not completed our
initial business combination within the required time period, our public stockholders may receive only approximately $10.25 per share, or less in certain circumstances, on our redemption of their stock, and our warrants will expire
worthless.
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If the net proceeds of our IPO and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate for the 18 months following the closing of our IPO (plus
any additional Extension Period), it could limit the amount available to fund our search for a target business or businesses and our ability to complete our initial business combination, and we will depend on loans from our sponsor, its
affiliates or members of our management team to fund our search and to complete our initial business combination.
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We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers or directors which may raise potential conflicts
of interest.
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Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and
results of operations.
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We identified a material weakness in our internal control over financial reporting during the year ended December 31, 2022. If we are unable to develop and maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
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For the year ended December 31, 2022, our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited
financial statements included in the accompanying financial statements.
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Our business, our search for a business combination, and any target business with which we ultimately consummate a business combination may be negatively impacted as a result of Russian actions in Ukraine.
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We may be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in the event of a liquidation or in connection with redemptions of our common stock after December 31, 2022.
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Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business
combination even though a majority of our public stockholders do not support such a combination.
We may not hold a stockholder vote to approve our initial business combination unless the business combination would require stockholder approval under applicable law or stock
exchange listing requirements or if we decide to hold a stockholder vote for business or other reasons. For instance, the NYSE rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to
obtain stockholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore, if we were structuring a business combination that required us to issue
more than 20% of our outstanding shares, we would seek stockholder approval of such business combination. However, except as required by applicable law or stock exchange rules, the decision as to whether we will seek stockholder approval of a
proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek
stockholder approval under applicable law or stock exchange listing requirements. Accordingly, we may consummate our initial business combination even if holders of a majority of the outstanding public shares of our common stock do not approve of
the business combination we consummate. Please see the section entitled “Business—Stockholders May Not Have the Ability to Approve Our Initial Business Combination” for additional information.
If we seek stockholder approval of our initial business combination, our initial stockholders, officers and directors have agreed to vote in favor of such
initial business combination, regardless of how our public stockholders vote.
Our initial stockholders have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote their founder shares and
any public shares held by them in favor of our initial business combination. As a result, in addition to our initial stockholders’ founder shares, we would need 7,217,600, or 37.5% (assuming all outstanding shares are voted), or 1,202,935, or 6.25%
(assuming only the minimum number of shares representing a quorum are voted), of the 19,246,931 public shares sold in our IPO to be voted in favor of our initial business combination in order to have such initial business combination approved. Our
other directors and officers have also entered into the letter agreement, which imposes the same obligations on them with respect to any public shares acquired by them. We expect that our initial stockholders and their permitted transferees will
own at least 20% of our outstanding shares of common stock at the time of any such stockholders vote. Accordingly, if we seek stockholders approval of our initial business combination, it is more likely that the necessary stockholders approval will
be received than would be the case if such persons agreed to vote their founder shares in accordance with the majority of the votes cast by our public stockholders.
Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your
shares from us for cash, unless we seek stockholder approval of such business combination.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of our initial business combination. Additionally, since
our Board may complete our initial business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the business combination. Accordingly, if we do not seek stockholder approval, your
only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer
documents mailed to our public stockholders in which we describe our initial business combination.
The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets,
which may make it difficult for us to enter into a business combination with a target.
We may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain
amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. Furthermore, we will only redeem our
public shares so long as (after such redemptions) our net tangible assets, after payment of the deferred underwriting commissions, will be at least $5,000,001 either prior to or upon consummation of an initial business combination (so that we do
not then become subject to the SEC’s “penny stock” rules), or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted
redemption requests would cause our net tangible assets to not be at least $5,000,001 either prior to or upon consummation of an initial business combination, after payment of the deferred underwriting commission, or such greater amount necessary
to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and,
thus, may be reluctant to enter into a business combination transaction with us.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable
business combination or optimize our capital structure.
At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights and, therefore, we will need
to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase
price or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements or arrange for third-party financing. In addition, if a larger number of shares is
submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third-party financing. Raising additional third-party financing may involve
dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. Furthermore, this dilution would increase to the extent that the anti-dilution provision of the Class B common stock results in the issuance of shares of
Class A common stock on a greater than one-to-one basis upon conversion of the shares of Class B common stock at the time of our business combination. The above considerations may limit our ability to complete the most desirable business
combination available to us or optimize our capital structure. The amount of the deferred underwriting commissions payable to the underwriters will not be adjusted for any shares that are redeemed in connection with an initial business combination.
The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commissions and after such redemptions, the per-share value of shares held by non-redeeming
stockholders will reflect our obligation to pay the deferred underwriting commissions.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial
business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of
cash at closing, the probability that our initial business combination would be unsuccessful increases. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the
trust account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the trust account. In either situation,
you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business
combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business
combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination within 18
months from the closing of our IPO or during any Extension Period. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that
particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the end of the time period described above. In addition, we may have limited time to
conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the
purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may receive only $10.25 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our amended and restated certificate of incorporation provides that we must complete our initial business combination within 18 months from the closing of our IPO or up to 21 months
from the closing of our IPO at the election of the Company, subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the trust account. We may not be able to find a suitable target business and complete our
initial business combination within such time period or during any Extension Period. Our ability to complete our initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and
the other risks described herein. For example, the outbreak of COVID-19 continues both in the United States and globally and, while the extent of the impact of the outbreak on us will depend on future developments, it could limit our ability to
complete our initial business combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Furthermore, we may be unable to complete a
business combination if continued concerns relating to COVID-19 limit the ability to have meetings with potential investors or the target company’s personnel, or if vendors and service providers are unavailable to negotiate and consummate a
transaction in a timely manner. Additionally, the outbreak of COVID-19 and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) may negatively impact businesses we may seek to acquire.
If we have not completed our initial business combination within such time period, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as
reasonably possible but not more than 10 business days thereafter, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds
held in the trust account (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and
liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may receive only $10.25 per share, or less than $10.25 per
share, on the redemption of their shares, and our warrants will expire worthless. See “—If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders
may be less than $10.25 per share” and other risk factors herein.
We have the right to extend the term we have to complete our initial business combination to up to 21 months from the closing of our IPO without providing our
public stockholders with a corresponding vote or redemption right.
We initially have until 18 months from the closing of our IPO to complete our initial business combination. However, if we anticipate that we may not be able to complete our initial
business combination within such period, we may, by resolution of our Board, extend the period of time we will have to complete an initial business combination by an additional three months, subject to the deposit of $1,750,000 (or $0.10 per unit)
into the trust account. Our public stockholders will not be entitled to vote on, or redeem their shares in connection with, any such extension. Our sponsor may elect, but is not required, to lend such amount to us. In addition, our sponsor may have
a conflict of interest in determining if and when to make such loan to us. In the event we complete our initial business combination, the loan would be repaid out of funds released to us from the trust account. If we do not complete a business
combination, the loan would not be repaid. This feature is different than most other special purpose acquisition companies, in which any extension of the company’s period to consummate an initial business combination would require a vote of the
company’s public stockholders and in connection with such vote, public stockholders would have the right to redeem their public shares.
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the COVID-19
outbreak or any future pandemic and the status of debt and equity markets.
In December 2019, a novel strain of coronavirus was reported to have surfaced, which has and is continuing to spread throughout parts of the world, including the United States. On
January 30, 2020, the World Health Organization declared the outbreak of COVID-19 a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency
for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. COVID-19 has adversely affected, and other events (such as
terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) could adversely affect, economies and financial markets worldwide, business operations and the conduct of commerce generally, and the business of any
potential target business with which we consummate a business combination could be, or may already have been, materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to
COVID-19 limit the ability to have meetings with potential investors or the target company’s personnel, or if vendors and service providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19
impacts our search for and ability to consummate a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the
actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19, any future pandemic or other events (such as terrorist attacks or natural disasters) continue for an extensive period of time, including as a
result of protectionist sentiments or legislation in our target markets, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially
adversely affected.
In addition, our ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which
may be impacted by a number of factors, such as the COVID-19 pandemic, current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions and other events, including, as a result of increased market volatility,
decreased market liquidity and availability of acceptable third-party financing. Political developments impacting government spending, including inflation or raising interest rates, may also negatively impact markets and cause weaker macro-economic
conditions. The effect of any or all of these events could adversely impact our ability to find a suitable business combination, as it may harm a potential target companies' operations and weaken their financial results.
Recent increases in inflation in the United States and elsewhere could make it more difficult for us to
consummate a business combination.
Recent increases in inflation in the United States and elsewhere may be leading to increased price volatility for publicly
traded securities, including ours, and may lead to other national, regional and international economic disruptions, any of which could make it more difficult for us to consummate a business combination.
As the number of special purpose acquisition companies evaluating targets remains high, attractive targets may
become scarcer and there may be more competition for attractive targets. This could increase the cost of our initial business combination and could result in our inability to find a target or to consummate an initial business combination.
In recent years, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition
companies have already entered into an initial business combination, and there are still many special purpose acquisition companies seeking potential targets or currently in registration preparing for an initial public offering. As a result, at
times, fewer attractive targets may be available to consummate an initial business combination.
In addition, because there are more special purpose acquisition companies seeking to enter into an initial business combination with available targets, the competition for available
targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector
downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our
ability to find and consummate an initial business combination, and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
If we seek stockholder approval of our initial business combination, our sponsor, directors, officers, advisors or any of their affiliates may elect to purchase
shares or warrants from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender
offer rules, our sponsor, directors, officers, advisors or any of their affiliates may purchase public shares or public warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the
completion of our initial business combination, although they are under no obligation to do so. Please see “Business—Permitted Purchases of Our Securities” for a description of how such persons will determine from which stockholders to seek to
acquire shares or warrants. Such a purchase may include a contractual acknowledgement that such public stockholder, although still the record holder of our public 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, advisors or any of their affiliates purchase public shares in privately negotiated transactions from public stockholders who have already elected to exercise their
redemption rights or submitted a proxy to vote against our initial business combination, such selling public stockholders would be required to revoke their prior elections to redeem their shares and any proxy to vote against our initial business
combination. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. The purpose of such
purchases could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of our initial business combination or to satisfy a closing condition in an agreement with a target
that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants
could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result
in the completion of our initial business combination that may not otherwise have been possible. We would expect any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject
to such reporting requirements.
In addition, if such purchases are made, the public “float” of our Class A common stock and the number of beneficial holders of our securities may be reduced, possibly making it
difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with
the procedures for tendering its shares, such shares may not be redeemed.
We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance
with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as
applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares, which will
include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. For example, we may require our public stockholders 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 date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the scheduled vote on the proposal to
approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or any other procedures, its shares may
not be redeemed. See “Business—Tendering Stock Certificates In Connection With a Tender Offer or Redemption Rights.”
Although we have selected general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our
initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general
criteria and guidelines.
Although we have selected general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial
business combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these criteria and guidelines, such combination may not be as successful as a
combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of
stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder
approval of the transaction is required by applicable law or stock exchange rules, or we decide to obtain stockholder approval for business or other reasons, it may be more difficult for us to attain stockholder approval of our initial business
combination if the target business does not meet our general criteria and guidelines. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.25 per
share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless. See “—If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share
redemption amount received by stockholders may be less than $10.25 per share” and other risk factors herein.
We may seek business combination opportunities with an early stage company, a financially unstable business or an entity lacking an established record of revenue
or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with an early stage company, a financially unstable business or an entity lacking an established record of sales or
earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include investing in a business without a proven business model or with limited historical financial data, volatile
revenues or earnings, intense competition and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly
ascertain or assess all of the significant risk factors and we may not have adequate time to complete all appropriate due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce
the chances that those risks will adversely impact a target business.
We may not necessarily be required to obtain an opinion from an independent investment banking firm or from an independent entity that commonly renders valuation
opinions, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our initial business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm that is a member
of FINRA or from an independent entity that commonly renders valuation opinions that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our
Board, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to our initial
business combination.
We may issue additional shares of Class A common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our
initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution
provisions described herein. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation authorizes the issuance of up to 250,000,000 shares of Class A common stock, par value $0.0001 per share, 25,000,000 shares of
Class B common stock, par value $0.0001 per share, and 2,500,000 shares of undesignated preferred stock, par value $0.0001 per share. As of the date of this Report, there are 230,753,069 and 20,188,268 authorized but unissued shares of Class A and
Class B common stock available, respectively, for issuance, which in the case of the Class A common stock, does not take into account shares reserved for issuance upon exercise of outstanding warrants and shares issuable upon conversion of the
shares of the Class B common stock. Shares of Class B common stock are automatically convertible into shares of our Class A common stock at the time of our initial business combination, initially at a one-for-one ratio but subject to adjustment as
set forth herein.
We may issue a substantial number of additional shares of Class A common stock and may issue shares of preferred stock, in order to complete our initial business combination or
under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial
business combination as a result of the anti-dilution provisions described herein. However, our amended and restated certificate of incorporation provides, among other things, that prior to our initial business combination, we may not issue
additional shares of capital stock that would entitle the holders thereof to (1) receive funds from the trust account or (2) vote as a class with our public shares (a) on any initial business combination or (b) to approve an amendment to our
amended and restated certificate of incorporation to (x) extend the time we have to consummate a business combination beyond 18 months from the closing of our IPO or up to 21 months from the closing of our IPO at the election of the Company,
subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the trust account, or (y) amend the foregoing provisions. The issuance of additional shares of common or preferred stock:
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may significantly dilute the equity interest of existing investors, which dilution would increase if the anti-dilution provisions in the founder shares resulted in the issuance of shares of Class A common stock on
a greater than one-to-one basis upon conversion of the founder shares;
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may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
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could cause a change in control if a substantial number of common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the
resignation or removal of our present officers and directors;
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may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us;
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may adversely affect prevailing market prices for our units, Class A common stock and/or warrants; and
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may not result in adjustment to the exercise price of our warrants.
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Resources could be wasted in researching business combinations that are not completed, which could materially adversely affect subsequent attempts to locate and
acquire or merge with another business. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.25 per share, or less than such amount in certain
circumstances, on the liquidation of our trust account and our warrants will expire worthless.
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments
will require substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the
proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons, including those beyond our
control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business
combination within the required time period, our public stockholders may receive only approximately $10.25 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless. See “—If third
parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.25 per share” and other risk factors herein.
We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose
management may not have the skills, qualifications or abilities to manage a public company.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be
limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we expected. Should
the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders or warrant
holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction
in value.
The officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s key personnel
could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we
contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition
candidate will not wish to remain in place.
Since our initial stockholders will lose their entire investment in us if our initial business combination is not completed (other than with respect to public
shares they may acquire), and because our initial stockholders who have an interest in founder shares may profit substantially from a business combination even under circumstances where our public stockholders would experience losses in connection
with their investment, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
Our sponsor currently owns 4,811,732 founder shares, after initially purchasing 7,187,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per
share, and after surrendering an aggregate of 2,375,768 founder shares for no consideration, which will be worthless if we do not complete an initial business combination. In addition, our sponsor purchased an aggregate of 10,661,119 private
placement warrants, each exercisable for one share of our Class A common stock, for a purchase price of $10,661,119 in the aggregate, or $1.00 per warrant, that will also be worthless if we do not complete our initial business combination. Each
private placement warrant may be exercised for one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein.
The founder shares are identical to the shares of Class A common stock included in the units sold in our IPO, except that: (1) the founder shares are subject to certain transfer
restrictions, as described in more detail below; (2) our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to: (a) waive their redemption rights with respect to any founder shares and
any public shares held by them in connection with the completion of our initial business combination; (b) waive their redemption rights with respect to any founder shares and any public shares held by them in connection with a stockholder vote to
approve an amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if
we have not consummated our initial business combination within 18 months from the closing of our IPO or up to 21 months from the closing of our IPO at the election of the Company, subject to certain conditions, including the deposit of $1,750,000
(or $0.10 per unit) into the trust account, or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (c) waive their rights to liquidating distributions from the trust account
with respect to any founder shares they hold if we fail to complete our initial business combination within 18 months from the closing of our IPO or during any Extension Period (although they will be entitled to liquidating distributions from the
trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame); (3) the founder shares are automatically convertible into shares of our Class A common stock at the
time of our initial business combination on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described in more detail below; (4) the founder shares are entitled to registration rights; and (5) only holders of
the founder shares will have the right to vote on the election of directors and to remove directors prior to our initial business combination.
The personal and financial interests of our sponsor, officers and directors may influence their motivation in identifying and selecting a target business combination, completing an
initial business combination and influencing the operation of the business following the initial business combination. In particular, because the founder shares were purchased at approximately $0.003 per share, the holders of our founder shares
(including members of our management team that directly or indirectly own founder shares) could make a substantial profit after our initial business combination even if our public stockholders lose money on their investment as a result of a
decrease in the post-combination value of their shares of Class A common stock (after accounting for any adjustments in connection with an exchange or other transaction contemplated by the business combination). For example, a holder of 1,000
founder shares would have paid approximately $3.00 to obtain such shares. At the time of an initial business combination, such holder would be able to convert such founder shares into 1,000 shares of our Class A common stock, and would receive the
same consideration in connection with our initial business combination as a public stockholder for the same number of shares of our Class A common stock. If the value of the shares of our Class A common stock on a post-combination basis (after
accounting for any adjustments in connection with an exchange or other transaction contemplated by the business combination) were to decrease to $5.00 per share of our Class A common stock, the holder of our founder shares would obtain a profit of
approximately $4,997 on account of the 1,000 founder shares that the holder had converted into shares of Class A common stock in connection with the initial business combination. By contrast, a public stockholder holding 1,000 shares of Class A
common stock would lose approximately $5,000 in connection with the same transaction. This risk may become more acute as the deadline for the completion of our initial business combination nears.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and
financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments as of the date of this Report to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial
debt to complete our initial business combination (including working capital loans that our sponsor, members of our management team or any of their affiliates or other third parties may make, up to $1,500,000 of which may be convertible into
warrants of the post-business combination entity at a price of $1.00 per warrant at the option of the lender at the time of the business combination). We have agreed that we will not incur any indebtedness unless we have obtained from the lender a
waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance of debt will affect the per share amount available for redemption from the trust account. Nevertheless, the incurrence of
debt could have a variety of negative effects, including:
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default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
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our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;
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our inability to pay dividends on our common stock;
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures,
acquisitions and other general corporate purposes;
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to
our competitors who have less debt.
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We may only be able to complete one business combination with the proceeds of our IPO and the sale of the private placement warrants, which will cause us to be
solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.
We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not
be able to effectuate our initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements
with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity our lack of
diversification may subject us to numerous economic, competitive and regulatory risks. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which
may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single business, property or asset; or
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dependent upon the development or market acceptance of a single or limited number of products, processes or services.
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This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular
industry in which we may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and
give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is
contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. With multiple business combinations, we could also face
additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the
operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete our initial business combination with a private company about which little information is available, which may result in a business
combination with a company that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally exists about
private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in a business combination with a company that is not as profitable
as we suspected, if at all.
Members of our management team and Board have significant experience as founders, board members, officers or executives of other companies. As a result, certain
of those persons have been, may be, or may become, involved in proceedings, investigations and litigation relating to the business affairs of the companies with which they were, are, or may in the future be, affiliated. This may have an adverse
effect on us, which may impede our ability to consummate an initial business combination.
During the course of their careers, members of our management team and Board have had significant experience as founders, board members, officers or executives of other companies.
As a result of their involvement and positions in these companies, certain persons were, are now, or may in the future become, involved in litigation, investigations or other proceedings relating to the business affairs of such companies or
transactions entered into by such companies. For example, Mr. Prather was CEO and President of Triple Crown Media during its bankruptcy in 2009. Any such litigation, investigations or other proceedings may divert our management team’s and
directors’ attention and resources away from identifying and selecting a target business or businesses for our initial business combination and may negatively affect our reputation, which may impede our ability to complete an initial business
combination.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified
governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us to complete
our initial business combination that some of our stockholders or warrant holders may not support.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing
instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds, extended the time to consummate an initial business combination and, with
respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. We cannot assure you that we will not seek to amend our charter or governing instruments or extend the time to
consummate an initial business combination in order to effectuate our initial business combination.
A provision of our warrant agreement may make it more difficult for us to consummate an initial business combination.
Unlike many blank check companies, if (x) we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing
of our initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our Board and, in the case of any
such issuance to our sponsor or its affiliates, without taking into account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than
60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the volume-weighted average
trading price of our Class A common stock during the 10-trading day period starting on the trading day after the day on which we consummate our initial business combination (such price, the “market value”) is below $9.20 per share, then the
exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the market value and the newly issued price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be
equal to 180% of the higher of the market value and the newly issued price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the market value and the newly issued price. This may
make it more difficult for us to consummate an initial business combination with a target business.
Our warrants are accounted for as a warrant liability and will be recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have
an adverse effect on the market price of our Class A common stock or may make it more difficult for us to consummate an initial business combination.
We account for our warrants as a warrant liability and will record at fair value upon issuance any changes in fair value each period reported in earnings as determined by us based
upon information available to us at the time of such determination. The impact of changes in fair value on earnings may have an adverse effect on the market price of our Class A common stock. In addition, potential targets may seek a SPAC that does
not have warrants that are accounted for as a warrant liability, which may make it more difficult for us to consummate an initial business combination with a target business.
Our warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and
exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
Our warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement,
including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which
jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other
claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have
consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United
States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in
the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon
such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage
such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with
resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and Board.
We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which
could compel us to restructure or abandon a particular business combination.
Although we believe that the net proceeds of our IPO and the sale of the private placement warrants will be sufficient to allow us to complete our initial business combination,
because we have not yet selected any prospective target business we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of our IPO and the sale of the private placement warrants prove to be insufficient,
either because of the size of our initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem for cash a significant number of shares from stockholders who elect redemption in
connection with our initial business combination or the terms of negotiated transactions to purchase shares in connection with our initial business combination, we may be required to seek additional financing or to abandon the proposed business
combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled
to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. In addition, even if we do not need additional financing to complete our initial business combination, we may
require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers,
directors or stockholders or any of their respective affiliates is required to provide any financing to us in connection with or after our initial business combination. If we have not completed our initial business combination within the required
time period, our public stockholders may receive only approximately $10.25 per share, or less in certain circumstances, on the liquidation of our trust account, and our warrants will expire worthless. See “—If third parties bring claims against us,
the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.25 per share” and other risk factors herein.
If the funds not being held in the trust account are insufficient to allow us to operate for at least the 18 months following the closing of our IPO or during
any Extension Period, we may be unable to complete our initial business combination.
The funds available to us outside of the trust account may not be sufficient to allow us to operate for at least the 18 months following the closing of our IPO or during any
Extension Period, assuming that our initial business combination is not completed during that time. We expect to incur significant costs in pursuit of our acquisition plans. Management’s plans to address this need for capital through potential
loans from certain of our affiliates are discussed in the section of this Report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” However, our affiliates are not obligated to make loans to us in the
future, and we may not be able to raise additional financing from unaffiliated parties necessary to fund our expenses. Any such event in the future may negatively impact the analysis regarding our ability to continue as a going concern at such
time.
We believe that the funds available to us outside of the trust account will be sufficient to allow us to operate for at least the 18 months following the closing of our IPO or
during any Extension Period; however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target
business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other
companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement
where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or
conduct due diligence with respect to, a target business. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.25 per share, or less in certain
circumstances, on the liquidation of our trust account and our warrants will expire worthless. See “—If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by
stockholders may be less than $10.25 per share” and other risk factors herein.
If the net proceeds of our IPO and the sale of the private placement warrants not being held in the trust account are insufficient, it could limit the amount
available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor or management team to fund our search, to pay our taxes and to complete our initial business
combination.
Of the net proceeds of our IPO and the sale of the private placement warrants, only a limited amount is available to us outside
the trust account to fund our working capital requirements. If we are required to seek additional capital, we would need to borrow funds from our sponsor, management team or other third parties to operate or may be forced to liquidate. None of
our sponsor, members of our management team nor any of their affiliates is under any obligation to loan funds to us in such circumstances. Any such loans may be repaid only from funds held outside the trust account or from funds released to us
upon completion of our initial business combination. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver
against any and all rights to seek access to funds in our trust account. If we are unable to obtain these loans, we may be unable to complete our initial business combination. If we have not completed our initial business combination within the
required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In such case, our public stockholders may receive only $10.25 per share, or less in certain
circumstances, and our warrants will expire worthless. See “—If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.25
per share” and other risk factors herein.
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial
business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.25 per share, or less in certain circumstances, on our redemption of their
stock, and our warrants will expire worthless.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment
partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in
identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge
than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there will be numerous target businesses we could potentially acquire with the net proceeds of our IPO and
the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others
an advantage in pursuing the acquisition of certain target businesses. Furthermore, in the event we seek stockholder approval of our initial business combination and we are obligated to pay cash for shares of our Class A common stock, it will
potentially reduce the resources available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business combination. If we have not completed our initial
business combination within the required time period, our public stockholders may receive only approximately $10.25 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless. See
“—If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.25 per share” and other risk factors herein.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination
with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro
forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial
statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards as issued by the International
Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB.
These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such financial statements in accordance with
federal proxy rules and complete our initial business combination within the prescribed time frame.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our
activities may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including restrictions on the nature of our investments and
restrictions on the issuance of securities, each of which may make it difficult for us to complete our initial business combination. In addition, we may have imposed upon us burdensome requirements, including registration as an investment company
with the SEC, adoption of a specific form of corporate structure and reporting, record keeping, voting, proxy and disclosure requirements and compliance with other rules and regulations that we are currently not subject to.
We do not believe that our anticipated principal activities will subject us to the Investment Company Act. The proceeds held in the trust account may be invested by the trustee only
in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Because the investment of the
proceeds will be restricted to these instruments, we believe we will meet the requirements for the exemption provided in Rule 3a-1 promulgated under the Investment Company Act. If we were deemed to be subject to the Investment Company Act,
compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to consummate our initial business combination. If we have not completed our initial business
combination within the required time period, our public stockholders may receive only approximately $10.25 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless. See “—If third
parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.25 per share” and other risk factors herein.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and
complete our initial business combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements.
Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a
material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our
ability to negotiate and complete our initial business combination, and results of operations.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving special purpose acquisition
companies and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; the potential liability of certain participants in proposed business combination transactions; and the
extent to which special purpose acquisition companies could become subject to regulation under the Investment Company Act. These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect our ability to
negotiate and complete our initial business combination and may increase the costs and time related thereto.
Because we are neither limited to evaluating target businesses in a particular industry, sector or geography, nor have we selected any specific target businesses
with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
We may seek to complete a business combination with an operating company in any industry, sector or geography, but we will not, under our amended and restated certificate of
incorporation, be permitted to effectuate our initial business combination solely with another blank check company or similar company with nominal operations. Because we have not yet selected or approached any specific target business with respect
to a business combination, there is no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our
initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or
earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target
business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence.
Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target
business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any
stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a
remedy for such reduction in value.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial
financial and management resources, and increase the time and costs of completing an initial business combination.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending
December 31, 2022. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public accounting firm
attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public
companies because a target business with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal
control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such initial business combination.
We identified a material weakness in our internal control over financial reporting during the year ended
December 31, 2022. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor
confidence in us and materially and adversely affect our business and operating results.
We identified a material weakness in our internal control over financial reporting related to our accounting for complex
financial instruments during the year ended December 31, 2022. As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of the end of the fiscal quarters ended March 31,
2022, June 30, 2022 and September 30, 2022. Based on an initial review, we did not identify certain transaction costs and over-allotment options forfeited in connection with our IPO, and, as a result, we booked adjusting entries to correct
over-allotment liability, additional paid in capital and deal expense as of March 31, 2022.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports
and prevent fraud. We, with the oversight of our Audit Committee, have actively undertaken remediation efforts to address the material weakness identified above and have developed measures and controls to prevent a re-occurrence of such a
deficiency in the future. We are committed to maintaining an effective internal control environment, and given the progress made in this area, management expects that after sufficient time elapses, the newly implemented controls will be operating
effectively and that the material weakness will be adequately remediated. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects. If we are unable to
develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and
adversely affect our business and operating results.
For the year ended December 31, 2022, our independent registered public accounting firm has included an
explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in the accompanying financial statements.
The report from our independent registered public accounting firm for the year ended December 31, 2022 includes an explanatory
paragraph stating that the date for mandatory liquidation and subsequent dissolution raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the
outcome of this uncertainty. If an initial business combination is not consummated and we are not able to obtain sufficient funding, our business, prospects, financial condition and results of operations will be harmed and we may be unable to
continue as a going concern. If we are unable to continue as a going concern, we may be forced to liquidate, and investors may lose part or all of their investment. Future reports from our independent registered public accounting firm may also
contain statements expressing substantial doubt about our ability to continue as a going concern. If there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide
additional funding to us on commercially reasonable terms, or at all, and our business may be harmed.
We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or
claim of any kind in or to any monies in the trust account and not to seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient
funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of
their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders.
Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
Our initial business combination and our structure thereafter may not be tax-efficient to our stockholders and warrant holders. As a result of our business
combination, our tax obligations may be more complex, burdensome and uncertain.
Although we will attempt to structure our initial business combination in a tax-efficient manner, tax structuring considerations are complex, the relevant facts and law are
uncertain and may change, and we may prioritize commercial and other considerations over tax considerations. For example, in connection with our initial business combination and subject to any requisite stockholder approval, we may structure our
business combination in a manner that requires stockholders and/or warrant holders to recognize gain or income for tax purposes, effect a business combination with a target company in another jurisdiction, or reincorporate in a different
jurisdiction (including, but not limited to, the jurisdiction in which the target company or business is located). We do not intend to make any cash distributions to stockholders or warrant holders to pay taxes in connection with our business
combination or thereafter. Accordingly, a stockholder or a warrant holder may need to satisfy any liability resulting from our initial business combination with cash from its own funds or by selling all or a portion of the shares received. In
addition, stockholders and warrant holders may also be subject to additional income, withholding or other taxes with respect to their ownership of us after our initial business combination.
In addition, we may effect a business combination with a target company that has business operations outside of the United States, and possibly, business operations in multiple
jurisdictions. If we effect such a business combination, we could be subject to significant income, withholding and other tax obligations in a number of jurisdictions with respect to income, operations and subsidiaries related to those
jurisdictions. Due to the complexity of tax obligations and filings in other jurisdictions, we may have a heightened risk related to audits or examinations by U.S. federal, state, local and non-U.S. taxing authorities. This additional complexity
and risk could have an adverse effect on our after-tax profitability and financial condition.
Our business, our search for a business combination, and any target business with which we ultimately consummate a business combination may be negatively
impacted as a result of Russian actions in Ukraine.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United
States, have instituted economic sanctions against the Russian Federation and Belarus. The impact of this action and related sanctions on the world economy are not determinable as of the date of this Report and the specific impact on our financial
condition, results of operations, and cash flows is also not determinable as of the date of this Report. These actions and related sanctions could adversely affect economies and financial markets worldwide, business operations and the conduct of
commerce generally, and the business of any potential target business with which we consummate a business combination could be, or may already have been, materially and adversely affected. The extent to which these actions and related sanctions
impact our search for and ability to consummate a business combination will depend on future developments, which are highly uncertain and cannot be predicted.
We may be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in the event of a liquidation or in connection with redemptions of our common
stock after December 31, 2022.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (H.R. 5376) (the “IRA”), which, among other things, imposes a 1% excise tax on any domestic
corporation that repurchases its stock after December 31, 2022 (the “Excise Tax”). The Excise Tax is imposed on the fair market value of the repurchased stock, with certain exceptions. Because we are a Delaware corporation and our securities trade
on the NYSE, we are a “covered corporation” within the meaning of the IRA. While not free from doubt, absent any further guidance from Congress, the Excise Tax may apply to any redemptions of our common stock after December 31, 2022, including
redemptions in connection with an initial business combination and any amendment to our amended and restated certificate of incorporation to extend the time to consummate an initial business combination, unless an exemption is available. Issuances
of securities in connection with our initial business combination transaction (including any PIPE transaction at the time of our initial business combination) are expected to reduce the amount of the Excise Tax in connection with redemptions
occurring in the same calendar year, but the number of securities redeemed may exceed the number of securities issued. Consequently, the Excise Tax may make a transaction with us less appealing to potential business combination targets. Further,
the application of the Excise Tax in the event of a liquidation is uncertain absent further guidance, and the proceeds held in the trust account could be subject to the Excise Tax, in which case the per-share amount that would otherwise be received
by our stockholders in connection with our liquidation may be reduced.
Risks Related to Our Securities
The NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to
additional trading restrictions.
Our units, Class A common stock and warrants are currently listed on the NYSE, but we cannot assure you that our securities
will continue to be listed on the NYSE in the future or prior to our initial business combination. In order to continue listing our securities on the NYSE prior to our initial business combination, we must maintain certain financial, distribution
and stock price levels. In general, we must maintain a minimum number of holders of our securities. On January 12, 2023, we received a notice letter from the NYSE indicating that we are not currently in compliance with the provision of Section
802.01B of the NYSE Listed Company Manual requiring us to maintain a minimum of 300 public stockholders on a continuous basis (see Note 11 to the financial statements attached hereto for additional information). Although we intend to take the
necessary steps to regain compliance with such requirement, there can be no assurance that we will be successful in doing so. Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with the
NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE. For instance, our stock price would generally be required to be
at least $4.00 per share. We cannot assure you that we will be able to meet those initial listing requirements at that time.
In addition, NYSE Listed Company Manual Section 303A.07(A) requires our audit committee to be comprised of a minimum of three
members, all of whom must be independent under the rules of the NYSE and Rule 10A-3 of the Exchange Act. One of our former independent directors and members of our audit committee, John Zieser, resigned from our Board, effective March 24, 2023. If
any of our other independent directors similarly resign from our Board, we may not be able to satisfy the requirements of NYSE Listed Company Manual Section 303A.07(A).
If the NYSE delists any of our securities from trading on its exchange and we are not able to list such securities on another national securities exchange, we expect such securities
could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity for our securities;
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a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading
activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are
referred to as “covered securities.” Because our units, Class A common stock and warrants are listed on the NYSE, our units, Class A common stock and warrants will qualify as covered securities under such statute. Although the states are preempted
from regulating the sale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of
covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators
view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on the NYSE, our securities would
not qualify as covered securities under such statute and we would be subject to regulation in each state in which we offer our securities.
You are not entitled to protections normally afforded to investors of many other blank check companies.
Because our Class A common stock is approved for listing on a national securities exchange, we are exempt from rules
promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors are not afforded the benefits or protections of those rules. Among other things, this means our units are immediately tradable and we
have a longer period of time to complete our business combination than do companies subject to Rule 419. Moreover, if our initial public offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held
in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of an initial business combination.
You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore,
you may be forced to sell your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (1) the completion of our initial business combination, and then
only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein; (2) the redemption of any public shares properly submitted in connection with a stockholder
vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not
complete our initial business combination within 18 months from the closing of our IPO or during any Extension Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (3)
the redemption of all of our public shares if we have not completed our initial business combination within 18 months from the closing of our IPO or during any Extension Period, subject to applicable law and as further described herein.
Stockholders who do not exercise their rights to the funds held in the trust account in connection with such an amendment to our amended and restated certificate of incorporation would still have rights to the funds held in the trust account in
connection with any other applicable amendment to our amended and restated certificate of incorporation and a subsequent business combination to the extent they are then stockholders. In no other circumstances will a public stockholder have any
right or interest of any kind in the trust account. Holders of warrants will not have any right to the proceeds held in the trust account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public
shares or warrants, potentially at a loss.
Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata
portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months from the closing of our IPO or during any Extension
Period may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it,
including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating
distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any
liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 18th month from the closing of our IPO (or following
any applicable Extension Period) in the event we do not complete our initial business combination and, therefore, we do not intend to comply with those procedures.
Because we do not intend to comply with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our
payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will
be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, consultants, etc.) or prospective target businesses. If our plan of distribution
complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any
liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially
be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed
to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months from the closing of our IPO or during any Extension Period is not considered a liquidating
distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption
distribution, instead of three years, as in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after the consummation of our initial business combination and you will not be entitled to any of the
corporate protections provided by such a meeting.
We may not hold an annual meeting of stockholders until after we consummate our initial business combination (unless required by the NYSE) and thus may not be in compliance with
Section 211(b) of the DGCL, which requires an annual meeting of stockholders be held for the purposes of electing directors in accordance with a company’s bylaws unless such election is made by written consent in lieu of such a meeting. Therefore,
if our stockholders want us to hold an annual meeting prior to our consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section
211(c) of the DGCL. Additionally, only holders of Class B common stock will have the right to vote on the election of directors and to remove directors prior to our initial business combination, and such rights may only be amended by a resolution
passed by the holders of a majority of our Class B common stock.
We did not register the issuance of shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at the time of our
IPO, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a “cashless basis” and potentially causing such warrants to expire
worthless.
We did not register the issuance of shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at the time of our
IPO. However, under the terms of the warrant agreement, we have agreed, as soon as practicable, but in no event later than 20 business days after the closing of our initial business combination, to use our commercially reasonable efforts to file,
and within 60 business days following our initial business combination have declared effective, a registration statement under the Securities Act covering the issuance of such shares and maintain a current prospectus relating to the Class A common
stock issuable upon exercise of the warrants, until the redemption or expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events
arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current, complete or correct or the SEC issues a
stop order. If the issuance of the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis, in which case, the number of shares
of Class A common stock that you will receive upon cashless exercise will be based on a formula subject to a maximum amount of shares equal to 0.361 shares of Class A common stock per warrant (subject to adjustment). However, no warrant will be
exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws
of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it
satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9)
of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use our commercially reasonable efforts to register or qualify the shares under applicable blue sky
laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the
shares underlying the warrants under applicable state securities laws and no exemption is available. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the
holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and may expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit
purchase price solely for the shares of Class A common stock included in the units. There may be a circumstance where an exemption from registration exists for holders of our private placement warrants to exercise their warrants while a
corresponding exemption does not exist for holders of the warrants included as part of units sold in our IPO. In such an instance, our sponsor and its permitted transferees (which may include our directors and executive officers) would be able to
exercise their warrants and sell the common stock underlying their warrants while holders of our public warrants would not be able to exercise their warrants and sell the underlying common stock. If and when the warrants become redeemable by us, we
may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A common stock for sale under all applicable state securities laws. As a result, we may redeem the warrants as set forth above even if the
holders are otherwise unable to exercise the warrants.
The grant of registration rights to our initial stockholders and their permitted transferees may make it more difficult to complete our initial business
combination, and the future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to a registration rights agreement with our sponsor, at or after the time of our initial business combination, our initial stockholders and their permitted transferees can
demand that we register the resale of their founder shares after those shares convert to shares of our Class A common stock. In addition, our sponsor and its permitted transferees can demand that we register the resale of the private placement
warrants and the shares of Class A common stock issuable upon exercise of the private placement warrants, and holders of warrants that may be issued upon conversion of working capital loans may demand that we register the resale of such warrants or
the Class A common stock issuable upon exercise of such warrants.
We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an
adverse effect on the market price of our Class A common stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to complete. This is because the stockholders of the target
business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common stock that is expected when the common stock owned by our initial
stockholders or their permitted transferees, the private placement warrants owned by our sponsor or warrants issued in connection with working capital loans are registered for resale.
Certain provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of
the agreement governing the release of funds from our trust account) may be amended with the approval of holders of at least 65% of our outstanding common stock, which is a lower amendment threshold than that of some other blank check companies. It
may be easier for us, therefore, to amend our amended and restated certificate of incorporation to facilitate the completion of an initial business combination that some of our stockholders may not support.
Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s
pre-business combination activity, without approval by holders of a certain percentage of the company’s stockholders. In those companies, amendment of these provisions typically requires approval by holders holding between 90% and 100% of the
company’s public shares. Our amended and restated certificate of incorporation provides that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of our IPO and the sale of the private
placement warrants into the trust account and not release such amounts except in specified circumstances) may be amended if approved by holders of at least 65% of our outstanding common stock, and corresponding provisions of the trust agreement
governing the release of funds from our trust account may be amended if approved by holders of at least 65% of our outstanding common stock. Additionally, only holders of Class B common stock will have the right to vote on the election of directors
and to remove directors prior to our initial business combination, and such rights may only be amended by a resolution passed by the holders of a majority of our Class B common stock. In all other instances, our amended and restated certificate of
incorporation provides that it may be amended by holders of a majority of our common stock, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders, who beneficially own 20% of our common stock, may
participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and
restated certificate of incorporation which govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete our initial business combination with which you do not agree.
Our sponsor, officers and directors have agreed, pursuant to a written agreement, that they will not propose any amendment to our amended and restated certificate of incorporation
(A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the
closing of our IPO or during any Extension Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem
their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by the number of then outstanding public shares. These
agreements are contained in a letter agreement that we have entered into with our sponsor, officers and directors. Our public stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the
ability to pursue remedies against our sponsor, officers or directors for any breach of these agreements. As a result, in the event of a breach, our public stockholders would need to pursue a stockholder derivative action, subject to applicable
law.
Our initial stockholders will control the election of our Board until consummation of our initial business combination and will hold a substantial interest in
us. As a result, they will elect all of our directors prior to the consummation of our initial business combination and may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Our initial stockholders own 20% of our outstanding common stock. In addition, the founder shares, all of which are held by our initial stockholders, will entitle the holders to
elect all of our directors prior to the consummation of our initial business combination. Holders of our public shares will have no right to vote on the election of directors during such time. These provisions of our amended and restated
certificate of incorporation may only be amended by a majority of our Class B common stock.
Accordingly, our initial stockholders may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including
amendments to our amended and restated certificate of incorporation. If our initial stockholders purchase any additional shares of Class A common stock in the aftermarket or in privately negotiated transactions, this would increase their control.
Factors that would be considered in making such additional purchases would include consideration of the current trading price of our Class A common stock. In addition, our Board, whose members were elected by our sponsor, is divided into three
classes, each of which will generally serve for three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our business combination,
in which case all of the current directors will continue in office until at least the completion of the business combination. If there is an annual meeting, as a consequence of our “staggered” Board, only a minority of the Board will be considered
for election and our initial stockholders, because of their ownership position, will control the outcome, as only holders of Class B common stock will have the right to vote on the election of directors and to remove directors prior to our initial
business combination. Accordingly, our initial stockholders will continue to exert control at least until the completion of our business combination.
Unlike many other similarly structured blank check companies, our initial stockholders will receive additional shares of Class A common stock if we issue shares
to consummate an initial business combination.
The founder shares will automatically convert into Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment as provided
herein. In the case that additional shares of Class A common stock, or equity-linked securities convertible or exercisable for Class A common stock, are issued or deemed issued in excess of the amounts offered in our IPO and related to the closing
of the initial business combination, the ratio at which founder shares shall convert into Class A common stock will be adjusted so that the number of Class A common stock issuable upon conversion of all founder shares will equal, in the aggregate,
on an as-converted basis, 20% of the total number of all outstanding shares of common stock upon completion of the initial business combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the business
combination, and any private placement warrants issued to our sponsor or its affiliates upon conversion of loans made to us. This is different from most other similarly structured blank check companies in which the initial stockholder will only be
issued an aggregate of 20% of the total number of shares to be outstanding prior to the initial business combination. Additionally, the aforementioned adjustment will not take into account any shares of Class A common stock redeemed in connection
with the business combination. Accordingly, the holders of the founder shares could receive additional shares of Class A common stock even if the additional shares of Class A common stock, or equity-linked securities convertible or exercisable for
Class A common stock, are issued or deemed issued solely to replace those shares that were redeemed in connection with the business combination. This may make it more difficult and expensive for us to consummate an initial business combination.
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then
outstanding public warrants. As a result, the exercise price of your warrants could be increased, the warrants could be converted into cash or stock, the exercise period could be shortened and the number of shares of our Class A common stock
purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement
provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to
make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public
warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among
other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the
last reported sale price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and
equity-linked securities as described above) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders and provided that certain other conditions
are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, we may redeem
the warrants as set forth above even if the holders are otherwise unable to exercise the warrants. Redemption of the outstanding warrants could force you to: (1) exercise your warrants and pay the exercise price therefor at a time when it may be
disadvantageous for you to do so; (2) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (3) accept the nominal redemption price which, at the time the outstanding warrants are called for
redemption, we expect would be substantially less than the market value of your warrants. None of the private placement warrants will be redeemable by us, subject to certain limited exceptions, so long as they are held by our sponsor or its
permitted transferees.
In addition, we may redeem your warrants at any time after they become exercisable and prior to their expiration at a price of $0.10 per warrant upon a minimum of 30 days’ prior
written notice of redemption provided that holders will be able to exercise their warrants prior to redemption for a number of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock. In
addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of the Class A common stock had your warrants remained
outstanding, and may not compensate the holders for the value of the warrants, including because the number of common stock received is capped at 0.361 shares of our Class A common stock per warrant (subject to adjustment) irrespective of the
remaining life of the warrants.
Our warrants and founder shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate our initial
business combination.
As of the date of this Report, we have outstanding warrants to purchase 20,284,584 shares of our Class A common stock at a price of $11.50 per whole share. Our initial stockholders
currently hold 4,811,732 founder shares. The founder shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment as set forth herein. In addition, if our sponsor, an affiliate of our sponsor or certain
of our officers and directors make any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at the price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the private placement
warrants. To the extent we issue shares of Class A common stock to effectuate a business transaction, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants or conversion
rights could make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of outstanding shares of our Class A common stock and reduce the value of the Class A common stock issued to complete the
business combination. Therefore, our warrants and founder shares may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders
are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender
offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined
under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in our IPO, without our prior consent, which we refer to as the “Excess Shares.” However, we would
not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete
our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if
we complete our initial business combination. As a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a
loss.
If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders
may be less than $10.25 per share.
Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than
our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust
account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to,
fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the
funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an
agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Making such a request of potential target businesses may make
our acquisition proposal less attractive to them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential target businesses that we might pursue. The underwriters of our IPO did not
execute agreements with us waiving such claims to the monies held in the trust account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or
skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are unable to find a service provider willing to execute a waiver. In addition, there is no
guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon
redemption of our public shares, if we have not completed our initial business combination within the required time period, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to
provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per share redemption amount received by public stockholders could be less than the $10.25 per
share initially held in the trust account, due to claims of such creditors.
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services
rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (1) $10.25 per public share or (2) such lesser amount per
public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes (less up to $100,000 of
interest to pay dissolution expenses), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of our IPO against
certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such
third-party claims. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnification obligations. Given that our sponsor’s only assets are securities of our company, our sponsor may not be able to satisfy
those indemnification obligations. We have not asked our sponsor to reserve for such obligations. See “—Our directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the
trust account available for distribution to our public stockholders.” As a result, if any such claims were successfully made against the trust account, the funds available for our initial business combination and redemptions could be reduced to
less than $10.25 per public share. In such event, we may not be able to complete our initial business combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or
directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
The securities in which we invest the proceeds held in the trust account could bear a negative rate of interest, which could reduce the interest income available for payment of
taxes or reduce the value of the assets held in trust such that the per share redemption amount received by stockholders may be less than $10.25 per share.
The net proceeds of our IPO and certain proceeds from the concurrent sale of the private placement warrants are held in the trust account. The proceeds held in the trust account may
only be invested in direct U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government
treasury obligations. While short-term U.S. treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in
recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event of very low or negative yields, the amount of interest income
(which we are permitted to use for payment of our tax obligations, and up to $100,000 of dissolution expenses) would be reduced. In the event that we have not completed our initial business combination or make certain amendments to our amended and
restated certificate of incorporation, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income. If the balance of the trust account is reduced below $179,375,000 as a
result of negative interest rates, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.25 per share.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is
filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our Board may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our Board and us to
claims of punitive damages.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is
not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to
recover some or all amounts received by our stockholders. In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith by paying public stockholders from the trust account prior to
addressing the claims of creditors, thereby exposing itself and us to claims of punitive damages.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is
filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per share amount that would otherwise be received by our stockholders in connection with our
liquidation may be reduced.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is
not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the
extent any bankruptcy claims deplete the trust account, the per share amount that would otherwise be received by our public stockholders in connection with our liquidation would be reduced.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete our initial business
combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that we will only redeem our public shares so long as our net
tangible assets, after payment of the deferred underwriting commissions and after such redemptions, will be at least $5,000,001 (a) in the case of our initial business combination, either prior to or upon consummation of such initial business
combination, after payment of the deferred underwriting commission or (b) in the case of an amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection
with our initial business combination or to redeem 100% of our public shares if we have not consummated our initial business combination within 18 months from the closing of our IPO or during any Extension Period or (ii) with respect to any other
provision relating to stockholders’ rights or pre-initial business combination activity, upon such amendment (in each case such that we do not then become subject to the SEC’s “penny stock” rules), or any greater net tangible asset or cash
requirement that may be contained in the agreement relating to our initial business combination. As a result, we may be able to complete our initial business combination even though a substantial majority of our public stockholders do not agree
with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, have
entered into privately negotiated agreements to sell their shares to our sponsor, officers, directors, advisors or any of their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of common stock
that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business
combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure
requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may 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 auditor 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 nonbinding advisory vote on executive compensation and stockholder approval of any
golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us
to lose that status earlier, including if the market value of our Class A common stock held by non-affiliates exceeds $700 million as of the end of any second quarter of a fiscal year, in which case we would no longer be an emerging growth company
as of the end of such fiscal year. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these
exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies
(that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the
extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, we are a “smaller reporting company” as defined in Item 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 Class A common stock held by
non-affiliates exceeds $250 million as of the end of that fiscal year’s second fiscal quarter, and (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our Class A common stock held by
non-affiliates exceeds $700 million as of the end of that fiscal year’s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public
companies difficult or impossible.
Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be
willing to pay in the future for our Class A common stock and could entrench management.
Our amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best
interests. These provisions include a staggered Board and the ability of the Board to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that
otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal
of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types
of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with our company or our company’s directors, officers or other employees.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of
Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (1) derivative action or proceeding brought on behalf of our company, (2) action asserting a claim of breach of a fiduciary duty owed by any director,
officer, employee or agent of our company to our company or our stockholders, or any claim for aiding and abetting any such alleged breach, (3) action asserting a claim against our company or any director or officer of our company arising pursuant
to any provision of the DGCL or our amended and restated certificate of incorporation or our bylaws, or (4) action asserting a claim against us or any director or officer of our company governed by the internal affairs doctrine except for, as to
each of (1) through (4) above, any claim (a) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal
jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (c) arising under the federal securities laws, including
the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall concurrently be the sole and exclusive forums. Notwithstanding the foregoing, the provisions of this paragraph will not apply to
suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring
any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the forum provisions in our amended and restated certificate of incorporation. If any action the subject matter of which is within the scope
of the forum provisions is filed in a court other than a court located within the State of Delaware (a “foreign action”) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the
state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such stockholder in any
such enforcement action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder.
This choice-of-forum provision may make it more costly for a stockholder to bring a claim, and it may also limit a stockholder’s ability to bring a claim in a judicial forum that it
finds favorable for disputes with our company or its directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation
inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our
business, financial condition and results of operations and result in a diversion of the time and resources of our management and Board.
If you exercise your public warrants on a “cashless basis,” you will receive fewer shares of Class A common stock from such exercise than if you were to exercise
such warrants for cash.
There are circumstances in which the exercise of the public warrants may be required or permitted to be made on a cashless basis.
First, if we call the public warrants for redemption in the circumstances when the price per share of Class A common stock equals or exceeds $18.00 and, in connection therewith, we
require warrant holders to exercise their warrants on a cashless basis or if a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of
our initial business combination, warrant holders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. If this
exemption, or another exemption is not available, holders will not be able to exercise their warrants on a cashless basis. In the event of an exercise on a cashless basis under these circumstances, a holder would pay the warrant exercise price by
surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the
excess of the “fair market value” of our Class A common stock (as defined in the warrant agreement) over the exercise price of the warrants by (y) the fair market value and (B) the product of 0.361 and the number of warrants surrendered by the
holder, subject to adjustment, and the number of shares of our Class A common stock received by a holder upon exercise will be fewer than it would have been had such holder exercised the warrant for cash. For example, if the holder is exercising
875 public warrants at $11.50 per share through a cashless exercise when the shares of our Class A common stock have a fair market value of $17.50 per share when there is no effective registration statement, then upon the cashless exercise, the
holder will receive 300 shares of our Class A common stock. The holder would have received 875 shares of our Class A common stock if the exercise price was paid in cash.
Second, if we call the public warrants for redemption when the price per share of Class A common stock equals or exceeds $10.00, holders who wish to exercise their warrants may do
so on a cashless basis. In the event of an exercise on a cashless basis under those circumstances, a holder would receive that number of shares determined by reference to an agreed table, which is set forth in the warrant agreement, based on the
redemption date and the “fair market value” of Class A common stock (as defined in the warrant agreement). In either case, this will have the effect of reducing the potential “upside” of the holder’s investment in our company because the warrant
holder will hold a smaller number of shares of our Class A common stock upon a cashless exercise of the warrants they hold.
Risks Related to Our Sponsor, Management, Directors and Employees
Past performance of our management team or their respective affiliates may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, our management team and their affiliates is presented for informational purposes only. Any past
experience and performance of our management team and their respective affiliates is not a guarantee either: (1) that we will be able to successfully identify a suitable candidate for our initial business combination; or (2) of any results with
respect to any initial business combination we may consummate. You should not rely on the historical experiences of our management team and their affiliates, including investments and transactions in which they have participated and businesses
with which they have been associated, including, without limitation, the sample transactions set forth under “Business–Sourcing of Potential Initial Business Combination Targets” as indicative of the future performance of an investment in us or
as indicative of every prior investment by each of the members of our management team or their affiliates. The market price of our securities may be influenced by numerous factors, many of which are beyond our control, and our stockholders
may experience losses on their investment in our securities.
We may engage in a business combination with one or more target businesses that may be affiliated with our sponsor, officers or directors which may raise potential conflicts of
interest.
In light of the involvement of our sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsor, officers and
directors. Our officers and directors also serve as officers and board members for other entities, including, without limitation, those described under “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest.” Our
sponsor, officers and directors are not currently aware of any specific opportunities for us to complete our initial business combination with any entities with which they are affiliated, and there have been no preliminary discussions concerning a
business combination with any such entity or entities. Although we are not specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our
criteria for a business combination as set forth in “Item 1. Business—Effecting our Initial Business Combination” and “Item 1. Business—Selection of a Target Business and Structuring of our Initial Business Combination” and such transaction was
approved by a majority of our independent and disinterested directors.
Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent entity that commonly renders valuation
opinions, regarding the fairness to our company from a financial point of view of a business combination with one or more domestic or international businesses affiliated with our sponsor, officers or directors, potential conflicts of interest still
may exist and, as a result, the terms of the business combination may not be as advantageous to our company and our public stockholders as they would be absent any conflicts of interest. For more information, see the section of this Report entitled
“Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest.”
Our directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account
available for distribution to our public stockholders.
In the event that the proceeds in the trust account are reduced below the lesser of: (1) $10.25 per public share; or (2) such lesser amount per public share held in the trust
account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes (less up to $100,000 of interest to pay dissolution
expenses), and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action
against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that
our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in certain instances. For example, the cost of such legal action may be deemed by the independent directors to be too high
relative to the amount recoverable or the independent directors may determine that a favorable outcome is not likely. Furthermore, even if our directors decide to seek to enforce the sponsor’s indemnification obligations, given that our sponsor’s
only assets are securities of our company, our sponsor may not be able to satisfy those indemnification obligations. If our independent directors choose not to enforce these indemnification obligations or are unsuccessful in enforcing the sponsor’s
indemnification obligations, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.25 per share.
We are dependent upon our directors and officers and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and in particular our senior management. One of our former directors, John Zieser, resigned from our Board
effective on March 24, 2023, and we are still evaluating the impact this may have on our operations. We believe that our success depends on the continued service of our directors and officers, at least until we have completed our initial business
combination. In addition, our directors and officers are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating their time among various business activities, including
identifying potential business combinations and monitoring the related due diligence. Moreover, certain of our directors and officers have time and attention requirements in relation to their other obligations. We do not have an employment
agreement with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our other directors or officers, in addition to Mr. Zieser, could have a detrimental effect on us. For more
information, see the section entitled “Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest.”
Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to
devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our
operations and our search for a business combination and their other responsibilities. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our officers and directors is engaged in
several other business endeavors for which they may be entitled to substantial compensation and are not required to contribute any specific number of hours per week to our affairs. Our officers and directors may also serve as officers or board
members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our
affairs which may have a negative impact on our ability to complete our initial business combination. For a complete discussion of our officers’ and directors’ other business affairs, please see the section of this Report entitled “Item 10.
Directors, Executive Officers and Corporate Governance—Conflicts of Interest.”
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements
may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or consulting
agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments
and/or our securities for services they would render to us after the completion of the business combination. Although we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be
the determining factor in our decision as to whether or not we will proceed with any potential business combination, the personal and financial interests of such individuals in negotiating such compensation may influence their motivation in
identifying and selecting a target business.
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those
intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Until we consummate our initial business combination, we will be engaged in the business of identifying and combining with one or more businesses. Our officers and directors are,
and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business. Our officers and directors also may become aware of business opportunities which may be appropriate
for presentation to us and other entities to which they owe certain fiduciary or contractual duties. Any such opportunities may present additional conflicts of interest in pursuing an acquisition target, and our directors and officers may have
conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its
presentation to us.
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. Our directors, officers, sponsor, or their respective officers and affiliates may become involved with subsequent blank
check companies similar to our company.
For a complete discussion of our officers’ and directors’ business affiliations and the potential conflicts of interest that you should be aware of, please see the sections of this
Report entitled “Item 10. Directors, Executive Officers and Corporate Governance” and “Item 13. Certain Relationships and Related Transactions, and Director Independence.”
Our officers, directors and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers or their respective affiliates from having a direct or indirect pecuniary or financial interest in any
investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into a business combination with a target business that is affiliated with our sponsor, directors or officers.
Nor do we have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.
Affiliates of our sponsor are engaged in an array of investment activities that may in the future create overlap with companies that may be a suitable business combination for us
and companies that would make an attractive target for such other affiliates.
Since only holders of our founder shares have the right to vote on the appointment of directors, the NYSE may consider us to be a “controlled company” within the
meaning of the NYSE rules and, as a result, we may qualify for exemptions from certain corporate governance requirements.
Only holders of our founder shares have the right to vote on the appointment of directors. As a result, the NYSE may consider us to be a “controlled company” within the meaning of
the NYSE corporate governance standards. Under the NYSE corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply
with certain corporate governance requirements, including the requirements that:
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we have a board that includes a majority of “independent directors,” as defined under the rules of the NYSE;
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we have a compensation committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
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we have a nominating and corporate governance committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
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We do not intend to utilize these exemptions and intend to comply with the corporate governance requirements of the NYSE, subject to applicable phase-in rules.
However, if we determine in the future to utilize some or all of these exemptions, you will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate
governance requirements.
Risks Related to The Company after a Business Combination
Subsequent to our completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other
charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will identify all material issues that may be present
with a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of
these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks,
unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we
report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming
pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business
combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.
Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key
personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business,
however, cannot presently be ascertained.
Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial business combination, it is possible that
some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our initial business combination, we cannot assure you that our assessment of these individuals will
prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of
control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure our initial business combination so that the post-transaction company in which our public stockholders own or acquire shares will own less than 100% of the equity
interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling
interest in the target business sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company
owns or acquires 50% or more of the outstanding voting securities of the target, our stockholders prior to our initial 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 initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of common stock in exchange for all of the outstanding capital stock of a target. In
this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to such transaction could own less than a majority of our
outstanding shares of common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we
initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business.
If our management team pursues a company with operations or opportunities outside of the United States for our initial business combination, we may face additional burdens in
connection with investigating, agreeing to and completing such combination, and if we effect such initial business combination, we would be subject to a variety of additional risks that may negatively impact our operations.
If our management team pursues a company with operations or opportunities outside of the United States for our initial business combination, we would be subject to risks associated
with cross-border business combinations, including in connection with investigating, agreeing to and completing our initial business combination, conducting due diligence in a foreign market, having such transaction approved by any local
governments, regulators or agencies and changes in the purchase price based on fluctuations in foreign exchange rates.
If we effect our initial business combination with such a company, we would be subject to any special considerations or risks associated with companies operating in an international
setting, including any of the following:
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costs and difficulties inherent in managing cross-border business operations and complying with commercial and legal requirements of overseas markets;
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rules and regulations regarding currency redemption;
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complex corporate withholding taxes on individuals;
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laws governing the manner in which future business combinations may be effected;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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longer payment cycles;
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changes in local regulations as part of a response to COVID-19;
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tax consequences, such as tax law changes, including termination or reduction of tax and other incentives that the applicable government provides to domestic companies, and variations in tax laws as compared to
the United States;
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currency fluctuations and exchange controls;
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rates of inflation;
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challenges in collecting accounts receivable;
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cultural and language differences;
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employment regulations;
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crime, strikes, riots, civil disturbances, terrorist attacks, natural disasters and wars;
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deterioration of political relations with the United States;
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obligatory military service by personnel; and
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government appropriation of assets.
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We may not be able to adequately address these additional risks. If we were unable to do so, we may be unable to complete such combination or, if we complete such combination, our
operations might suffer, either of which may adversely impact our results of operations and financial condition.
If our management following our initial business combination is unfamiliar with U.S. securities laws, they may have to expend time and resources becoming
familiar with such laws, which could lead to various regulatory issues.
Following our initial business combination, any or all of our management could resign from their positions as officers of the company, and the management of the target business at
the time of the business combination could remain in place. Management of the target business may not be familiar with U.S. securities laws. If new management is unfamiliar with U.S. securities laws, they may have to expend time and resources
becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
Other Risks
We are a blank check company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a blank check company with no operating results. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective
of completing our initial business combination with one or more target businesses. If we fail to complete our initial business combination, we will never generate any operating revenues.
Data privacy and security breaches, including, but not limited to, those resulting from cyber incidents or attacks, acts of vandalism or theft, computer viruses
and/or misplaced or lost data, could result in information theft, data corruption, operational disruption, reputational harm, criminal liability and/or financial loss.
We will depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal.
Sophisticated and deliberate attacks on, or privacy and security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary
information, and sensitive or confidential data. As an early stage company without significant investments in data privacy or security protection, we may not be sufficiently protected against such occurrences and therefore could be liable for
privacy and security breaches, including potentially those caused by any of our subcontractors. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents or other
incidents that result in a privacy or security breach. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to reputational harm, criminal liability and/or financial loss.
| Item 1B. |
Unresolved Staff Comments.
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None.
| Item 2. |
Properties.
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We currently utilize office space at 3282 Northside Parkway, Suite 275, Atlanta, GA 30327 from an affiliate of our sponsor. We consider our current office space adequate for our
current operations.
Subsequent to the closing of our IPO, pursuant to an administrative services agreement, we agreed to pay the affiliate of our sponsor a total of $20,000 per month for office space,
administrative and support services. We initially agreed to pay these monthly fees until the earlier of the completion of our initial business combination or our liquidation. On August 1, 2022, the affiliate of our sponsor agreed to waive all
future administrative fees and reimburse all previously paid administrative fees, and on November 10, 2022, we and the affiliate of our sponsor entered into the termination agreement for the administrative services agreement to effect such
agreement and terminate the administrative services agreement.
| Item 3. |
Legal Proceedings.
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There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
| Item 4. |
Mine Safety Disclosures.
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None.
PART II
| Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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Market Information.
Our units, Class A common stock and warrants are traded on The New York Stock Exchange under the symbols “HMA.U,” “HMA” and “HMA.WS,” respectively. Our units commenced public trading on January 21,
2022, and our Class A common stock and warrants commenced public trading on March 14, 2022.
Holders
As of April 1, 2023, there was one holder of record of our Units, one holder of record of our Class A common stock, one holder of record of our Class B common stock and two holders
of record of our redeemable warrants.
Dividends
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of
cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. The payment of any cash dividends subsequent
to our initial business combination will be within the discretion of our Board of Directors at such time. In addition, our Board of Directors is not currently contemplating and does not anticipate declaring any share dividends in the foreseeable
future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On March 3, 2021, our sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses related to our IPO pursuant to a promissory note. This loan was non-interest bearing, unsecured and
due at the earlier of June 30, 2022 or the closing of our IPO. The loan was repaid in full upon the closing of our IPO. We overpaid $16,055, which was returned by our sponsor. As of December 31, 2022, there were no amounts outstanding under the
promissory note. The promissory note is no longer available to us.
On March 4, 2021, our sponsor purchased 7,187,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. On October 27, 2021, our sponsor
surrendered 1,437,500 founder shares for no consideration, resulting in 5,750,000 founder shares outstanding. On January 14, 2022, our sponsor surrendered 718,750 founder shares for no consideration, resulting in 5,031,250 founder shares
outstanding. On February 4, 2022, our sponsor surrendered 219,518 founder shares for no consideration, as a result of the underwriters’ partial exercise of their over-allotment option in our IPO, resulting in 4,811,732 founder shares outstanding.
The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the outstanding common stock upon completion of our IPO. Such securities were issued in connection with our organization
pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Our sponsor is an accredited investor for purposes of Rule 501 of Regulation D.
On January 25, 2022, we consummated our IPO of 17,500,000 Units. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share,
and one-half of one Warrant, with each whole Warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share, subject to adjustment. The Units were sold at a price of $10.00 per Unit, generating gross
proceeds to us of $175,000,000. BofA Securities, Inc. and Moelis & Company LLC were joint book-running managers of our IPO. The securities sold in the offering were registered under the Securities Act on registration statements on Form
S-1 (No. 333-261374). The registration statements became effective on January 20, 2022.
Simultaneously with the closing of the IPO, we completed the private sale of an aggregate of 9,875,000 Private Placement Warrants to Heartland Sponsor LLC at a purchase price of
$1.00 per Private Placement Warrant, generating gross proceeds to us of $9,875,000.
The Private Placement Warrants are identical to the Warrants sold in the IPO, except that the Private Placement Warrants, so long as they are held by the purchasers thereof or their
permitted transferees, (i) are not redeemable by us, (ii) may not (including the Class A common stock issuable upon exercise of such Private Placement Warrants), subject to certain limited exceptions, be transferred, assigned or sold by such
holders until 30 days after the completion of our initial business combination, (iii) may be exercised by the holders on a cashless basis and (iv) are entitled to registration rights. No underwriting discounts or commissions were paid with respect
to such sale. The issuance of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
A total of $ 179,375,000, comprised of $171,500,000 of the proceeds from the IPO (which amount includes $6,125,000 of the underwriters’ deferred discount) and $7,875,000 of the
proceeds from the sale of the Private Placement Warrants, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee.
On February 3, 2022, the underwriters of our IPO partially exercised the over-allotment option and on February 7, 2022, purchased 1,746,931 Over-Allotment Units, generating gross proceeds of
$17,469,310. In connection with the partial exercise of the over-allotment option, our sponsor purchased an additional 786,119 Private Placement Warrants, generating gross proceeds to us of $786,119. In connection with the closing and sale of the
Over-Allotment Units and 786,119 additional Private Placement Warrants, a total of $17,906,042.75 comprised of $17,119,923.80 of the proceeds from the closing and sale of the Over-Allotment Units (which amount includes $611,425.85 of the
underwriters’ deferred discount) and $786,118.95 of the proceeds from the sale of the additional 786,119 Private Placement Warrants, was placed into the trust account.
The proceeds held in the trust account are invested in U.S. government treasury bills with a maturity of 185 days or less and in money market funds meeting certain conditions under Rule 2a-7 under the
Investment Company Act which invest only in direct U.S. government treasury obligations.
We paid a total of $3,849,386 in underwriting discounts and commissions and $891,506 for other costs and expenses related to the IPO. In addition, the underwriters agreed to defer $6,736,426 in
underwriting discounts and commissions.
There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus dated January 20, 2022 which was filed with the SEC.
Stock Repurchases
We did not repurchase shares of our common stock during the year ended December 31, 2022.
| Item 6. |
[Reserved]
|
| Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which
are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may
differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual
Report on Form 10-K.
Overview
We are a blank check company incorporated as a Delaware corporation on February 10, 2021 and created for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We have not selected any Business Combination target and we have not, nor has anyone on our behalf, had any substantive discussions,
directly or indirectly, with any Business Combination target. We intend to effectuate our initial Business Combination using cash from the proceeds of our IPO and the sale of the private placement warrants, the proceeds of the sale of our capital
stock in connection with our initial Business Combination, shares of our capital stock issued to owners of the target, debt or a combination of cash, stock and debt.
The issuance of additional shares of our capital stock in connection with our initial Business Combination:
| • |
may significantly dilute the equity interest of our existing investors, which dilution would increase if the anti-dilution provisions in the founder shares resulted in the issuance of shares of Class A common stock on a greater than
one-to-one basis upon conversion of the founder shares;
|
| • |
may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;
|
| • |
could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation
or removal of our present officers and directors;
|
| • |
may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us;
|
| • |
may adversely affect prevailing market prices for our units, Class A common stock and/or warrants; and
|
| • |
may not result in adjustment to the exercise price of our warrants.
|
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
| • |
default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations;
|
| • |
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver
or renegotiation of that covenant;
|
| • |
our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
|
| • |
our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;
|
| • |
our inability to pay dividends on our common stock;
|
| • |
using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general
corporate purposes;
|
| • |
limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
|
| • |
increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
|
| • |
limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who
have less debt.
|
Results of Operations
Our entire activity since inception through December 31, 2022 related to our formation and IPO, and subsequent to our IPO, the search for a target for our initial Business Combination. We do not
expect to generate any operating revenues until after the completion of a Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after our IPO. We expect that we will incur
increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.
For the year ended December 31, 2022, we had a net income of $10,676,120, which mainly consisted of formation and operating costs, provision for income taxes, warrant issuance costs, change in fair
value of warrant liability, change in fair value of over-allotment option liability, and income from marketable securities held in the trust account.
For the period from February 10, 2021 (inception) through December 31, 2021, we had a net loss of $14,010, which consisted of solely formation and operating costs.
Liquidity, Capital Resources and Going Concern
As of December 31, 2022, the Company had $234,169 in its operating bank account, and an adjusted working capital surplus of $490,105, which excludes franchise taxes payable of $200,935, income tax
payable of $418,334 and other allowed withdrawals of $12,872, of which such amounts can be paid from interest earned on the trust account. As of December 31, 2022, $2,844,775 of the amount on deposit in the trust account represents interest income,
which is available to pay the Company’s tax obligations.
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for
identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, and structuring, negotiating, and consummating the Business Combination.
However, if the estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so,
the Company may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing or draw on the Working Capital Loans (as defined in Note 5 to our financial
statements appearing elsewhere in this Report) either to complete a Business Combination or because it becomes obligated to redeem a significant number of the public shares upon consummation of a Business Combination, in which case the Company may
issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of its Business
Combination. If the Company is unable to complete the Business Combination because it does not have sufficient funds available, the Company will be forced to cease operations and liquidate the trust account. In addition, following the Business
Combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations. Accordingly, the Company may not be able to obtain additional financing.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard
Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until July 25, 2023 (or up until October 25, 2023, at the election of the Company,
subject to certain conditions described herein) to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and
an extension has not been requested by the sponsor and approved by the Company’s stockholders, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, it is uncertain that we will have sufficient liquidity
to fund the working capital needs of the Company through July 25, 2023 or through twelve months from the issuance of this report. Management has determined that the mandatory liquidation, should a Business Combination not occur and an extension
not be requested by the sponsor, and potential subsequent dissolution and the Company’s liquidity condition raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts
of assets or liabilities should the Company be required to liquidate after July 25, 2023 (or after October 25, 2023, at the election of the Company, subject to certain conditions described herein). The Company intends to continue to search for
and seek to complete a Business Combination before the mandatory liquidation date. The Company is within 12 months of its mandatory liquidation date as of the time of filing of this Annual Report on Form 10-K.
Off-Balance Sheet Financing Arrangements
As of December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. Following the IPO, we had an agreement to pay an affiliate of the sponsor a total
of $20,000 per month for office space, administrative and support services, but on August 1, 2022, the affiliate of the sponsor agreed to waive all future administrative fees and reimburse all previously paid administrative fees, and on November
10, 2022, we and the affiliate of the sponsor entered into the termination agreement for the administrative services agreement to effect such agreement and terminate the administrative services agreement.
The holders of founder shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights pursuant to a
registration rights agreement signed in connection with the consummation of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such
registration statements.
The underwriters had a 45-day option from the date of the IPO to purchase up to an additional 2,625,000 Units to cover over-allotments, if any. The underwriters partially exercised their
over-allotment option on February 3, 2022 to purchase an additional 1,746,931 Units at a price of $10.00 per Unit.
The underwriters received a cash underwriting discount of $3,500,000 upon the IPO and $349,386 upon the partial exercise of the over-allotment option.
Additionally, the underwriters are entitled to a deferred underwriting discount of $6,736,426, upon the completion of our initial Business Combination.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally
accepted accounting principles (“US GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. In accordance with US GAAP, we base our estimates on historical experience and on various other assumptions that we believe are
reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are fully described in Note 2 to our financial statements appearing elsewhere in this Report, and we believe those accounting policies are critical to the
process of making significant judgments and estimates in the preparation of our financial statements.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU
2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an
entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. As a smaller reporting company, ASU 2020-06 is effective January 1, 2024 for
fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The adoption of ASU 2020-06 is not expected to have an impact on our
financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an
“emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised
accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not
be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS
Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things: (1) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to
Section 404 of the Sarbanes-Oxley Act; (2) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (3) comply with any requirement
that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (4) disclose
certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.
| Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk
|
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
| Item 8. |
Financial Statements and Supplementary Data
|
This information appears following Item 15 of this Form 10-K and is included herein by reference.
| Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
None.
| Item 9A. |
Controls and Procedures.
|
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the
effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended December 31, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal
executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective because of a material weakness in our internal control over financial
reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis. As a result of this review, our management has concluded that we did not have adequate controls in place to prevent or detect material misstatements related to our accounting for complex
financial instruments. As a result, on an initial review we did not identify certain transaction costs and over-allotment options forfeited in connection with our initial public offering, and, as a result, we booked adjusting entries to correct
over-allotment liability, additional paid in capital and deal expense as of March 31, 2022.
Our management performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with generally accepted accounting principles
in the United States of America. Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for
the periods presented, and we are in the process of remediating the material weakness identified above. Management understands that the accounting standards applicable to our financial statements are complex and has since the inception of the
company benefited from the support of experienced third-party professionals with whom management has regularly consulted with respect to accounting issues. Management intends to continue to further consult with such professionals in connection
with accounting matters.
The Company, with the oversight of its Audit Committee, has actively undertaken remediation efforts to address the material weakness identified above and has developed measures
and controls to prevent a re-occurrence of such a deficiency in the future.
The Company is committed to maintaining an effective internal control environment, and given the progress made in this area, management expects that after sufficient time elapses,
the newly implemented controls will be operating effectively and that the material weakness will be adequately remediated.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and
reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with
US GAAP. Our internal control over financial reporting includes those policies and procedures that:
| (1) |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,
|
| (2) |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors, and
|
| (3) |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of
our internal control over financial reporting at December 31, 2022. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated
Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2022.
Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related
accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional
staff with the requisite experience and training to supplement existing accounting professionals.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| Item 9B. |
Other Information.
|
None.
| Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
|
Not applicable.
| Item 10. |
Directors, Executive Officers and Corporate Governance.
|
Directors and Executive Officers
|
Name
|
|
Age
|
|
Title
|
|
Robert S. Prather, Jr.
|
|
78
|
|
Chief Executive Officer and Director
|
|
Shawn Pack
|
53
|
Chief Financial Officer
|
||
|
Salvatore Muoio
|
|
63
|
|
Director
|
|
Steven T. Shapiro
|
|
55
|
|
Director
|
|
Alan J. Weber
|
|
74
|
|
Director
|
Our directors and executive officers are as follows:
Mr. Robert S. Prather Jr., our Chief Executive Officer and one of our directors since March 2021, has extensive experience in the media, entertainment and sports industry. Mr.
Prather and a partner acquired control of Gray, a public company, in late 1993. During his tenure, he helped grow the market capitalization of Gray from approximately $52 million to more than $400 million. He was instrumental in increasing Gray’s
EBITDA from approximately $6 million at the beginning of his tenure to approximately $176 million during his final full year, representing a CAGR of approximately 20%. Through strategic and transformative acquisitions, Mr. Prather helped Gray
increase the number of television stations it owned from three to 30, as well as increase the number of newspapers owned from one to five. Mr. Prather anticipated the eventual decline of the newspaper industry, and in December 2005, Gray spun off
five newspapers and one wireless business to a separate public company. Gray operated 22 number one ranked television stations and stations in 17 college towns and eight state capitals. Mr. Prather also served as CEO and a Director of Bull Run
Corporation, a sports and affinity marketing management company, from 1992 until its merger into Triple Crown Media, Inc. in December 2005. During his time at Gray, Mr. Prather and his partner also acquired Host Communications, a college sports
marketing business which became a wholly-owned subsidiary of Bull Run. Host Communications provided sports marketing and productions services to a number of collegiate conferences and universities. After successfully growing Host Communications,
the business was sold in 2007 to IMG, led by Ted Forstmann, for $74 million. Following his tenure at Gray, Mr. Prather formed Heartland Media in 2013 and partnered with MSouth Equity Partners to help grow the business. Under Mr. Prather’s
leadership, Heartland Media acquired its first television station in 2013, and from 2014 to 2017 it acquired 10 additional television stations for total consideration of $220 million. Mr. Prather grew Heartland Media’s cash flow to approximately
$29 million in 2019. Mr. Prather led the sale of 11 television stations by Heartland Media in February 2020 for $305 million cash. Mr. Prather also currently serves as the Chief Executive Officer and President of Allen Media Broadcasting, LLC.
Since 2004, Mr. Prather has served on the board of GAMCO Investors, Inc. (NYSE: GBL) where he is the Lead Independent Director. He has also served on the board of Ryman Hospitality
Properties, Inc. (NYSE: RHP), formerly known as Gaylord Entertainment Company, since 2009. Ryman Hospitality Properties, Inc. is a REIT which specializes in group-oriented, destination hotel assets in urban and resort markets. Ryman Hospitality
Properties also owns the Opry Entertainment Group. Previously, Mr. Prather served as a director of Diebold-Nixdorf, Inc. (NYSE: DBD) from April 2013 to April 2018. In 2015, Mr. Prather was actively involved as a board member in Diebold’s $1.9
billion acquisition of Wincor Nixdorf AG, a German ATM maker and financial technology company, which combined the second and third largest ATM / financial technology companies in the world. Mr. Prather was previously the largest shareholder of
Rawlings Sporting Goods Company, Inc. (formerly NASDAQ: RAWL), where he served as Vice-Chairman from 1998 to 2001. He was instrumental in selling Rawlings to K2 Inc. for a 48% premium to the unaffected share price. Mr. Prather was on the Board of
Directors and an Advisory Board member for Swiss Army Brands, Inc. (formerly NASDAQ: SABI) from 1995 to 2011. Mr. Prather received an undergraduate and graduate degree from the Georgia Institute of Technology. Our Board has determined that Mr.
Prather’s extensive industry experience acquiring, growing and selling companies makes him a qualified member of our Board.
Shawn Pack, our Chief Financial Officer since February 2022, is the Chief Financial Officer of Heartland Media, LLC. Prior to joining Heartland Media, Ms. Pack served as the Chief
Financial Officer of the non-profit media company, AETC, Inc. (WABE), a position she held since October 2021, where she was responsible for planning, developing and implementing key financial initiatives as well as ensuring compliance with industry
requirements. Prior to that, she worked for over 20 years at Cox Enterprises, most recently as Vice President of Business Operations of Cox Media Group, a position she held starting in December 2013. Ms. Pack received a BBA in Accounting from
Augusta University.
Salvatore Muoio, CFA, one of our directors since January 2022, is the founder and managing member of S Muoio & Co. LLC and the manager of several related investment
partnerships. Mr. Muoio has significant experience in the public markets and has been involved in the securities industry since 1985. Prior to establishing SM Investors, L.P. in 1997, Mr. Muoio served in the equity markets group of Lazard Frères
& Co. LLC from 1995 to 1996 as Director of Equity Research and as an equity analyst concentrating in telecommunications and media industries. Mr. Muoio started his career at Gabelli Funds, Inc. from 1985 to 1995 where he served in several
capacities, including as a securities analyst for Gabelli & Company, Inc., Director of Research for GAMCO Investors, and as Portfolio Manager for the Gabelli Global Telecommunications Fund, Inc. Mr. Muoio also serves on the Board of Directors
of LICT Corporation and CIBL, Inc., which are diversified publicly traded holding companies involved in various telecommunications, media, and service businesses. Mr. Muoio closely follows companies in the media, entertainment and sports industries
which will be helpful in sourcing a potential business combination. Mr. Muoio is a member of the Institute of Chartered Financial Analysts, as well as the New York Society of Securities Analysts. Mr. Muoio received a B.B.A. with a major in finance
from the University of Notre Dame in 1981 and an M.B.A. with a concentration in Finance from Notre Dame in 1985. Our Board has determined that Mr. Muoio’s extensive experience with public markets and securities, especially in the media,
entertainment and sports industries, makes him a qualified member of our Board.
Steven T. Shapiro, one of our directors since January 2022, is a founding partner of GoldenTree Asset Management and sits on GoldenTree’s Executive Committee. For many years, he was
responsible for the firm’s investments in media and communications as well its investments in distressed assets. Started in 2000, GoldenTree currently has approximately $47 billion under management and is based in New York, with offices in West
Palm Beach, London, Singapore, Sydney, Tokyo and Dublin. Under Mr. Shapiro’s guidance, GoldenTree made numerous successful investments totaling several billions of dollars in sectors including broadcasting, outdoor, entertainment, publishing, cable
and telecom. Prior to GoldenTree, Mr. Shapiro was a Managing Director in the High Yield Group at CIBC World Markets, where he headed Media and Telecommunications Research. While at CIBC, Mr. Shapiro was involved in several billion dollars of equity
and debt financings for media and communications companies. Prior to its acquisition by CIBC in 1995, Mr. Shapiro was a research analyst with The Argosy Group, a high yield investment-banking boutique in New York. Before joining Argosy, Mr. Shapiro
was a bankruptcy attorney with Stroock & Stroock & Lavan in New York. Mr. Shapiro’s extensive experience will be invaluable in helping assess and evaluate potential business combinations. Mr. Shapiro has served on numerous corporate and
not-for-profit boards. He is currently a member of the Board of Overseers of the University of Pennsylvania Law School, and is a member of the Executive Committee and former President of the Board of Trustees of the Abraham Joshua Heschel School in
New York. Mr. Shapiro is a graduate of The University of Pennsylvania Law School, where he served as Senior Editor of the Labor Law Journal. He graduated with Honors from the University of Pennsylvania College of Arts & Sciences with a major in
modern diplomatic history and was a member of the History Honor Society. Our Board has determined that Mr. Shapiro’s extensive experience researching and investing in media and communications companies makes him a qualified member of our Board.
Alan J. Weber, one of our directors since January 2022, is the Chief Executive Office of Weber Group LLC, focusing on investments in the Financial Services and Technology Services
industries/sectors. He has vast experience as a senior executive at financial companies, including large publicly traded companies such as Citibank and Aetna, Inc. Mr. Weber is the former Chairman and CEO of U.S. Trust Co., a 160 year-old firm
specializing in trust, investment management, tax and estate planning and private banking. Prior to joining U.S. Trust in October 2002, Mr. Weber was Vice Chairman and Chief Financial Officer at Aetna, Inc., where he was responsible for corporate
strategy, capital management, information technology, investor relations and financial operations. The cornerstone of Mr. Weber’s career was built at Citicorp, where he worked from 1971 to 1998, holding senior positions in corporate banking,
consumer banking and corporate operations/technology. Mr. Weber was Chairman of Citibank International and an Executive Vice President of Citibank. Mr. Weber is a director of Street Diligence, Inc., a fintech services business. Mr. Weber was a
director of Broadridge Financial Solutions, Inc., a global provider of investor communications, securities processing, wealth management services and outsourcing solutions to the financial services industry, from 2007 until his retirement from the
board in November 2021. From 2008 until 2018, he was the Chairman of KGS-Alpha Capital Markets, a fixed income broker-dealer. Previously, Mr. Weber was a director of Diebold-Nixdorf, Inc., and Sandridge Energy, Inc., (NYSE: SD), an oil and gas
exploration company. Mr. Weber received his B.S. in Economics from the Wharton School at the University of Pennsylvania and an MBA from the Kellogg School at Northwestern University. Our Board has determined that Mr. Weber’s extensive experience in
the financial services and technology industries along with his significant board experience make him a qualified member of our Board.
Number, Terms of Office and Election of Officers and Directors
Our Board consists of four members. Our Board is divided into three classes with only one class of directors being elected in each year and each class (except for those directors
appointed prior to our first annual meeting of stockholders) serving a three-year term. The term of office of the first class of directors, consisting of Mr. Muoio and Mr. Shapiro will expire at our first annual meeting of stockholders. The term of
office of the second class of directors, consisting of Mr. Weber will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Mr. Prather will expire at the third annual meeting of
stockholders. We may not hold an annual meeting of stockholders until after we consummate our initial business combination (unless required by the NYSE). Holders of our founder shares will have the right to elect all of our directors prior to
consummation of our initial business combination and to remove directors prior to our initial business combination, and holders of our public shares will not have the right to vote on the election of directors during such time.
Our officers are elected by the Board and serve at the discretion of the Board, rather than for specific terms of office. Our Board is authorized to appoint persons to the offices
set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chair or Co-Chairs of the Board, a Chief Executive Officer, a President, a Chief Financial Officer, a Chief Operating Officer, a Secretary and
such other offices (including without limitation, Vice Presidents, Assistant Secretaries and a Treasurer) as may be determined from time to time by the Board.
Director Independence
The rules of the NYSE require that a majority of our Board be independent within one year of our IPO. An “independent director” is defined generally as a person who, in the opinion
of the company’s board of directors, has no material relationship with the listed company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company). Our Board has determined that each of
Mssrs. Muoio, Shapiro and Weber are independent directors under applicable SEC and NYSE rules. Our Board also determined that John Zieser, a former director who resigned effective March 24, 2023, was an independent director under applicable SEC and
NYSE rules as of and during the fiscal year ended December 31, 2022. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Executive Officer and Director Compensation
None of our officers or directors have received any cash compensation for services rendered to us. Commencing on the date that our securities were first listed on the NYSE through
the earlier of consummation of our initial business combination and our liquidation, we agreed to pay an affiliate of our sponsor a total of $20,000 per month for office space, administrative and support services pursuant to an administrative
services agreement. However, on August 1, 2022, the affiliate of our sponsor agreed to waive all future administrative fees and reimburse all previously paid administrative fees, and on November 10, 2022, we and the affiliate of our sponsor entered
into the termination agreement for the administrative services agreement to effect such agreement and terminate the administrative services agreement. Our sponsor, officers and directors, or any of their respective affiliates, will be reimbursed
for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all
payments that were made by us to our sponsor, officers, directors or our or any of their affiliates.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting, management or other compensation
from the combined company. All compensation will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business
combination. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it
will be up to the directors of the post-combination business to determine executive officer and director compensation. Any compensation to be paid to our officers after the completion of our initial business combination will be determined by a
compensation committee constituted solely by independent directors.
We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment. The existence or terms of any such employment or
consulting arrangements may influence our management’s motivation in identifying or selecting a target business, and we do not believe that the ability of our management to remain with us after the consummation of our initial business combination
should be a determining factor in our decision to proceed with any potential business combination.
Committees of the Board of Directors
Our Board has three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. Subject to phase-in rules, the rules of
the NYSE and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and the rules of the NYSE require that the compensation committee and the nominating and corporate
governance committee of a listed company be comprised solely of independent directors. The charter of each committee is available on our website.
Audit Committee
We have established an audit committee of the Board. The current members of our audit committee are Mssrs. Shapiro and Weber. Mr. Weber serves as chairman of the audit committee.
We expect that Mr. Muoio will be appointed to the audit committee promptly to fill the vacancy caused by Mr. Zieser’s resignation.
Each member of the audit committee is financially literate and at least one member of our audit committee qualifies as an “audit committee financial expert” as defined in applicable
SEC rules and has accounting or related financial management expertise.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
| • |
assisting Board oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm’s qualifications and
independence, and (4) the performance of our internal audit function and independent registered public accounting firm;
|
| • |
the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and any other independent registered public accounting firm engaged by us;
|
| • |
pre-approving all audit and non-audit services to be provided by the independent registered public accounting firm or any other registered public accounting firm engaged by us, and establishing pre-approval
policies and procedures;
|
| • |
reviewing and discussing with the independent registered public accounting firm all relationships the auditors have with us in order to evaluate their continued independence;
|
| • |
setting clear hiring policies for employees or former employees of the independent registered public accounting firm;
|
| • |
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
|
| • |
obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (1) the independent auditor’s internal quality-control procedures and (2) any material issues
raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent
audits carried out by the firm and any steps taken to deal with such issues;
|
| • |
meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent registered public accounting firm, including reviewing our specific
disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
|
| • |
reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and
|
| • |
reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or
government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the
Financial Accounting Standards Board, the SEC or other regulatory authorities.
|
Compensation Committee
We have established a compensation committee of the Board. The members of our compensation committee are Mssrs. Muoio and Shapiro. We expect that one of Mssrs. Muoio or Shapiro
will be appointed to serve as chairman of the compensation committee promptly to fill the vacancy caused by Mr. Zieser’s resignation.
We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
| • |
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and
objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
|
| • |
reviewing and making recommendations to our Board with respect to the compensation, and any incentive-compensation and equity-based plans that are subject to board approval of all of our other officers;
|
| • |
reviewing our executive compensation policies and plans;
|
| • |
implementing and administering our incentive compensation equity-based remuneration plans;
|
| • |
assisting management in complying with our proxy statement and annual report disclosure requirements;
|
| • |
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
|
| • |
producing a report on executive compensation to be included in our annual proxy statement; and
|
| • |
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
|
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other advisor and
will be directly responsible for the appointment, compensation and oversight of the work of any such advisor. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other advisor, the compensation
committee will consider the independence of each such advisor, including the factors required by the NYSE and the SEC.
Nominating and Corporate Governance Committee
We have established a nominating and corporate governance committee of the Board. The current members of our nominating and corporate governance committee are Mssrs. Muoio and
Shapiro. Mr. Muoio serves as chair of the nominating and corporate governance committee. We expect that Mr. Weber will be appointed to the nominating and corporate governance committee promptly to fill the vacancy caused by Mr. Zieser’s
resignation.
We have adopted a nominating and corporate governance committee charter, which details the purpose and responsibilities of the nominating and corporate governance committee,
including:
| • |
identifying, screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by the Board, and recommending to the Board candidates for nomination for election at the annual
stockholder meeting or to fill vacancies on the Board;
|
| • |
developing and recommending to the Board and overseeing implementation of our corporate governance guidelines;
|
| • |
coordinating and overseeing the annual self-evaluation of the Board, its committees, individual directors and management in the governance of the company; and
|
| • |
reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary.
|
The charter also provides that the nominating and corporate governance committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firm to be
used to identify director candidates, and will be directly responsible for approving the search firm’s fees and other retention terms.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and
evaluating nominees for director, the Board considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests
of our stockholders. Prior to our initial business combination, holders of our public shares will not have the right to recommend director candidates for nomination to our Board.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, and in the past year has not served, as a member of the board of directors or compensation committee of any entity that has one or more
officers serving on our Board.
Code of Ethics
We have adopted a code of ethics and business conduct applicable to our directors, officers and employees (our “Code of Ethics”). A copy of the Code of Ethics will be provided
without charge upon request from us and is also be available on our website: www.heartlandmediaacquisition.com. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Corporate Governance Guidelines
We have adopted corporate governance guidelines in accordance with the corporate governance rules of the NYSE that serve as a flexible framework within which our Board and its
committees operate. These guidelines cover a number of areas including board membership criteria and director qualifications, director responsibilities, board agenda, roles of the Chairman of the Board, Chief Executive Officer and presiding
director, meetings of independent directors, committee responsibilities and assignments, board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and
continuing education, evaluation of senior management and management succession planning. A copy of the corporate governance guidelines will be provided without charge upon request from us and is also be available on our website.
Conflicts of Interest
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
| • |
the corporation could financially undertake the opportunity;
|
| • |
the opportunity is within the corporation’s line of business; and
|
| • |
it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation.
|
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to at least one other entity pursuant to
which such officer or director is or will be required to present a business combination opportunity to such entity. In addition, our sponsor, officers and directors may participate in the formation of, or become an officer or director of, other
blank check companies similar to ours during the period in which we are seeking an initial business combination, which may have acquisition objectives that are similar to ours. Accordingly, as a result of multiple business affiliations, our
officers and directors have similar legal obligations relating to presenting business opportunities meeting the above listed criteria to multiple entities, and 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 these obligations to present such business combination opportunity to such entity, and only present it to us if such
entity rejects the opportunity. 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. Our amended and restated
certificate of incorporation provides that, prior to the consummation of our initial business combination, 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 the director or officer is
permitted to refer that opportunity to us without violating any legal obligation. Our officers and directors would continue to be subject to all other fiduciary duties owed to us and our stockholders and no other waivers of their respective
fiduciary obligations have been provided to any such officers and directors. We do not have any plan for any waiver of the fiduciary duties of our officers and directors post-business combination.
Below is a table summarizing the entities to which our officers and directors currently have fiduciary duties or contractual obligations that may present a conflict of interest:
|
Name of Individual
|
|
Entity Name
|
|
|
Entity’s business
|
|
|
Affiliation
|
|
Robert S. Prather Jr.
|
|
Heartland Media, LLC
|
|
|
Media
|
|
|
President and CEO
|
|
GAMCO Investors, Inc.
|
|
|
Investment management
|
|
|
Director
|
||
|
Ryman Hospitality Properties, Inc.
|
|
|
Real estate
|
|
|
Director
|
||
|
|
Allen Media Broadcasting, LLC
|
|
|
Media
|
|
|
President and CEO
|
|
|
Shawn Pack
|
|
Heartland Media, LLC
|
|
|
Media
|
|
|
Chief Financial Officer
|
|
Salvatore Muoio
|
|
S. Muoio & Co. LLC
|
|
|
Investment management
|
|
|
Managing Member and Chief Investment Officer
|
|
CIBL, Inc.
|
|
|
Communications
|
|
|
Director
|
||
|
LICT Corp.
|
|
|
Communications
|
|
|
Director
|
||
|
Steven T. Shapiro
|
|
GoldenTree Asset Management
|
|
|
Investment management
|
|
|
Partner and Portfolio Manager
|
|
FS Credit Income Fund
|
|
|
Investment management
|
|
|
Director
|
||
|
Alan J. Weber
|
|
Weber Group LLC
|
|
|
Investment management
|
|
|
Chief Executive Officer
|
|
Street Diligence, Inc.
|
Communications Fintech
|
Director
|
Potential investors should also be aware of the following other potential conflicts of interest:
| • |
None of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business activities. We do
not intend to have any full-time employees prior to the completion of our initial business combination. In addition, our officers and directors are engaged in several other business endeavors for which they may be entitled to substantial
compensation and are not required to contribute any specific number of hours per week to our affairs.
|
| • |
In the course of their other business activities, our officers and directors may become aware of investment and business opportunities that may be appropriate for presentation to us as well as the other entities
with which they are affiliated, including other blank check companies similar to ours, which may have acquisition objectives that are similar to ours, during the period in which we are seeking an initial business combination. Our management
may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
|
| • |
Our sponsor subscribed for founder shares prior to our IPO and purchased private placement warrants in a transaction that closed simultaneously with the closing of our IPO.
|
| • |
Our initial stockholders have agreed to waive their redemption rights with respect to their founder shares and any public shares held by them in connection with the consummation of our initial business
combination. Our other directors and officers have also entered into the letter agreement, which imposes the same obligations on them with respect to any public shares acquired by them. Additionally, our initial stockholders have agreed to
waive their redemption rights with respect to their founder shares if we fail to consummate our initial business combination within 18 months after the closing of our IPO or during any Extension Period. However, if our initial stockholders
or any of our officers, directors or affiliates acquire public shares, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to consummate our initial business combination
within the prescribed time frame. If we do not complete our initial business combination within such applicable time period, the proceeds of the sale of the private placement warrants held in the trust account will be used to fund the
redemption of our public shares, and the private placement warrants will expire worthless. With certain limited exceptions, the founder shares will not be transferable, assignable or salable by our initial stockholders until the earlier of
(1) one year after the completion of our initial business combination and (2) the date on which we consummate a liquidation, merger, capital stock exchange, reorganization, or other similar transaction after our initial business combination
that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last reported sale price of our Class A common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business
combination, the founder shares will be released from the lock-up. With certain limited exceptions, the private placement warrants and the shares of common stock underlying such warrants, will not be transferable, assignable or salable by
our sponsor until 30 days after the completion of our initial business combination. Since our sponsor and officers and directors may directly or indirectly own shares of Class A common stock and warrants, our officers and directors 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.
|
| • |
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation
following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether to proceed with a particular business combination. Although we believe the ability of such individuals to remain
with us after the completion of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination, the personal and financial interests of such
individuals in negotiating such compensation may influence their motivation in identifying and selecting a target business
|
| • |
Our key personnel may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such key personnel was included by a target business as a
condition to any agreement with respect to our initial business combination.
|
| • |
Our officers, directors and their respective affiliates may have competitive pecuniary interests that conflict with our interests. We have not adopted a policy that expressly prohibits our directors, officers or
affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into a business
combination with a target business that is affiliated with our sponsor, directors or officers. Nor do we have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types
conducted by us.
|
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors, which may raise potential conflicts of
interest. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors, we, or a committee of disinterested directors, will obtain an opinion from an independent
investment banking firm which is a member of FINRA or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company and our stockholders from a financial point of view. Despite our
agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent entity that commonly renders valuation opinions, regarding the fairness to our company from a financial point of view of a
business combination with one or more domestic or international businesses affiliated with our sponsor, officers or directors, potential conflicts of interest still may exist and, as a result, the terms of the business combination may not be as
advantageous to our company and our public stockholders as they would be absent any conflicts of interest. In addition, our amended and restated certificate of incorporation provides that an affirmative vote of a majority of the members of the
audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction. A majority of the members of the entire audit committee will constitute a quorum. Without a meeting, the unanimous
written consent of all of the members of the audit committee will be required to approve a related party transaction.
Although none of our sponsor, 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, we do not have a policy that prohibits our sponsor, executive officers or directors, or any of their respective affiliates, from
negotiating for the reimbursement of out-of-pocket expenses by a target business. Further, commencing on the date our securities were first listed on the NYSE, we agreed to pay an affiliate of our sponsor for office space, secretarial and general
administrative services provided to us pursuant to the Administrative Services Agreement in the amount of $20,000 per month. We initially agreed to pay these monthly fees until the earlier of the completion of our initial business combination or
our liquidation. However, on August 1, 2022, the affiliate of our sponsor agreed to waive all future administrative fees and reimburse all previously paid administrative fees, and on November 10, 2022, we and the affiliate of our sponsor entered
into the Termination Agreement for the Administrative Services Agreement to effect such agreement and terminate the Administrative Services Agreement.
In addition, our sponsor or any of its affiliates may make additional investments in us in connection with the initial business combination, although our sponsor and its affiliates
have no obligation or current intention to do so. If our sponsor or any of its affiliates elects to make additional investments, such proposed investments could influence our sponsor’s motivation to complete an initial business combination.
The conflicts described above may not be resolved in our favor.
In the event that we submit our initial business combination to our public stockholders for a vote, our initial stockholders have agreed, pursuant to the terms of a letter agreement
entered into with us (and their permitted transferees will agree), to vote their founder shares and any public shares held by them in favor of our initial business combination. Our other directors and officers have also entered into the letter
agreement, which imposes the same obligations on them with respect to any public shares acquired by them.
Limitation on Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now
exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty
as directors, except to the extent such exemption from liability or limitation thereof is not permitted by the DGCL, unless a director violated his or her duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally
violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived improper personal benefit from his or her actions as a director.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated
certificate of incorporation. Our bylaws also permit us to maintain insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification.
We have obtained a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to
indemnify our officers and directors. These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative
litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. A stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage
awards against officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions,
we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
| Item 11. |
Executive Compensation.
|
Employment Agreements
As of December 31, 2022, we have not entered into any employment agreements with our executive officers and have not made any agreements to provide benefits upon termination of
employment.
Executive Officers and Director Compensation
No executive officer has received any cash compensation for services rendered to us. No compensation of any kind, including finder’s, consulting or other similar fees, will be paid
by us to our sponsor, officers or directors or any affiliate of our sponsor, officers or directors, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of
the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on
suitable business combinations. Our audit committee reviews on a quarterly basis any payments that were made to our sponsor, officers or directors or our or their affiliates. Any such payments prior to an initial business combination will be made
using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for
their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
| Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
We have no compensation plans under which equity securities are authorized for issuance.
The following table sets forth information regarding the beneficial ownership of our common stock as of the date of this Report, by:
| • |
each person known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock;
|
| • |
each of our executive officers and directors; and
|
| • |
all our executive officers and directors as a group.
|
As of the date of this Report, we had 19,246,931 shares of Class A common stock and 4,811,732 shares of Class B common stock, issued and outstanding.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following
table does not reflect record or beneficial ownership of the private placement warrants as these warrants are not exercisable within 60 days of the date of this Report.
|
|
|
Class A Common Stock
|
|
|
Class B Common Stock
|
|
|||||||
|
|
|
Beneficially
Owned |
|
|
Approximate
Percentage
of Issued and
Outstanding Class A
Common Stock
|
|
|
Beneficially
Owned |
|
|
Approximate
Percentage
of Issued and
Outstanding Class B
Common Stock
|
|
|
|
Name and Address of Beneficial Owner(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heartland Sponsor LLC
|
─
|
─%
|
4,811,732(2)
|
100%
|
|||||||||
|
Robert S. Prather, Jr.
|
─
|
─%
|
4,811,732(2)
|
100%
|
|||||||||
|
Shawn Pack
|
─
|
─%
|
─
|
─%
|
|||||||||
|
Salvatore Muoio(3)
|
─
|
─%
|
─
|
─%
|
|||||||||
|
Steven T. Shapiro(3)
|
─
|
─%
|
─
|
─%
|
|||||||||
|
Alan Weber(3)
|
─
|
─%
|
─
|
─%
|
|||||||||
|
Other 5% Beneficial Owners
|
|||||||||||||
|
Highbridge Capital Management, LLC(4)
|
1,745,235
|
9.1%
|
─
|
─%
|
|||||||||
|
Shaolin Capital Management LLC(5)
|
1,263,246
|
6.9%
|
─
|
─%
|
|||||||||
|
Sculptor Capital LP(6)
|
1,195,700
|
6.2%
|
─
|
─%
|
|||||||||
|
AQR Capital Management, LLC(7)
|
1,049,152
|
5.5%
|
─
|
─%
|
|||||||||
|
Calamos Market Neutral Income Fund(8)
|
1,000,000
|
5.2%
|
─
|
─%
|
|||||||||
|
All directors and officers as a group (5 individuals)
|
|
—
|
|
|
—
|
|
|
4,811,732
|
|
|
100%
|
||
| (1) |
Unless otherwise noted, the business address of each of our stockholders is c/o Heartland Media Acquisition Corp., 3282 Northside Pkwy, Suite 275, Atlanta, GA 30327.
|
| (2) |
Represents shares held by our sponsor. Certain of our officers and directors are members of our sponsor. The shares held by our sponsor are beneficially
owned by Mr. Prather, our Chief Executive Officer and the managing member of our sponsor, who has voting and dispositive power over the shares held by our sponsor.
|
| (3) |
Does not include any shares held by our sponsor. This individual is a member of our sponsor, as described in footnote 2.
|
| (4) |
Based solely upon the Schedule 13G filed by Highbridge Capital
Management, LLC (“Highbridge”) on February 2, 2023. The address of Highbridge is 277 Park Avenue, 23rd Floor, New York, New York 10172.
|
| (5) |
Based solely upon the Schedule 13G filed by Shaolin Capital Management LLC and certain other reporting persons filing therewith (collectively “Shaolin”) on
February 14, 2023. The address of Shaolin is 230 NW 24th Street, Suite 603, Miami, FL 33127.
|
| (6) |
Based solely upon the Schedule 13G/A filed by Sculptor Capital LP and
certain other reporting persons filing therewith (collectively, “Sculptor”) on February 14, 2023. The address of Sculptor is 9 West 57th Street, New York, New York 10019.
|
| (7) |
Based solely upon the Schedule 13G filed by AQR Capital Management, LLC and certain other reporting persons filing therewith (collectively “AQR”) on February
14, 2023. The address of AQR is One Greenwich Plaza, Greenwich, CT 06830.
|
| (8) |
Based solely upon the Schedule 13G filed by Calamos Market Neutral Income Fund, a series of Calamos Investment Trust (“Calamos”) on February 9, 2023. The
address of Calamos is 2020 Calamos Court Naperville, IL 60563.
|
| Item 13. |
Certain Relationships and Related Transactions, and Director Independence.
|
On March 4, 2021, our sponsor purchased 7,187,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. The purchase price of the founder
shares was determined by dividing the amount of cash contributed to us by the number of founder shares issued. On October 27, 2021, our sponsor surrendered 1,437,500 founder shares for no consideration, resulting in 5,750,000 shares outstanding of
which 750,000 were subject to forfeiture in the event the underwriters’ over-allotment option was not exercised. On January 14, 2022, our sponsor surrendered 718,750 founder shares for no consideration, resulting in 5,031,250 shares outstanding of
which 656,250 were subject to forfeiture in the event the underwriters’ over-allotment option was not exercised. On February 4, 2022, our sponsor surrendered 219,518 founder shares for no consideration, as a result of the underwriters’ partial
exercise of their over-allotment option in our IPO, resulting in 4,811,732 founder shares outstanding as of this Report. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the
outstanding common stock upon consummation of our IPO. The founder shares (including the Class A common stock issuable upon conversion thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Our sponsor purchased an aggregate of 10,661,119 private placement warrants at a price of $1.00 per warrant (approximately $10,661,119 in the aggregate) in a private placement that
occurred simultaneously with the closing of our IPO. Each private placement warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. Private placement warrants
may be exercised only for a whole number of shares. The private placement warrants (including the Class A common stock issuable upon exercise of the private placement warrants) may not, subject to certain limited exceptions, be transferred,
assigned or sold by the holders thereof until 30 days after the completion of our initial business combination.
There will be no redemption rights or liquidating distributions from the trust account with respect to the founder shares or private placement warrants, which will expire worthless
if we do not consummate a business combination within the prescribed time period.
As more fully discussed in “Part III, Item 10. Directors, Executive Officers and Corporate Governance—Conflicts of Interest,” 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-current 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.
We entered into the Administrative Services Agreement with an affiliate of our sponsor, pursuant to which we agreed to pay a total of $20,000 per month for office space,
administrative and support services to such affiliate commencing on the date that our securities were first listed on the NYSE. We initially agreed to pay these monthly fees until the earlier of the completion of our initial business combination or
our liquidation. However, on August 1, 2022, the affiliate of our sponsor agreed to waive all future administrative fees and reimburse all previously paid administrative fees, and on November 10, 2022, we and the affiliate of our sponsor entered
into the Termination Agreement for the Administrative Services Agreement to effect such agreement and terminate the Administrative Services Agreement.
Our sponsor, officers and directors or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such
as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis any payments made by us to our sponsor, officers, directors or our or any of their
affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
On March 3, 2021, our sponsor agreed to loan us an aggregate of up to $300,000 to cover expenses related to our IPO pursuant to a promissory note. This loan was non-interest bearing, unsecured and
due at the earlier of June 30, 2022 or the closing of our IPO. The loan was repaid in full upon the closing of our IPO. We overpaid $16,055, which was returned by our sponsor. As of December 31, 2022, there were no amounts outstanding under the
promissory note. The promissory note is no longer available to us.
In addition, in order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of
our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we may repay such loaned amounts out of the proceeds of the trust account
released to us. Otherwise, such loans may be repaid only out of funds held outside the trust account. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be
identical to the private placement warrants issued to our sponsor. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to our initial business combination, we do not expect to
seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all
amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time
of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive
officer and director compensation.
Upon the closing of our IPO, we entered into a registration rights agreement with respect to the founder shares, private placement warrants and warrants issued upon conversion of
working capital loans (if any).
In the event that we submit our initial business combination to our public stockholders for a vote, our initial stockholders have agreed, pursuant to the terms of a letter agreement
entered into with us upon the closing of our IPO (and their permitted transferees will agree), to vote their founder shares and any public shares held by them in favor of our initial business combination. Our other directors and officers have also
entered into the letter agreement, which imposes the same obligations on them with respect to any public shares acquired by them.
Related Party Policy
Prior to the closing of our IPO, we had not yet adopted a formal policy for the review, approval or ratification of related party transactions. Accordingly, the transactions
discussed above were not reviewed, approved or ratified in accordance with any such policy.
We have adopted a Code of Ethics, which requires us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our Board (or the
appropriate committee of our Board) or as disclosed in our public filings with the SEC. Under our Code of Ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or
guarantee of indebtedness) involving us.
In addition, our audit committee, pursuant to a written charter that we have adopted, will be responsible for reviewing and approving related party transactions to the extent that
we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction. A majority of the members
of the entire audit committee will constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party transaction. Our audit committee reviews on a
quarterly basis any payments made by us to our sponsor, officers or directors, or our or any of their affiliates.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a
director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or
directors unless we, or a committee of independent and disinterested directors, have obtained an opinion from an independent investment banking firm which is a member of FINRA or an independent entity that commonly renders valuation opinions that
our initial business combination is fair to our company from a financial point of view. Furthermore, no finder’s fees, reimbursements or cash payments will be made by us to our sponsor, officers or directors, or our or any of their affiliates, for
services rendered to us prior to or in connection with the completion of our initial business combination. However, the following payments will be made to our sponsor, officers or directors, or any of their affiliates, none of which will be made
from the proceeds of our IPO and the sale of the private placement warrants held in the trust account prior to the completion of our initial business combination:
| • |
Reimbursement for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination; and
|
| • |
Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to fund working capital deficiencies or finance transaction costs in connection with an
intended initial business combination, the terms of which have not been determined nor have any written agreements been executed with respect thereto. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per
warrant at the option of the lender.
|
The above payments may be funded using the net proceeds of our IPO and the sale of the private placement warrants not held in the trust account or, upon completion of the initial
business combination, from any amounts remaining from the proceeds of the trust account released to us in connection therewith.
Director Independence
The rules of the NYSE require that a majority of our Board be independent within one year of our IPO. An “independent director” is defined generally as a person who, in the opinion
of the company’s board of directors, has no material relationship with the listed company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company). We have three “independent directors” as defined in the NYSE rules and applicable SEC rules. Our Board has determined that each of Mssrs. Muoio, Shapiro and Weber is an independent director under applicable SEC and NYSE rules. Our Board also determined that John Zieser, a former director who resigned effective March
24, 2023, was an independent director under applicable SEC and NYSE rules as of and during the fiscal year ended December 31, 2022. Our independent directors will have regularly scheduled meetings at which only independent directors are
present.
| Item 14. |
Principal Accountant Fees and Services.
|
The firm of Marcum LLP acts as our independent registered public accounting firm. The following is a summary of fees paid to Marcum LLP for services rendered.
Audit Fees
During the fiscal periods ended December 31, 2022 and 2021, fees for our independent registered public accounting firm were $123,600 and $39,655, respectively, for the services they
performed in connection with our IPO and fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Marcum LLP in connection with regulatory filings.
Audit-Related Fees
During the fiscal periods ended December 31, 2022 and 2021, our independent registered public accounting firm did not render assurance related services related to the performance
of the audit or review of financial statements.
Tax Fees
During the fiscal period ended December 31, 2022 and 2021, our independent registered public accounting firm did not render services to us for tax compliance, tax advice and tax
planning.
All Other Fees
During the fiscal periods ended December 31, 2022 and 2021, there were no fees billed for products and services provided by our independent registered public accounting firm
other than those set forth above.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our IPO. As a result, the audit committee did not pre-approve all of the foregoing services, although
any services rendered prior to the formation of our audit committee were approved by our Board. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and
permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to
the completion of the audit).
| Item 15. |
Exhibit and Financial Statement Schedules.
|
| (a) |
The following documents are filed as part of this annual report on Form 10-K:
|
| 1. |
Financial Statements: See “Index to Financial Statements” on page F-1 of the accompanying financial statements.
|
| (b) |
Financial Statement Schedules. All schedules are omitted for the reason that the information is included in the financial statements or the notes thereto or that they are not required or are not applicable.
|
| (c) |
Exhibits: The following exhibits are filed with this Report. Exhibits which are incorporated herein by reference can be obtained from the SEC’s website at sec.gov.
|
|
Exhibit
Number
|
Description
|
|
|
1.1
|
||
|
3.1
|
||
|
3.2
|
||
|
4.1
|
||
|
4.2
|
||
|
4.3
|
||
|
4.4
|
||
|
4.5
|
||
|
10.1
|
||
|
10.2
|
||
|
10.3
|
||
|
10.4
|
||
|
10.5
|
||
|
10.6
|
||
|
10.7
|
||
|
10.8
|
||
|
10.9
|
|
10.10
|
||
|
10.11
|
||
|
10.12
|
||
|
10.13
|
||
|
10.14
|
||
|
Power of Attorney (included on signature page of this annual report)
|
||
|
Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
|
101.INS*
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document.
|
|
|
101.SCH*
|
Inline XBRL Taxonomy Extension Schema Document.
|
|
|
101.CAL*
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
101.DEF*
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
101.LAB*
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
101.PRE*
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
104*
|
Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document, which is contained in Exhibit 101).
|
| * |
Filed herewith.
|
| ** |
Furnished.
|
| Item 16. |
Form 10-K Summary.
|
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York City, New York, on the 17th day of April, 2023.
|
HEARTLAND MEDIA ACQUISITION CORP.
|
||
|
By:
|
/s/ Robert S. Prather, Jr.
|
|
|
Name: Robert S. Prather, Jr.
|
||
|
Title: Chief Executive Officer
|
||
KNOW ALL BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Robert S. Prather, Jr. and Shawn Pack, each acting alone, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign this annual report on Form 10-K (including amendments thereto), and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this annual report has been signed below by the following persons in the capacities and on the dates indicated.
|
Name
|
Position
|
Date
|
||
|
/s/ Robert S. Prather, Jr.
|
Chief Executive Officer and Director
|
April 17, 2023
|
||
|
Robert S. Prather, Jr.
|
(Principal executive officer)
|
|||
|
/s/ Shawn Pack
|
Chief Financial Officer
|
April 17, 2023
|
||
|
Shawn Pack
|
(Principal financial and accounting officer)
|
|||
|
/s/ Salvatore Muoio
|
Director
|
April 17, 2023
|
||
|
Salvatore Muoio
|
||||
|
/s/ Steven T. Shapiro
|
Director
|
April 17, 2023
|
||
|
Steven T. Shapiro
|
||||
|
/s/ Alan J. Weber
|
Director
|
April 17, 2023
|
||
|
Alan J. Weber
|
76
HEARTLAND MEDIA ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
|
F-2
|
|
|
Financial Statements:
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7 to F-20
|
To the Stockholders and Board of Directors of
Heartland Media Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Heartland Media Acquisition Corp.
(the “Company”) as of December 31, 2022 and 2021,
the related statements of operations, changes in stockholders’ (deficit) equity and cash flows for the year ended December 31, 2022 and for the period from
February 10, 2021 (inception) through December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021,
and the results of its operations and its cash flows for the year ended December 31, 2022 and for the period from February 10, 2021 (inception) through December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company is a Special Purpose Acquisition Corporation that was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
one or more businesses or entities on or before July 25, 2023. The Company must also seek the approval of the board of directors to extend the business combination deadline by an additional three months through October 25, 2023. The Company has
not identified a viable business combination target as of the issuance date of these financial statements. There is also no approved plan in place to extend the business combination deadline beyond July 25, 2023 nor does the Company have
sufficient capital resources to fund a required extension payment or ongoing operations, including the continued search for a viable target for any period of time after July 25, 2023. These matters raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 1. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a
going concern.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, audits of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2021.
New York, NY
April 17, 2023
HEARTLAND MEDIA ACQUISITION CORP.
| December 31, | ||||||||
| 2022 | 2021 | |||||||
|
Assets
|
||||||||
|
Cash
|
$
|
|
$ | |||||
|
Prepaid expenses
|
|
|||||||
|
Total current assets
|
||||||||
|
Prepaid insurance, long-term
|
||||||||
|
Deferred offering costs
|
|
|||||||
|
Marketable securities held in Trust Account
|
||||||||
|
Total Assets
|
$
|
|
$ | |||||
|
Liabilities Commitments and Contingencies, and Stockholders’ (Deficit) Equity
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable and accrued expenses
|
$
|
|
$ | |||||
|
Promissory note – related party
|
|
|||||||
|
Income taxes payable
|
||||||||
|
Total current liabilities
|
|
|||||||
|
Warrant liability
|
||||||||
|
Deferred tax liability
|
||||||||
|
Deferred underwriting fee payable
|
||||||||
| Total Liabilities |
||||||||
|
Commitments and Contingencies (Note 6)
|
||||||||
| Temporary Equity |
||||||||
|
Class A common stock subject to possible redemptions, $
|
||||||||
|
Stockholders’ (Deficit) Equity
|
||||||||
|
Preferred stock, $
|
|
|||||||
|
Class A common stock, $
|
|
|||||||
|
Class B common stock, $
|
|
|||||||
|
Additional paid-in capital
|
|
|||||||
|
Accumulated deficit
|
(
|
)
|
( |
) | ||||
|
Total Stockholders’ (Deficit) Equity
|
(
|
)
|
||||||
|
Total Liabilities, Commitments and Contingencies, and Stockholders’ (Deficit) Equity
|
$
|
|
$ | |||||
| (1) |
|
The accompanying notes are an integral part of these financial statements.
HEARTLAND MEDIA ACQUISITION CORP.
|
For the Year Ended December 31,
|
For the Period from February 10, 2021 (Inception) Through December 31,
|
|||||||
|
2022
|
2021
|
|||||||
|
Formation costs, operating costs, and general and administrative costs
|
$
|
|
$
|
|
||||
|
Loss from operations
|
(
|
)
|
(
|
)
|
||||
|
Other income (expense):
|
||||||||
|
Warrant issuance costs
|
(
|
)
|
|
|||||
|
Change in fair value of warrant liability
|
|
|
||||||
|
Change in fair value of over-allotment option liability
|
|
|
||||||
|
Interest earned on marketable securities held in Trust Account
|
|
|
||||||
|
Total other income, net
|
|
|
||||||
|
Income (Loss) before provision for income taxes
|
|
(
|
)
|
|||||
|
Provision for income taxes
|
(
|
)
|
|
|||||
|
Net income (loss)
|
$
|
|
$
|
(
|
)
|
|||
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to redemption
|
|
|
||||||
|
Basic and diluted net income per share, Class A Common stock
|
$
|
|
$
|
|
||||
|
Basic weighted average shares outstanding, Class B common stock(1)
|
|
|
||||||
|
Basic net income (loss) per Class B common stock
|
$
|
|
$
|
(
|
)
|
|||
|
Diluted weighted average shares outstanding, Class B common stock(1)
|
|
|
||||||
|
Diluted net income (loss) per Class B common stock
|
$
|
|
$
|
(
|
)
|
|||
| (1) |
|
HEARTLAND MEDIA ACQUISITION CORP.
FOR THE YEAR ENDED DECEMBER 31, 2022 AND FOR THE PERIOD FROM FEBRUARY 10, 2021 (INCEPTION) THROUGH DECEMBER 31, 2021
|
Class A
Common Stock
|
Class B
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Total
Stockholders’
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity (Deficit)
|
||||||||||||||||||||||
|
Balance as of February 10, 2021 (Inception)
|
|
$
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Class B common stock issued to Sponsor (1)
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Net loss
|
—
|
|
—
|
|
|
(
|
)
|
(
|
)
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|||||||||||||||||||
|
Balance as of December 31, 2021
|
|
|
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|
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(
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)
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Sale of
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Sale of
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Sale of
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—
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—
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Sale of
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—
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—
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Underwriters’ discount
|
—
|
|
—
|
|
(
|
)
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|
(
|
)
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|||||||||||||||||||
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Underwriters’ discount-OA
|
—
|
|
—
|
|
(
|
)
|
|
(
|
)
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|||||||||||||||||||
|
Offering expenses reimbursed by underwriter
|
—
|
|
—
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|
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|||||||||||||||||||||
|
Offering expenses reimbursed by underwriter – OA
|
—
|
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—
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|||||||||||||||||||||
|
Deferred underwriter Discount
|
—
|
|
—
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||
|
Deferred underwriter Discount-OA
|
—
|
|
—
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||
|
Offering costs closed to APIC
|
—
|
|
—
|
|
(
|
)
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(
|
)
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|||||||||||||||||||
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Warrant issuance costs
|
—
|
|
—
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|
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Incentives to bankers to participate in private placement
|
—
|
|
—
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|||||||||||||||||||||
|
Warrant liability recognition
|
—
|
|
—
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||
|
Initial classification of over-allotment liability
|
—
|
|
—
|
|
(
|
)
|
|
(
|
)
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|||||||||||||||||||
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Forfeiture of
|
|
|
(
|
)
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(
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)
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|
|||||||||||||||||||
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Initial measurement for Class A common stock to redemption value
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||
| Remeasurement for Class A common stock to redemption value |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||
|
Net income
|
—
|
|
—
|
|
|
|
|
|||||||||||||||||||||
|
Balance as of December 31, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||||||||||
| (1) |
|
HEARTLAND MEDIA ACQUISITION CORP.
|
For the Year Ended December 31,
|
For the Period from
February 10, 2021
(Inception) Through
December 31,
|
|||||||
|
2022
|
2021
|
|||||||
|
Cash flows from Operating Activities:
|
||||||||
|
Net income (loss)
|
$
|
|
$
|
(
|
)
|
|||
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
||||||||
|
Interest earned on marketable securities held in Trust Account
|
(
|
)
|
|
|||||
|
Change in fair value of warrant liability
|
(
|
)
|
|
|||||
|
Change in over-allotment option liability
|
(
|
)
|
|
|||||
|
Warrant issuance costs
|
|
|
||||||
|
Deferred tax provision
|
|
|
||||||
|
Changes in current assets and current liabilities:
|
||||||||
|
Prepaid expenses
|
(
|
)
|
(
|
)
|
||||
|
Accounts payable and accrued expenses
|
(
|
)
|
|
|||||
|
Income taxes payable
|
|
|
||||||
|
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
|
Cash Flows from Investing Activities:
|
||||||||
|
Investment of cash in Trust Account
|
(
|
)
|
|
|||||
|
Net cash used in investing activities
|
(
|
)
|
|
|||||
|
Cash flows from Financing Activities:
|
||||||||
|
Proceeds from issuance of Founder Shares
|
|
|
||||||
|
Proceeds from promissory note – related party
|
|
|
||||||
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
||||||
|
Proceeds from the partial exercise of over-allotment option, net of underwriting discounts paid
|
|
|
||||||
|
Proceeds from the sale of Private Placement Warrants
|
|
|
||||||
|
Proceeds from reimbursement by underwriters of offering costs
|
|
|
||||||
|
Receipt of overpayment from related party
|
|
|||||||
|
Payment of promissory note – related party
|
(
|
)
|
|
|||||
|
Payment of deferred offering costs
|
(
|
)
|
|
|||||
|
Net cash provided by financing activities
|
|
|
||||||
|
Net change in cash
|
|
|
||||||
|
Cash, beginning of the year
|
|
|
||||||
|
Cash, end of the year
|
$
|
|
$
|
|
||||
|
Supplemental disclosure of noncash investing and financing activities:
|
||||||||
|
Deferred offering costs in accrued offering costs and expenses
|
$
|
|
$
|
|
||||
|
Initial value of Class A common stock subject to possible redemption, including accretion of
carrying value to redemption value of $
|
$
|
|
$
|
|
||||
|
Remeasurement for Class A common stock to redemption amount
|
$
|
|
$
|
|
||||
|
Payment of offering costs made by sponsor
|
$
|
|
$
|
|
||||
|
Deferred underwriting fee payable
|
$
|
|
$
|
|
||||
|
Deferred offering cost charged to Additional paid-in capital
|
$
|
|
$
|
|
||||
| Proceeds allocated to warrant liability |
$ |
$ |
||||||
The accompanying notes are an integral part of these financial statements.
HEARTLAND MEDIA ACQUISITION CORP.
DECEMBER 31, 2022
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Heartland Media Acquisition Corp. (the “Company”) is a blank check company incorporated as a Delaware corporation on February 10, 2021. The
Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”). The Company has not selected any specific target business and the Company has not, nor has anyone on its behalf, initiated
any substantive discussions, directly or indirectly, with any target business regarding a Business Combination with the Company.
As of December 31, 2022, the Company had not commenced any operations. All activity for the period from February 10, 2021 (inception) through December 31, 2022 relates to the Company’s formation and the IPO (as defined below), and since the IPO, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Heartland Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s IPO was declared effective on January 20, 2022 (the “Effective Date”). On January 25, 2022, the
Company consummated its Initial Public Offering (“IPO”) of 17,500,000 units (the “Units”). Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (the “Public Shares”), and of one redeemable
warrant of the Company (the “Public Warrants”). Each whole warrant is exercisable to purchase one whole share of Class A common stock
at $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $175,000,000 ,
which is discussed in Note 3.
Simultaneously with the closing of the IPO, the Company completed the private sale (the “Private Placement”) of an aggregate
of 9,875,000 warrants (the “Private Placement Warrants”), at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $9,875,000 ,
which is discussed in Note 4.
On February 7, 2022, the Company issued an additional 1,746,931 Units in connection with the partial exercise by the underwriters of the IPO of their over-allotment option, generating gross proceeds of $17,469,310 , which is discussed in Note 3. Simultaneously with the closing of the underwriters’ partial exercise of the over-allotment option, the
Company sold an additional 786,119 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, to the Sponsor in a private placement (the “Over-allotment Private Placement” and, together with the Private Placement, the “Private Placements”) generating gross proceeds of $786,119 , which is discussed in Note 4.
Transaction costs amounted to $11,801,638
consisting of $3,849,386 of underwriting commissions, $6,736,426 of deferred underwriting commissions, $805,493 of incentives to two investors (see Note 4),
and $891,506 of other offering costs, partially offset by the reimbursement of $481,173 of offering expenses by the underwriters. The Company’s remaining cash after payment of the offering costs is held outside of the Trust Account (as defined below) for
working capital purposes.
The Company’s Business Combination must be with one
or more target businesses that together have a fair market value equal to at least 80 % of the balance in the Trust Account (net of
taxes payable) at the time of the signing of an agreement to enter into a Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination 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”). There is no assurance that the Company will be able to successfully effect a Business Combination.
Following the closing of the IPO on January 25, 2022 and the partial exercise of the over-allotment option on February 7, 2022, an amount of $197,281,043 ($10.25 per Unit) from the
net proceeds of the sale of the Units and the sale of the Private Placement Warrants was placed in a Trust Account (“Trust Account”) and invested only in U.S. “government securities” with a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to
the Company to pay taxes, the funds held in the Trust Account will not be released from the Trust Account until the earliest to occur of: (1) the completion of the initial Business Combination; (2) the redemption of any Public Shares properly
submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial Business
Combination or to redeem 100 % of the Public Shares if the Company does not complete the initial Business Combination within 18 months from the closing of the IPO or up to 21
months from the closing of the IPO at the election of the Company, subject to certain conditions, including the deposit of $1,750,000
(or $0.10 per unit) into the Trust Account or (B) with respect to any other provision relating to stockholders’ rights or pre-initial
Business Combination activity; and (3) the redemption of all of the Public Shares if the Company has not completed the initial Business Combination within 18 months from the closing of the IPO or during any Extension Period (as defined below), subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s
creditors, if any, which could have priority over the claims of the public stockholders.
The Company will provide the public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of
the initial Business Combination either: (1) in connection with a stockholder meeting called to approve the initial Business Combination; or (2) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of
a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their shares at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, as of business days prior to the consummation of the initial Business Combination,
including interest earned on the funds held in the Trust Account (net of taxes payable), divided by the number of then outstanding Public Shares, subject to the limitations described herein.
The shares of common stock subject to redemption were recorded at a redemption value and classified as temporary equity upon the completion of
the IPO, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the
Company’s Class A common stock is not a “penny stock” upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business
Combination.
The Company has only 18 months
from the closing of the IPO (July 25, 2023) to complete the initial Business Combination (the “Combination Period”) or up to 21 months
from the closing of the IPO (up to October 25, 2023) at the election of the Company, subject to certain conditions. If the Company has not completed the initial Business Combination within the Combination Period or during any Extension Period,
the Company will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10
business days thereafter, redeem 100 % of the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (net of taxes payable and less up to $100,000
of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating
distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject in each case to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Sponsor, officers and directors have agreed to: (1) waive their redemption rights with respect to their founder shares and any public shares
held by them in connection with the completion of the initial Business Combination; (2) waive their redemption rights with respect to their founder shares and any public shares held by them in connection with a stockholder vote to approve an
amendment to the Company’s amended and restated certificate of incorporation; and (3) waive their rights to liquidating distributions from the Trust Account with respect to any founder shares they hold if the Company fails to complete the initial
Business Combination within the Combination Period or during any extended time that the Company has to consummate a Business Combination beyond 18 months as a result of either (a) at the election of the Company, an additional three months,
subject to certain conditions, including the deposit of $1,750,000 (or $0.10 per unit) into the Trust Account or (b) a stockholder vote to amend the Company’s amended and restated certificate of incorporation (any such additional period, an “Extension Period”)
(although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete the initial Business Combination within the prescribed time frame).
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the independent
registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account
to below (1) $10.25 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the
liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes (less up to $100,000 of interest to pay dissolution expenses), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the
Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be
unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company has not independently verified whether the Sponsor has sufficient funds to satisfy its
indemnification obligations. Given that the Sponsor’s only assets are securities of the Company, the Sponsor may not be able to satisfy those indemnification obligations. The Company has not asked the Sponsor to reserve for such obligations.
Liquidity, Capital Resources and Going Concern
As of December 31,
2022, the Company had $234,169 in its operating bank account, and an adjusted working capital surplus of $490,105 , which excludes franchise taxes payable of $200,935 ,
income tax payable of $418,334 and other allowed withdrawals of $12,872 , of which such amounts can be paid from interest earned on the Trust Account. As of December 31, 2022, $2,844,775 of the amount on deposit in the Trust Account represents interest income, which is available to pay the Company’s tax obligations.
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and
evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, and structuring, negotiating, and consummating the Business Combination. However, if the estimate of the
costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business
prior to a Business Combination. Moreover, the Company may need to obtain additional financing or draw on the Working Capital Loans (as defined below) either to complete a Business Combination or because it becomes obligated to redeem a
significant number of the Public Shares upon consummation of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable
securities laws, the Company would only complete such financing simultaneously with the completion of its Business Combination. If the Company is unable to complete the Business Combination because it does not have sufficient funds available,
the Company will be forced to cease operations and liquidate the Trust Account. In addition, following the Business Combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its
obligations. Accordingly, the Company may not be able to obtain additional financing.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until July 25, 2023 (or up until October 25, 2023, at the election of the Company, subject to certain conditions described herein)
to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an extension has not been requested by the
sponsor and approved by the Company’s stockholders, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, it is uncertain that we will have sufficient liquidity to fund the working capital needs of the
Company through July 25, 2023 or through twelve months from the issuance of this report. Management has determined that the mandatory liquidation, should a Business Combination not occur and an extension not be requested by the sponsor, and
potential subsequent dissolution and the Company’s liquidity condition raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after July 25, 2023 (or after October 25, 2023, at the election of the Company, subject to certain conditions described herein). The Company intends to continue to search for and seek to complete a Business
Combination before the mandatory liquidation date. The Company is within 12 months of its mandatory liquidation date as of the time of filing of this Annual Report on Form 10-K.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action,
various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of
these financial statements and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other
things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The
excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase.
However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In
addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or
otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the
fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in
connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the
Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash
available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012, (the “JOBS Act”), and it may 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have
not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is
irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging
growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Making estimates
requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in the financial statements is the determination of the fair value of
the warrant liability. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial
institution, which, at times, may exceed the Federal Deposit Insurance Coverage limit of $250,000. The Company has not experienced losses on this account.
The Company is exposed to volatility in the banking market. At various times, we could have deposits with certain U.S. banks in excess of the
maximum amounts insured by the U.S. Federal Deposit Insurance Corporation (“FDIC”). On March 10, 2023, Silicon Valley Bank became insolvent. State regulators closed the bank and the FDIC was appointed as its receiver. The Company did not hold
any deposits with Silicon Valley Bank as of December 31, 2022.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash
equivalents. The Company had no 234,169 and $25,722
in cash as of December 31, 2022 and 2021, respectively.
Offering Costs
Deferred offering costs consisted of legal expenses incurred through the balance sheet date that are directly related to the IPO. Deferred offering costs were
allocated to the separable financial instruments issued in the IPO based on a relative fair value basis compared to the total proceeds received. Upon completion of the IPO, offering costs associated with warrant liability were expensed and
presented as non-operating expenses in the statements of operations, and offering costs associated with the common stock were charged to the temporary equity.
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1, SEC Staff Accounting bulletin Topic 5A – “Expenses of Offering”, and SEC Staff Accounting
bulletin Topic 5T – “Accounting for Expenses or Liabilities Paid by Principal Stockholder(s).” Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO.
Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction of equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed
immediately. The Company incurred offering costs amounting to $11,801,638 as a result of the IPO (consisting of $3,849,386 of underwriting commissions, $6,736,426
of deferred underwriting commissions, $805,493 of incentives to two investors (see Note 4), and $891,506 of other offering costs, partially offset by the reimbursement of $481,173 of offering expenses by the underwriters). The Company immediately expensed $788,506 of offering costs in connection with the warrant liability.
Marketable Securities Held in Trust Account
At December 31, 2022, substantially all of the assets held in the Trust Account were held in
money market funds which are invested primarily in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value
at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in the Trust Account are included in interest earned on marketable securities held in the Trust Account in the accompanying
statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Class A Common Stock Subject to Possible Redemption
The Company’s Class A common stock that was sold as part of the Units in the IPO contains a redemption feature which allows for the redemption
of such Public Shares in connection with the Company’s liquidation, or if there is a stockholder vote or tender offer in connection with the Company’s initial Business Combination. In accordance with ASC 480-10-S99, the Company classifies such
Public Shares subject to redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Public Shares sold as part of the Units in the IPO were issued with Public Warrants and as such,
the initial carrying value of Public Shares classified as temporary equity were the allocated proceeds determined in accordance with ASC 470-20.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to
equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit. The Company does not
adjust the redemption value for dissolution expenses until it is probable that the Company will liquidate.
As of December 31, 2022, the amount of Public Shares reflected on the balance sheets are reconciled in the following table:
|
Gross proceeds
|
$
|
|
||
|
Less: Proceeds allocated to liability classified warrants and over-allotment
|
(
|
)
|
||
|
Less: Class A common stock issuance costs
|
(
|
)
|
||
|
Add: Accretion of carrying value to redemption value
|
|
|||
|
Add: Remeasurement of carrying value to redemption value
|
|
|||
|
Class A common stock subject to possible redemption, 12/31/22
|
$
|
|
Income Taxes
The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740
requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax
loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There
were no no
The Company has identified the United States as its only “major” tax jurisdiction.
The Company is subject to income tax examinations by major taxing authorities since inception. These
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months.
Net Income (Loss) per Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income
(loss) per common stock is computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. Remeasurement associated with the redeemable shares of Class A common stock is excluded from earnings
(loss) per share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection
with the (i) IPO, and (ii) Private Placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 20,284,584 shares of Class A common stock in the aggregate. As of December 31, 2022 and 2021, the Company did no
The following table reflects the calculation of basic and diluted net income (loss) per common
stock (in dollars, except per share amounts):
|
For the Year Ended December 31,
|
For The Period from February 10, 2021 (inception) Through December 31,
|
|||||||||||||||
|
2022
|
2021
|
|||||||||||||||
|
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||
|
Basic net income (loss) per common stock:
|
||||||||||||||||
|
Numerator:
|
||||||||||||||||
|
Allocation of net income (loss), as adjusted
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
|||||||
|
Denominator:
|
||||||||||||||||
|
Basic weighted-average shares outstanding
|
|
|
|
|
||||||||||||
|
Basic net income (loss) per common stock
|
$
|
|
$
|
|
$
|
|
$
|
(
|
) |
|||||||
|
Numerator:
|
||||||||||||||||
|
Allocation of net income (loss), as adjusted
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
|||||||
|
Denominator:
|
||||||||||||||||
|
Diluted weighted-average shares outstanding
|
|
|
|
|
||||||||||||
|
Diluted net income (loss) per common stock
|
$
|
|
$
|
|
$
|
|
$
|
(
|
) |
|||||||
Fair Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets, primarily due to
its short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| • |
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
| • |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for
identical or similar instruments in markets that are not active; and
|
| • |
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which
one or more significant inputs or significant value drivers are unobservable.
|
In some
circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on
the lowest level input that is significant to the fair value measurement.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then
re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of
the balance sheet date.
The accounting treatment of derivative financial instruments required that the Company record a derivative liability upon the closing of the
IPO. Accordingly, the Company classified each warrant as a liability at its fair value and the warrants were allocated a portion of the proceeds from the issuance of the Units equal to their fair value determined by the Monte Carlo simulation.
This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statements of operations. The
Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
Recent Accounting
Standards
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of
beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces
additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted
method for all convertible instruments. As a smaller reporting company, ASU 2020-06 is effective January 1, 2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early
adoption permitted beginning on January 1, 2021. The adoption of ASU 2020-06 is not expected to have an impact on the Company’s financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting
standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
On January 25, 2022, the Company sold 17,500,000
Units at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock, and of one redeemable warrant. Each whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.
On February 7, 2022, the Company issued an additional 1,746,931 Units in connection with the partial exercise by the underwriters of their over-allotment option, generating gross proceeds of $17,469,310 .
Following the closing of the IPO on January 25, 2022 and the partial exercise of the over-allotment option on February 7, 2022, an amount of $197,281,043 ($10.25 per Unit) from the
net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a Trust Account and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company
Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act which invest only in direct U.S. government treasury obligations.
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Company’s Sponsor purchased an aggregate of 9,875,000 Private Placement Warrants at a price of $1.00 per
Private Placement Warrant ($9,875,000 in the aggregate) in a private placement that closed simultaneously with the closing of the IPO.
Each whole Private Placement Warrant is exercisable to purchase one whole share of common stock at a price of $11.50 per share.
Simultaneously with the closing of the underwriters’ partial exercise of the over-allotment option, the Company sold an additional 786,119 Private Placement Warrants, at a price of $1.00
per Private Placement Warrant, to the Sponsor in a private placement, generating gross proceeds of $786,119 .
The Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination and they will not be redeemable by the Company so long as they are held by the Sponsor or its permitted
transferees. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the
warrants included in the Units sold in the IPO.
On December 9, 2021, two
investors affiliated with an employee of an affiliate of an underwriter of the Company’s IPO committed to purchase a total of 85,800
units in the Sponsor (the “Sponsor Units”) at a price of $5.00 per Sponsor Unit, for total proceeds to the Sponsor of $429,000 . Each Sponsor Unit relates to a membership interest in the Sponsor consisting of 1.75 shares of Class B common stock, par value $0.0001 per
share, of the Company and 4.9375 Private Placement Warrants of the Company. Upon the IPO, the excess of the fair value of the
membership interests transferred over the purchase price of $891,506 was accounted for as offering costs in connection with the private
placement and immediately expensed.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On March 4, 2021, the Sponsor purchased 7,187,500
founder shares for an aggregate purchase price of $25,000 , or approximately $0.003 per share. On October 27, 2021, the Sponsor surrendered 1,437,500
founder shares for no consideration, resulting in 5,750,000 shares outstanding of which 750,000 were subject to forfeiture in
the event the underwriters’ over-allotment option was not exercised. On January 14, 2022, the Sponsor surrendered 718,750 founder
shares for no consideration, resulting in 5,031,250 shares outstanding of which 656,250 were subject to forfeiture in
the event the underwriters’ over-allotment option was not exercised. Prior to the initial investment in the Company of $25,000 by its
Sponsor, the Company had no assets, tangible or intangible. The number of founder shares issued was based on the expectation that the founder shares would represent 20 % of the outstanding shares after the IPO. Up to 656,250 founder shares
were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. As a result of the underwriters’ election to partially exercise their over-allotment option on February 3, 2022, 436,732 shares of Class B common stock are no longer subject to forfeiture and 219,518 were forfeited.
The initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination; or (B) the date on which the Company completes a liquidation, merger, capital stock
exchange, reorganization or other similar transaction after the initial Business Combination that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property (the “Lock-up”).
Any permitted transferees would be subject to the same restrictions and other agreements of the initial stockholders with respect to any founder shares. Notwithstanding the foregoing, if the last reported sale price of the Class A common stock
equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30 -trading
day period commencing at least 150 days after the initial Business Combination, the founder shares will be released from the Lock-up.
Promissory Note—Related Party
The Company’s Sponsor agreed to loan the Company up to $300,000 to be used for a portion of the expenses of the IPO. The loan was non-interest bearing, unsecured and due at the earlier of June 30, 2022 or the closing of the IPO.
The loan was repaid in
full upon the closing of the IPO. The Company overpaid $16,055 , which was returned by the Sponsor. As of December 31, 2022 and 2021,
$0 and $86,414 were
outstanding under the promissory note, respectively.
Administrative Support Agreement
Subsequent to the
closing of the IPO, the Company agreed to pay an affiliate of the Sponsor a total of $20,000 per month for office space,
administrative and support services. The Company initially agreed to pay these monthly fees until the earlier of the completion of the initial Business Combination or the Company’s liquidation. For the year ended December 31, 2022 the Company
incurred and paid $107,742 for these services. For the period from February 10, 2021 (inception) through December 31, 2021, the
Company did no t incur or pay any fees for these services. On August 1, 2022, the affiliate of the Sponsor agreed to waive all
future administrative fees and reimbursed all previously paid administrative fees on September 21, 2022; on November 10, 2022, the Company and an affiliate of the Sponsor entered into the termination agreement for the administrative services
agreement to effect such agreement and terminate the administrative services agreement.
Termination of Administrative Services Agreement
As noted above,
on August 1, 2022, Heartland Media, LLC, an affiliate of the Sponsor, agreed to waive all future administrative fees and reimburse all previously paid administrative fees under the administrative services agreement, dated January 20, 2022, by
and between the Company and Heartland Media, LLC, and on November 10, 2022, the Company and Heartland Media, LLC entered into a termination agreement for the administrative services agreement (the “Termination Agreement”) to effect such
agreement and terminate the administrative services agreement effective on the date of the signing of the Termination Agreement.
Related Party Loans
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the
Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes the initial Business
Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, such loans may be repaid only out of funds held outside the Trust Account. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to the Sponsor. At December 31, 2022 and 2021, no
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the founder shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any
shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the founder shares) are entitled to registration rights pursuant to a
registration rights agreement entered into in connection with the closing of the IPO requiring the Company to register such securities for resale (in the case of the founder shares, only after conversion to shares of Class A common stock). The
holders of these securities are entitled to make up to three demands, excluding short form registration demands, that the Company
registers such securities. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination and rights to require the
Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriter’s Agreement
The underwriters had a 45 -day
option from the date of the IPO to purchase up to an additional 2,625,000 Units to cover over-allotments, if any. The underwriters
partially exercised their over-allotment option on February 3, 2022 to purchase an additional 1,746,931 Units at a price of $10.00 per Unit.
The underwriters received a cash underwriting discount of $3,500,000 upon the IPO and $349,386 upon the partial exercise of the
over-allotment option.
Additionally, the underwriters are entitled to a deferred underwriting discount of $6,736,426 , upon the completion of the Company’s initial Business Combination.
Contingent Fee Arrangement
On July 7, 2022,
the Company entered into an agreement with a vendor to provide financial advisory services in connection with a potential Business Combination. The agreement calls for the Company to pay a fee upon the closing of a Business Combination with a
company that was identified by the vendor. The agreement further specifies that the fee will be 1 % of the transaction consideration
in the event of a successful Business Combination with a minimum fee of $2.5 million. The fees are payable upon the consummation of
a successful Business Combination.
NOTE 7. WARRANT LIABILITY
As of December 31, 2022, there were 9,623,465 Public
Warrants outstanding. No warrants were outstanding as of December 31, 2021. Each warrant entitles the holder thereof to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein. In addition, if (x) the Company issues additional shares of the Class A common stock or equity-linked securities for capital
raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20
per share of the Class A common stock (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any
founder shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “newly issued price”), (y) the aggregate gross proceeds from such issuances represent more than 60 % of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business
Combination (net of redemptions), and (z) the volume-weighted average trading price of the Class A common stock during the 20 -trading
day period starting on the trading day after the day on which the Company consummates the initial Business Combination (such price, the “market value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115 % of the higher of the market value and the newly issued price, and the $18.00
per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180 % of the higher of the market value and
the newly issued price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the
higher of the market value and the newly issued price.
The warrants will become exercisable on the later of 12 months
from the closing of the Company’s IPO or 30 days after the completion of its initial Business Combination, and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or
liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such
warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of
Class A common stock is available, subject to the Company satisfying its obligations described below with respect to registration, or such warrant may be exercised on a cashless basis in accordance with the terms of the warrant agreement. No
warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified
under the securities laws of the state of the exercising holder, or an exemption is available. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant
will not be entitled to exercise such warrant and such warrant may have no value and may expire worthless. In no event will the Company be required to net cash settle any warrants. In the event that a warrant is not exercisable, the purchaser of
a Unit containing such warrant will have paid the full purchase price for the Unit solely for the share of Class A common stock underlying such Unit.
The Company has not registered the shares of Class A common stock issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon
as practicable, but in no event later than 20 business days after the closing of the
initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC a registration statement registering the issuance, under the Securities Act, of the shares of Class A common stock issuable upon exercise
of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective within 60 business
days after the closing of the initial Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the redemption or expiration of the warrants in accordance with the
provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange and, as such, does not satisfy the definition of a “covered
security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in
the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the
extent an exemption is not available. If a registration statement covering the shares of the Class A common stock issuable upon exercise of the warrants is not effective by the 60 th business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the
Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. In such event, each holder would pay the exercise
price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied
by the excess of the “fair market value” of the Company’s Class A common stock over the exercise price of the warrants by (y) the fair market value and (B) the product of 0.361 and the number of warrants surrendered by such holder, subject to adjustment. The “fair market value” as used in this paragraph shall mean the average of the volume-weighted average
price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of
exercise is received by the warrant agent.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
| • |
in whole and not in part;
|
| • |
at a price of $
|
| • |
upon a minimum of
|
| • |
if, and only if, the last reported sale price of the Class A common stock for any
|
Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| • |
in whole and not in part;
|
| • |
at $
|
| • |
if, and only if, the Reference Value equals or exceeds $
|
| • |
if, and only if, the Reference Value is less than $
|
The Company accounted for the 20,284,584 warrants
issued in connection with the IPO and underwriters’ partial exercise of their over-allotment option (the 9,623,465 Public Warrants and
the 10,661,119 Private Placement Warrants) in accordance with the guidance contained in ASC 815-40. Such guidance provides that
because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. Accordingly, the Company classified each warrant as a liability at its fair value. This liability is subject to
re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statements of operations.
NOTE 8. STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred Stock — The Company is authorized to
issue 2,500,000 0.0001 no
Class A Common Stock — The Company is authorized
to issue 250,000,000 shares of Class A common stock with a par value of $0.0001 per share. At December 31, 2022, there were 19,246,931 no
Class B Common Stock — The Company is authorized
to issue 25,000,000 shares of Class B common stock with a par value of $0.0001 per share. On March 4, 2021, the Sponsor purchased 7,187,500
founder shares for an aggregate purchase price of $25,000 , or approximately $0.003 per share. On October 27, 2021, the Sponsor surrendered 1,437,500
founder shares for no consideration, resulting in 5,750,000 shares outstanding of which 750,000 were subject to forfeiture
in the event the underwriters’ over-allotment option was not exercised. On January 14, 2022, the Sponsor surrendered 718,750 founder
shares for no consideration, resulting in 5,031,250 shares outstanding of which 656,250 were subject to forfeiture
in the event the underwriters’ over-allotment option was not exercised. Prior to the initial investment in the Company of $25,000 by
its Sponsor, the Company had no assets, tangible or intangible. The number of founder shares issued was based on the expectation that the founder shares would represent 20 % of the outstanding shares after the IPO. As a result of the underwriters’ election to partially exercise their over-allotment option on February
3, 2022, 436,732 shares of Class B common stock are no longer subject to forfeiture and 219,518 were forfeited.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business
Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the
like, and subject to further adjustment, as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities (as described herein), are issued or deemed issued in excess of the amount issued in the IPO and
related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class
B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate,
on an as-converted basis, 20 % of the aggregate number of all shares of common stock outstanding upon the completion of the IPO, plus
the aggregate number of shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (net of the number of shares of Class A common stock redeemed in connection with the
initial Business Combination), excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, an affiliate of the Sponsor or
any of the Company’s officers or directors.
NOTE 9. INCOME TAX
The Company’s net deferred tax assets (liability) at December 31, 2022 and 2021 are as follows:
|
|
December 31,
|
December 31, | ||||||
|
|
2022
|
2021 |
||||||
|
Deferred tax assets (liabilities)
|
||||||||
|
Net operating loss carryforward
|
$
|
|
$ | |||||
|
Startup/Organization Expenses
|
|
|||||||
| Unrealized gain/loss |
( |
) | ||||||
|
Total deferred tax assets
|
|
|||||||
|
Valuation Allowance
|
(
|
)
|
( |
) | ||||
|
Deferred tax liability
|
$
|
(
|
)
|
$ | ||||
The income tax provision for the year ended December 31, 2022 and for the period from February 10, 2021 (inception) through December 31, 2021
consists of the following:
|
|
December 31,
|
February 10,
2021 (inception) through
December 31,
|
||||||
|
|
2022
|
2021 |
||||||
|
Federal
|
||||||||
|
Current
|
$
|
|
$ | |||||
|
Deferred
|
(
|
)
|
( |
) | ||||
|
State and Local
|
||||||||
|
Current
|
|
|||||||
|
Deferred
|
|
|||||||
|
Change in valuation allowance
|
|
|||||||
|
Income tax provision
|
$
|
|
$ | |||||
As of December 31, 2022 and 2021, the Company had $0 and $12,872 of U.S. federal net operating loss carryovers, respectively,
available to offset future taxable income, which do not expire.
In assessing the realization of the deferred tax assets (liability), management considers whether it is more likely than not that some portion
of all of the deferred tax assets (liability) will not be realized. The ultimate realization of deferred tax assets (liability) is dependent upon the generation of future taxable income during the periods in which temporary differences
representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets (liability), projected future taxable income and tax planning strategies in making this assessment. After
consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets (liability) and has therefore established a full valuation allowance. For
the year ended December 31, 2022, the change in the valuation allowance was $228,661 . For the period from February 10, 2021
(inception) through December 31, 2021, the change in the valuation allowance was $2,942 .
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2022 and 2021 is as follows:
|
|
December 31, 2022
|
December 31, 2022 |
||||||
|
|
||||||||
|
Statutory federal income tax rate
|
|
%
|
% | |||||
| State taxes, net of federal tax benefit |
% | % | ||||||
| Deferred tax liability change in rate |
% | % | ||||||
| Change in fair value of warrants |
( |
)% | % | |||||
| Transaction costs allocated to warrants |
% | % | ||||||
|
Valuation allowance
|
|
%
|
( |
)% | ||||
|
Income tax provision
|
|
%
|
% | |||||
The effective tax rate differs from the statutory tax rate of 21
NOTE 10. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s liabilities that are measured at fair value on December 31, 2022, and indicates the
fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
|
December 31,
2022
|
Quoted
Prices In
Active
Markets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
||||||||||||
|
Assets:
|
||||||||||||||||
|
Marketable securities held in Trust Account
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
|
||||||||||||||||
|
:
|
||||||||||||||||
|
Warrant liability – Private Placement Warrants
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Warrant liability – Public Warrants
|
|
|
|
|
||||||||||||
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The Private Placement Warrants and Public Warrants were accounted for as liability in accordance with ASC 815-40 and are presented within liabilities on the balance
sheets. The warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability in the statements of operations.
The key inputs into the Monte Carlo simulation models were as follows at December 31, 2022 and January 25, 2022 (initial measurement date):
|
|
Initial
Measurement
|
|||||||
|
|
December 31,
|
January 25,
|
||||||
|
Input:
|
2022
|
2022
|
||||||
|
Risk-free interest rate
|
|
|
%
|
|||||
|
Term (in tears)
|
—
|
|
||||||
|
Expected volatility
|
|
|
%
|
|||||
|
Exercise price
|
$
|
|
$
|
|
||||
|
Stock price
|
$
|
|
$
|
|
||||
The Company’s Public Warrants began separately trading on March 14, 2022. After this date, the Public Warrant values per share were based on the observed trading
prices of the Public Warrants as of each balance sheet date. The fair value of the Public Warrant liability is classified as Level 1 as of December 31, 2022.
Initially and through June 30, 2022, the Private Placement Warrants were valued using a Monte Carlo model, which is considered to be a Level 3
fair value measurement due to the use of unobservable inputs. The subsequent measurement of the Private Placement Warrants is classified as Level 2 due to the use of an observable market quote for a similar asset in an active market. The estimated
fair value of the Private Placement Warrants transferred from a Level 3 fair value measurement to a Level 2 fair value measurement during the year ended December 31, 2022 was $1,172,723 .
The following table presents the changes in the fair value of Level 3 warrant liabilities:
|
Private
|
||||||||||||
|
Placement
|
Public
|
Warrant Liabilities
|
||||||||||
|
Fair value as of January 1, 2022
|
$
|
|
$
|
|
$
|
|
||||||
|
Initial measurement on January 25, 2022
|
|
|
|
|||||||||
|
Change in fair value
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Transfer to Level 1
|
|
(
|
)
|
(
|
)
|
|||||||
|
Transfer to Level 2
|
(
|
)
|
|
(
|
)
|
|||||||
|
Fair value as of December 31, 2022
|
$
|
|
$
|
|
$
|
|
||||||
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements
were issued. Based upon this review, other than as stated below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On January 12, 2023, the Company received a notice letter (the “Notice”) from The New York Stock Exchange (the “NYSE”) indicating that the Company is not currently in compliance with the provision of Section 802.01B of the NYSE Listed
Company Manual requiring the Company to maintain a minimum of 300 public stockholders on a continuous basis (the “Minimum Public
Stockholders Requirement”).
Pursuant to the Notice, the Company is subject to the procedures set forth in Sections 801 and 802 of the NYSE Listed Company Manual, and accordingly must submit to the NYSE within 45 days of receiving the Notice a business plan that demonstrates how the Company expects to return to compliance with the Minimum Public Stockholders Requirement within 18 months of receiving the Notice. The Company intends to submit such a business plan to the NYSE by the required deadline to regain compliance with
the Minimum Public Stockholders Requirement within the required timeframe.
The Company’s business plan will be reviewed by the Listings Operations Committee (the “Committee”) of the NYSE. If the Committee accepts the plan, the Company will be subject to quarterly monitoring for compliance with the plan. If
the Committee does not accept the plan, the Company will be subject to suspension and delisting procedures.
During such time as the Company is deemed noncompliant with the Minimum Public Stockholders Requirement, the Company’s Class A common stock, warrants, and units will bear the indicator “.BC” on the consolidated tape to indicate
noncompliance with the NYSE’s quantitative continued listing standards.
The Notice and the procedures described above have no current effect on the continued listing of the Company’s securities on the NYSE, subject to the Company’s compliance with the NYSE’s other applicable continued listing requirements.
F-20