Item 1. Business
ITEM 1. BUSINESS
General
We are a blank check company incorporated as
a Delaware corporation whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses. We have not selected any specific business combination target and we have
not, nor has anyone on our behalf, engaged in any substantive discussions, directly or indirectly, with any business combination target
with respect to an initial business combination with us. While we may pursue an initial business combination target in any business,
industry or geographic location, we intend to search globally for target companies within the M&E industry with a primary focus on
the United States, and in particular on identifying attractive targets among content studios and film production, family entertainment,
animation, music, gaming, e-sports, talent management, talent-facing brands and businesses.
Overview
The COVID-19 pandemic catalyzed immense and dramatic
power shifts in the vast, interconnected M&E industry, which surged to $2.2 trillion in global revenues in 2021 and is expected to
reach $2.6 trillion by 2025 according to a 2021 report by PricewaterhouseCoopers. 1 A clear driver of change in this space
has been the new potential of AI-based technologies plus the evolution of digital consumption, especially as a result of the COVID-19
pandemic, as a sustained revenue driver existing alongside traditional media consumption channels. Consumers’ embrace of the new
ecosystem helped offset revenue declines due to pandemic-related closures and has created heightened growth opportunities for media &
entertainment companies.
As a result, our management team believes a number
of strong and growing M&E businesses are now in a position where capital and expertise are needed to achieve their full growth potential.
While some M&E business have turned to consolidation, others are seeking capital and scale through alternative means that maintain
independence from larger conglomerates. This includes, for instance, celebrity-owned studios and production houses with robust content
pipelines seeking enhanced scale; new media entities (e.g., podcast, music rights and IP aggregators, e-sports) looking for capital to
continue their growth trajectory; undervalued talent-facing companies with solid business fundamentals, such as large agencies and PR
firms; and non-traditional business divisions, such as virtual reality or animated digital production houses, trapped within traditional
media companies.
Business Strategy
We believe that our team has desirable attributes
to potential targets in the M&E space. Our team is a multi-cultural, multi-ethnic mixture of seasoned public-company executives,
Hollywood insiders, media operators, media investors, and individuals with ample public markets and M&A experience. Our team has
demonstrated an extensive track record of successful acquisitions, value creation, and value enhancement in media & entertainment
industry and has access to proprietary opportunities globally that can be leveraged to drive value. Our team’s proprietary connections
include touchpoints to, for example, celebrity-owned studios and brands, family entertainment media, animation, talent management, and
music, including direct relationships with many celebrities.
Our team’s track record extends to successful
experiences negotiating deals with numerous studios, franchises, agencies, distributors and streamers, as well as experience working
directly with talent and production studios, navigating M&E companies through acquisition transactions (as both acquiror and acquiree),
expanding product ranges for existing businesses, and providing strategic guidance to develop revenue and commercial opportunities.
1 Global Entertainment & Media Outlook 2022-2026 (pwc.com),
PricewaterhouseCoopers. June 20, 2022, https://www.pwc.com/gx/en/news-room/press-releases/2022/global-entertainment-and-media-outlook-2022-2026.html.
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Furthermore, we believe our team’s diversity
is especially attractive to prospective M&E targets and a key competitive advantage to achieving higher value. The U.S. M&E sector
is one of the least diverse of all industries, with 92% of film executives, for instance, being white, according to a 2021 McKinsey &
Company report. The same report found this has translated into substantial loses for the industry, with an estimated minimum $10 billion
in revenue lost due to a lack of representation. 2
Given the wealth of data supporting the reality
that diverse teams outperform non-diverse counterparts, our diverse management team represents a core advantage for our company; we believe
our team’s diversity will make us more attractive to M&E targets, both in terms of addressing diversity gaps and in terms of
helping prospective targets achieve higher returns once public.
Management Team
Our management team has a long history of value
creation in the private and public markets, with a strong track record of creating value for stockholders including through acquiring
and operating successful businesses within our target sectors. In particular, many of the companies our team has invested in or operated
have been affiliated with celebrity partners, and several members of our team have become trusted partners with celebrities and business
owners. We believe this unique network of relationships and extensive experience sourcing and executing transactions will enhance our
ability to complete a successful business combination and accelerate the growth trajectory and profitability of the acquired business
post-business combination.
We believe that we are well positioned to identify
attractive acquisition opportunities in the M&E industry, in particular because our team will utilize their access to industry contacts
and proprietary deal flow to generate business combination opportunities. We believe that our team’s networks in particular will
broaden our access to potential transaction opportunities outside typical competitive deal sourcing intermediaries. Our team is well-connected
in our target sectors and, as such we have the opportunity to be potential targets’ preferred partner for opportunities that they
might think are appropriate for a SPAC acquisition. Illustrative networks, for instance, include the networks and accolades of Mr. Hertz,
Mr. Yada, and Mr. Melendez.
Mr. Hertz, who is an independent director on
our Board and chair of our Executive Committee and our Compensation Committee, works closely with the Smith Family Circle and is a director
and co-founder of JUST Goods, Inc., as well as an advisor to the largest shareholder of the Smith Family’s marquee media and branded
products company, Westbrook Inc. Mr. Hertz is also a Senior Partner in the Los Angeles law firm of Hertz Lichtenstein Young & Polk
LLP, which represents some of the most prominent talent, entrepreneurs, agencies and brands in the entertainment, fashion, sports, media,
and technology. Prior to joining the firm, Mr. Hertz oversaw music – business and legal affairs – for The Walt Disney Company.
Mr. Hertz is also a principal in memBrain – an entertainment marketing and strategy consulting firm. memBrain advises numerous
Fortune 500 and emerging ventures in various industries, such as Hasbro, McDonald’s, Intel, UBS, the NY Islanders, and Logitech.
Kosaku Yada and Miguel Melendez, who serve as
our strategic advisors, are also deeply integrated with several media companies and celebrity circles. Mr. Yada is the CEO and a co-founder
of Westbrook Inc., as well as a director for the Smith Family Circle, Founding CEO of the Smith Family Circle, a director of JUST Goods,
Inc., and Managing Partner at Dreamers VC. Mr. Melendez is also a Westbrook Inc. co-founder, as well as a co-founder of Just Water and
a partner in Three Six Zero Entertainment. He has been a talent and business management executive for over three decades, during which
time he has established and guided the careers of numerous recording artists and international pop acts, including Academy Award and
Grammy Award winner Jennifer Hudson, Grammy Award winning artist Robin Thicke and Teddy Riley’s Blackstreet. Mr. Melendez’s
creative partnerships have also produced a variety of successful content in both television and film including the Emmy Award winning
Facebook Watch series, Red Table Talk , the critically acclaimed TNT series Hawthorne, and the Queen Latifah Talk Show for
CBS.
The networks and experiences of our other members
are discussed in more detail in Part III, Item 10 ( Directors, Executive Officers and Corporate Governance ), and we believe each
individual member of our team features a comparably strong mixture of experiences and networks which we feel constitutes a strong advantage
to successfully consummating a deal. The Chair of our Board, Mr. Turner, for example, was formerly Chair of the Board of Microvision,
Inc. (NASDAQ: MVIS), a public company in the LIDAR space, and is currently the company’s Audit Committee chair. He has served on
numerous public and private companies boards of directors as well. Mr. Turner was the Chief Financial Officer of Coinstar Inc. from 2003
until June 2009 and was CFO when the company acquired Redbox. He also previously served as Senior Vice President of Operations, Chief
Financial Officer, and Treasurer of Real Networks, Inc., a digital media and technology company.
2 “Race in the workplace: The Black experience in the US
private sector” McKinsey & Company.
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Similarly, our Chief Executive Officer Mr. Bengochea
has extensive media experience. Mr. Bengochea is currently Founder and Chief Executive Officer of Bengochea Capital LLC, an investment
firm founded in 2020 to pursue frontier asset classes and, through Mr. Bengochea’s network of connections to various industry executives
and celebrities, to examine global opportunities in media and entertainment. Bengochea Capital has been present at the Cannes Film Festival,
among other prestigious events, and was a registered media entity with the Recording Academy for the 2023 Grammy Awards, and is a registered
media entity with the Recording Academy for the upcoming 2024 Grammy Awards. Prior to founding Bengochea Capital, Mr. Bengochea worked
for Sony’s Global Business Development team in Los Angeles and, before that, practiced law as a corporate attorney at the law firm
of Jenner & Block in New York City. Mr. Bengochea holds an A.B. summa cum laude from Harvard University, a J.D. from Harvard Law
School, and an M.B.A. from Harvard Business School.
Mrs. Waxman also represents a wealth of media
experience. Throughout her 30-year tenure at 20 th Century Fox, Mrs. Waxman served in a variety of roles within the finance
organization. Most notably, as Executive Vice President and Deputy CFO, she was responsible for driving strategic priorities, setting
financial priorities, policies and procedures and controls for the global finance organization. She also provided financial leadership
and guidance to over 300 employees in all finance divisions including film production, theatrical, home entertainment and television
marketing and distribution, financial reporting, accounting, corporate compliance, and strategic sourcing. Before joining 20 th
Century Fox, Ms. Waxman was a Senior Auditor at Ernst & Young.
Commitment to Diversity
As a first generation American and native Spanish
speaker, Mr. Bengochea is a passionate advocate for greater Hispanic and general diversity in entertainment, media, and in the public
markets, and for promoting more people of color in executive leadership level.
Several members of our team also champion diversity
of leadership and investment. This is a statistical rarity in both the public markets and in the SPAC space, and that the team believes
there is high demand to remedy this disparity in both in the public markets and in the media and entertainment industry. Reports such
as the aforementioned McKinsey & Company finding that a lack of diversity is causing substantial losses in the media industry, we
believe, further augments our team’s attractiveness to potential targets, and is a further point of differentiation in the marketplace.
Acquisition Strategy
Our team will leverage its skills, expertise
and strong network within Hollywood and other international M&E hubs to identify attractive target companies and provide guidance
on the benefits of being a publicly-traded entity, including broader access to capital, increased liquidity for potential acquisitions,
expanded branding opportunities in the marketplace, and reputational and consumer confidence gains, and on the process of transitioning
from a private company to a public registrant. We will also be able to source potential targets from our team’s contacts within
private equity, with celebrities, with M&E investors, and with various industry leaders.
Consistent with this strategy, we have identified
parameters and criteria that we think are important and relevant in evaluating prospective target businesses. We will apply these parameters
in evaluating prospects, even though we may ultimately decide to execute our initial business combination with a fundamentally strong
company that may not match all of our initial parameters:
● Growth Prospects : We intend to seek companies with
high growth trajectories within the M&E industry that are driven by competitive advantages that can be accelerated or magnified through
a partnership with us and access to the public markets.
● Earnings Potential : We intend to acquire one or more
businesses that have multiple and diverse potential drivers of revenue and earnings growth and that have the potential to generate strong
and stable free cash flow.
● M&E Focus : We intend to prioritize entities within
our team’s core spheres of expertise and from among our team’s proprietary connections, such as celebrity content producers
and brands, family entertainment, animation, gaming, and music businesses which we believe have benefited from the evolving M&E ecosystem.
This includes businesses in entertainment for which AI-based technologies can enhance cash flows by improving efficiency or output or
reduce costs.
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● Diversity : We intend to seek targets that can benefit
from our team’s diversity and relationships in the M&E sector. This includes prospective targets who can enhance their existing
business and generate value by working with individual members of our team or becoming part of our team’s network; targets who
are minority owned-or-operated; and targets who wish to increase or highlight their executive diversity.
● Public Advantages : We intend to seek target companies
that are public market ready and whose leadership teams have the vision to take advantage of and appreciate the benefits of becoming
a publicly-traded entity.
● Evolving Circumstance : We intend to seek companies
which are capitalizing on M&E industry shifts and trends created by various factors such as the migration from cable television to
streaming services and the proliferation of generative AI-based technologies.
● Valuations : We consider ourselves to be rigorous,
disciplined and valuation-centric investors, with a keen understanding of market value and successful track record. We intend to seek
companies with a respectable market share and growth potential in the segments in which they operate. We expect that ongoing market turbulence
in recent years, such as the 2023 SAG-AFTRA strike and unprecedented inflation, have continued to disrupt a number of companies within
the M&E industry that may also be available at a discount.
These criteria are not intended to be exhaustive.
Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general
guidelines, as well as other considerations, factors and criteria deemed relevant by our management in effecting our initial business
combination consistent with our business objectives. In the event that we decide to enter into our initial business combination with
a target business that does not meet any of the above criteria and guidelines, we will disclose that the target business does not meet
any of the above criteria in our stockholder communications related to our initial business combination. In evaluating a prospective
target business, we expect to conduct a due diligence review which may encompass, among other things, meetings with incumbent management
and employees, document reviews, interviews of customers and suppliers, inspections of facilities, as well as reviewing financial and
other information which will be made available to us.
Our management team’s existing M&E
connections are expected to position us favorably as a business partner with a number of prospective targets. We are not prohibited from
pursuing a business combination with a company that is affiliated with our sponsor, officers or directors. In the event that we seek
to complete a business combination with a business that is affiliated with our sponsor, officers or directors, we, or a committee of
independent directors, expect to obtain an opinion from an independent investment banking firm or another independent entity that commonly
renders valuation opinions that our business combination is fair to our stockholders from a financial point of view. In the event that
we seek such a business combination, we expect that the independent members of our Board of Directors would be involved in approving
the transaction.
Sources of Target Businesses
While we have not yet selected a target business
with which to consummate our initial business combination, we believe based on our management’s business knowledge and past experience
that there are numerous potential candidates. We expect that our principal means of identifying potential target businesses will be through
the extensive contacts and relationships of our initial stockholders, officers and directors. While our officers and directors are not
required to commit any specific amount of time in identifying or performing due diligence on potential target businesses, our officers
and directors believe that the relationships they have developed over their careers will generate a number of potential business combination
opportunities that will warrant further investigation. We also anticipate that target business candidates will be brought to our attention
from various unaffiliated sources, including investment bankers, venture capital funds, private equity funds, leveraged buyout funds,
management buyout funds and other members of the financial community. Target businesses may be brought to our attention by such unaffiliated
sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses they
think we may be interested in on an unsolicited basis, since many of these sources will have read our Prospectus and know what types
of businesses we are targeting.
Our officers and directors must present to us
all target business opportunities that have a fair market value of at least 80% of the assets held in the trust account (net of deferred
underwriting commissions and taxes payable) at the time of our prospective entry into the agreement with respect to the would-be initial
business combination target, subject to any fiduciary or contractual obligations. While we have not engaged the services of any professional
firms or other individuals that specialize in business acquisitions on any formal basis, we may in the future engage the services of
professional firms or other individuals that specialize in business acquisitions, in which event we may pay a finder’s fee, consulting
fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction, with such fee
potentially coming from the $12,000 per month fee we have allocated for various management services as discussed throughout this Annual
Report.
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Our audit committee will review and approve all
reimbursements and payments made to our initial stockholders, officers, directors or our or their respective affiliates, with any interested
director abstaining from such review and approval.
Selection of a Target Business and Structuring of a Business
Combination
Subject to our management team’s fiduciary
obligations and the limitations that a target business have a fair market value of at least 80% of the balance in the trust account (net
of deferred underwriting commissions and taxes payable) at the time of the execution of a definitive agreement for our initial business
combination, as described below in more detail, and that we must acquire a controlling interest in the target business, our management
will have virtually unrestricted flexibility in identifying and selecting a prospective target business. We have not established any
specific attributes or criteria (financial or otherwise) for prospective target businesses other than the parameters described in Part
I, Item I ( Business—Acquisition Strategy ) of this Annual Report. In evaluating a prospective target business, our management
may consider a variety of factors in addition to those parameters, including:
● financial condition and results of operation;
● growth potential;
● brand recognition and potential;
● experience and skill of management and availability of additional
personnel;
● capital requirements;
● competitive position;
● barriers to entry;
● stage of development of the products, processes or services;
● existing distribution and potential for expansion;
● degree of current or potential market acceptance of the products,
processes or services;
● proprietary aspects of our tangible and intangible assets
and the extent of intellectual property or other protections for our products, formulas, brands or media;
● impact of regulation on the business;
● regulatory environment of the industry;
● costs associated with effecting the business combination;
● industry leadership, sustainability of market share and attractiveness
of industries in which a target business participates; and
● macro competitive dynamics in the industry within which the
company competes.
These criteria are not intended to be exhaustive.
Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors
as well as other considerations deemed relevant by our management team in effecting a business combination consistent with our business
objective. In evaluating a prospective target business, we will conduct an extensive due diligence review which will encompass, among
other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information which
is made available to us. This due diligence review will be conducted either by our directors, officers, and/or strategic advisors, our
professional advisors (such as lawyers, accountants, and financial advisors), and by unaffiliated third parties we may engage or that
our sponsor may engage on our behalf pursuant to our administrative services agreement with our sponsor.
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The time and costs required to select and evaluate
a target business and to structure and complete our initial business combination cannot presently be ascertained with any degree of certainty.
Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination
is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business combination.
Fair Market Value of Target Business
NASDAQ listing rules require that the target
business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in
the trust account (net of deferred underwriting commissions and taxes payable) at the time of the execution of a definitive agreement
for our initial business combination. Notwithstanding the foregoing, if we are not then listed on NASDAQ for whatever reason, we would
no longer be required to meet the foregoing 80% fair market value test.
We currently anticipate structuring a business
combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination where we merge directly with the target business or a newly formed subsidiary or where we acquire less than 100%
of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders
or for other reasons, but we do not intend to complete such business combination unless the post-transaction company owns or acquires
50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient
for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended. Even if the post-transaction
company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively
own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination
transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the
outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result
of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own
less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests
or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses
that is owned or acquired is what will be valued for purposes of the 80% of trust account balance test.
The fair market value of the target will be determined
by our Board of Directors based upon one or more standards generally accepted by the financial community (such as actual and potential
sales, earnings, cash flow and/or book value). The proxy solicitation materials or tender offer documents used by us in connection with
any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business, as well
as the basis for our determinations. If our Board is not able to independently determine that the target business has a sufficient fair
market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that
commonly renders valuation opinions, with respect to the satisfaction of such criteria. We will not be required to obtain an opinion
from an investment banking firm as to the fair market value if our Board of Directors independently determines that the target business
complies with the 80% threshold.
Lack of Business Diversification
We may seek to effect a business combination
with more than one target business, although we expect to complete our business combination with just one business. Therefore, at least
initially, the prospects for our success may be entirely dependent upon the future performance of a single business operation. Unlike
other entities which may have the resources to complete several business combinations of entities operating in multiple industries or
multiple areas of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses. By consummating a business combination with only a single entity, our lack of diversification
may:
● subject us to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent
to a business combination, and
● result in our dependency upon the performance of a single
operating business or the development or market acceptance of a single or limited number of products, processes or services.
If we determine to simultaneously acquire several
businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our purchase of its
business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us, and delay our
ability, to complete the business combination. With multiple acquisitions, we could also face additional risks, including additional
burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and
the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies
in a single operating business.
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Limited Ability to Evaluate the Target Business’ Management
Although we intend to scrutinize the management
of a prospective target business when evaluating the desirability of effecting a business combination, we cannot assure you that our
assessment of the target business’ management will prove to be correct. In addition, we cannot assure you that the management team
will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of our officers
and directors, if any, in the target business following a business combination cannot presently be stated with any certainty. While it
is possible that some of our key personnel will remain associated in senior management or advisory positions with us following a business
combination, it is unlikely that they will devote their full-time efforts to our affairs subsequent to a business combination. Moreover,
they would only be able to remain with the company after the consummation of a business combination if they are able to negotiate employment
or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation
of the business combination and could provide for them to receive compensation in the form of cash payments and/or our securities for
services they would render to the company after the consummation of the business combination. While the personal and financial interests
of our key personnel may influence their motivation in identifying and selecting a target business, their ability to remain with the
company after the consummation of a business combination will not be the determining factor in our decision as to whether or not we will
proceed with any potential business combination. Additionally, we cannot assure you that our officers and directors will have significant
experience or knowledge relating to the operations of the particular target business.
Following a business combination, we may seek
to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have
the ability to recruit additional managers, or that any such additional managers we do recruit will have the requisite skills, knowledge
or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve an Initial
Business Combination
In connection with any proposed business combination,
we will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders
may seek to convert their shares, regardless of whether they vote for or against the proposed business combination or don’t vote
at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide
our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder
vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable),
in each case subject to the limitations described herein and in our amended and restated certificate of incorporation. The decision as
to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us
in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction
and whether the terms of the transaction would otherwise require us to seek stockholder approval. If we determine to engage in a tender
offer, such tender offer will be structured so that each stockholder may tender all of his, her or its shares rather than some pro rata
portion of his, her or its shares. In that case, we will file tender offer documents with the SEC which will contain substantially the
same financial and other information about the initial business combination as is required under the SEC’s proxy rules. Whether
we seek stockholder approval or engage in a tender offer, we will consummate our initial business combination only if a majority of the
outstanding shares of common stock voted are voted in favor of the business combination. We have no specified maximum percentage threshold
for redemptions in our amended and restated certificate of incorporation and even those public stockholders who vote in favor of our
initial business combination have the right to convert their public shares. As a result, this may make it easier for us to consummate
our initial business combination.
If we seek to consummate an initial business
combination with a target business that imposes any type of working capital closing condition or requires us to have a minimum amount
of funds available from the trust account upon consummation of such initial business combination, this may force us to seek third party
financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial
business combination and we may not be able to locate another suitable target within the applicable time period, if at all. Public stockholders
may therefore have to wait 12 months (or up to 18 months, if we extend the time to complete a business combination as described in this
Annual Report) from the closing of our IPO in order to be able to receive a pro rata share of the trust account.
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Our initial stockholders, officers and directors
have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination, (2) not to convert any
shares of common stock in connection with a stockholder vote to approve a proposed initial business combination and (3) not sell any
shares of common stock in any tender in connection with a proposed initial business combination.
None of our officers, directors, initial stockholders
or their affiliates has indicated any intention to purchase units or shares of common stock from persons in the open market or in private
transactions. However, if we hold a meeting to approve a proposed business combination and a significant number of stockholders vote,
or indicate an intention to vote, against such proposed business combination or that they wish to convert their shares, our officers,
directors, initial stockholders or their affiliates could make such purchases in the open market or in private transactions in order
to reduce the number of redemptions. Notwithstanding the foregoing, our officers, directors, initial stockholders and their affiliates
will not make purchases of shares of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which
are rules designed to stop potential manipulation of a company’s stock.
Redemption Rights (a/k/a Conversion Rights)
At any meeting called to approve an initial business
combination, public stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business
combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account as of two business
days prior to the consummation of the initial business combination, less any taxes then due but not yet paid. Alternatively, we may provide
our public stockholders with the opportunity to sell their shares of our common stock to us through a tender offer (and thereby avoid
the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account,
less any taxes then due but not yet paid. The per-share amount we will distribute to investors who properly convert their shares will
not be reduced by the deferred underwriting commissions we will pay to EF Hutton.
Our initial stockholders and our officers and
directors will not have redemption rights with respect to any shares of common stock owned by them, directly or indirectly, whether acquired
prior to the IPO or purchased by them in the IPO or in the aftermarket. Additionally, the holders of founder’s shares will not
have redemption rights with respect to the Representative Shares (as defined in our Prospectus).
We may require public stockholders, whether they
are a record holder or hold their shares in “street name,” to either (i) tender their certificates to our transfer agent
or (ii) deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At
Custodian) System, at the holder’s option, in each case prior to a date set forth in the proxy materials sent in connection with
the proposal to approve the business combination.
There is a nominal cost associated with the above-referenced
delivery process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically
charge the tendering broker a nominal amount and it would be up to the broker whether or not to pass this cost on to the holder. However,
this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights. The need to deliver
shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
However, in the event we require stockholders
seeking to exercise redemption rights prior to the consummation of the proposed business combination and the proposed business combination
is not consummated this may result in an increased cost to stockholders.
Any proxy solicitation materials we furnish to stockholders in connection
with a vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy such certification and
delivery requirements. Accordingly, a stockholder would have from the time the stockholder received our proxy statement up until the
vote on the proposal to approve the business combination to deliver his or her shares if he or she wishes to seek to exercise his or
her redemptions rights. This time period varies depending on the specific facts of each transaction. However, as the delivery process
can be accomplished by the stockholder, whether or not he is a record holder or his shares are held in “street name,” in
a matter of hours by simply contacting the transfer agent or his broker and requesting delivery of his shares through the DWAC System,
we believe this time period is sufficient for an average investor. However, we cannot assure you of this fact. Please see the risk factor
in our Prospectus titled “ In connection with any stockholder meeting called to approve a proposed initial business combination,
we may require stockholders who wish to convert their shares in connection with a proposed business combination to comply with specific
requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising
their rights. ” for further information on the risks of failing to comply with these requirements.
8
Any request to convert such shares once made,
may be withdrawn at any time up to the vote on the proposed business combination or the expiration of the tender offer. Furthermore,
if a holder of public shares delivered his or her certificate in connection with an election of their redemption and subsequently decides
prior to the applicable date not to elect to exercise such rights, he or she may simply request that the transfer agent return the certificate
(physically or electronically).
If the initial business combination is not approved
or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to convert
their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any shares delivered by public
holders.
Liquidation if No Business Combination
Our amended and restated certificate of incorporation
provides that we will have only 12 months from the closing of our IPO to complete an initial business combination.
However, we may extend the period of time to
consummate a business combination up to two times, each by an additional three months (for a total of 18 months to complete a business
combination). In order to extend the time available for the Company to consummate a business Combination, without the need for a separate
stockholder vote, our sponsor must, upon five days’ advance notice prior to the application deadline, deposit into the trust account
$229,770 ($0.0333 per unit), or an aggregate of $459,540, for each three-month extension, on or prior to the date of the application
deadline. In the event that the stockholders, or affiliates or designees, elect to extend the time to complete the Company’s initial
business combination and deposit the applicable amount of money into trust, the initial stockholders will receive a non-interest bearing,
unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that the Company is unable to
close a business combination unless there are funds available outside the trust account to do so. Such note would be paid upon consummation
of the Company’s initial business combination.
If we have not completed an initial business
combination by such date and stockholders have not otherwise amended our charter to extend this date, we will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem
100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust
account, including any interest not previously released to us but net of taxes payable and up to $100,000 of interest income that may
be released to us for liquidation expenses, divided by the number of then outstanding public shares, which redemption will completely
extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any),
subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining
stockholders and our Board of Directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under
Delaware law to provide for claims of creditors and the requirements of other applicable law.
Our initial stockholders, officers and directors
have agreed that they will not propose any amendment to our amended and restated certificate of incorporation that would affect our public
stockholders’ ability to convert or sell their shares to us in connection with a business combination as described herein or affect
the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination within 12
months (or up to 18 months, if we extend the time to complete a business combination as described in this Annual Report) from the closing
of our IPO unless we provide our public stockholders with the opportunity to convert their shares of common stock upon such approval
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest not previously
released to us but net of franchise and income taxes payable, divided by the number of then outstanding public shares. This redemption
right shall apply in the event of the approval of any such amendment, whether proposed by our initial stockholders, executive officers,
directors or any other person.
9
Under the Delaware General Corporation Law, stockholders
may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public
shares in the event we do not complete our initial business combination within the required time period may be considered a liquidation
distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the Delaware General
Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during
which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims
brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders
with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
It is our intention to redeem our public shares as soon as reasonably possible following our 12-month anniversary (or up to 18 months,
if we extend the time to complete a business combination as described in this Annual Report), 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.
Furthermore, if the pro rata portion of our trust
account distributed to our public stockholders upon the redemption of 100% of our public shares in the event we do not complete our initial
business combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption
distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations
for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of
a liquidation distribution.
Because we will not be complying with Section
280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based
on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially
brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company,
and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be
from our current and former vendors (such as lawyers, auditors investment bankers, etc.) or prospective target businesses.
We are required to seek to have all third parties
(including any vendors or other entities we may engage) and any prospective target businesses enter into agreements with us waiving any
right, title, interest or claim of any kind they may have in or to any monies held in the trust account. As a result, the claims that
could be made against us will be limited, thereby lessening the likelihood that any claim would result in any liability extending to
the trust. We therefore believe that any necessary provision for creditors will be reduced and should not have a significant impact on
our ability to distribute the funds in the trust account to our public stockholders. Nevertheless, MaloneBailey, LLP, our independent
registered public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the
monies held in the trust account. Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses
will execute such agreements. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse
against the trust account. Bengochea SPAC Sponsors I LLC, an entity affiliated with Mr. Bengochea, has agreed that it will be liable
to ensure that the proceeds in the trust account are not reduced below $10.00 per share by the claims of target businesses or claims
of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but we cannot
assure you that it will be able to satisfy its indemnification obligations if it is required to do so. We have not independently verified
whether Bengochea SPAC Sponsors I LLC has sufficient funds to satisfy its indemnity obligations, we have not asked it to reserve for
such obligations and we do not believe it has any significant liquid assets. Accordingly, we believe it is unlikely that it will be able
to satisfy its indemnification obligations if it is required to do so. Additionally, the agreement Bengochea SPAC Sponsors I LLC entered
into specifically provides for two exceptions to the indemnity given: it will have no liability (1) as to any claimed amounts owed to
a target business or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any
kind they may have in or to any monies held in the trust account, or (2) as to any claims for indemnification by EF Hutton against certain
liabilities, including liabilities under the Securities Act. As a result, if we liquidate, the per-share distribution from the trust
account could be less than $10.00 due to claims or potential claims of creditors.
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We anticipate notifying the trustee of the trust
account to begin liquidating such assets promptly after our 12-month anniversary (or up to 18 months, if we extend the time to complete
a business combination as described in this Annual Report) and anticipate it will take no more than 10 business days to effectuate such
distribution. The holders of the founder’s shares have waived their rights to participate in any liquidation distribution from
the trust account with respect to such shares. There will be no distribution from the trust account with respect to our rights or warrants,
which will expire worthless. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account.
If such funds are insufficient, we will use the up to $100,000 of interest earned on the funds held in the trust account that may be
released to us for our liquidation expenses.
If we are unable to complete an initial business
combination and expend all of the net proceeds of the IPO, other than the proceeds deposited in the trust account, and without taking
into account interest, if any, earned on the trust account, or any increase as a result of our extending the time to consummate a business
combination as described herein, the initial per-share redemption price would be $10.00. As discussed above, the proceeds deposited in
the trust account could become subject to claims of our creditors that are in preference to the claims of public stockholders.
Our public stockholders shall be entitled to
receive funds from the trust account only in the event of our failure to complete a business combination within the required time period,
if the stockholders seek to have us convert or purchase their respective shares upon a business combination which is actually completed
by us or upon certain amendments to our amended and restated certificate of incorporation prior to consummating an initial business combination.
In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.
If we are forced to file a bankruptcy case or
an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to
applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over
the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to
return to our public stockholders at least $10.00 per share.
If we are forced to file a bankruptcy case or
an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders could be viewed
under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.”
As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. Furthermore, because we intend to distribute
the proceeds held in the trust account to our public stockholders promptly after 12 months (or up to 18 months, if we extend the time
to complete a business combination as described in this Annual Report) from the closing of our IPO, this may be viewed or interpreted
as giving preference to our public stockholders over any potential creditors with respect to access to or distributions from our assets.
Furthermore, our Board may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and
thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to
addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation
contains certain requirements and restrictions relating to our operations that will apply to us until the consummation of our initial
business combination. These provisions cannot be amended without the approval of a majority of our stockholders. If we seek to amend
any provisions of our amended and restated certificate of incorporation that would affect our public stockholders’ ability to convert
or sell their shares to us as described herein or affect the substance or timing of our obligation to redeem 100% of our public shares
if we do not complete a business combination within 12 months (or up to 18 months, if we extend the time to complete a business combination
as described in this Annual Report) from the closing of our IPO, we will provide public stockholders with the opportunity to convert
their public shares in connection with any such vote. This redemption right shall apply in the event of the approval of any such amendment,
whether proposed by any executive officer, director, initial stockholder, or any other person. Our initial stockholders, officers and
directors have agreed to waive any redemption rights with respect to any founder’s shares and any public shares they may hold in
connection with any vote to amend our amended and restated certificate of incorporation. Specifically, our amended and restated certificate
of incorporation provides, among other things, that:
● 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 convert their shares, regardless of whether
they vote for or against the proposed business combination or don’t vote at all, into their pro rata share of the aggregate amount
then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares
to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the
aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein
and in our amended and restated certificate of incorporation;
11
● we will consummate our initial business combination only
if a majority of the outstanding shares of common stock voted are voted in favor of the business combination;
● if our initial business combination is not consummated within
12 months (or up to 18 months, if we extend the time to complete a business combination as described in this Annual Report) from the
closing of our IPO, then we will redeem all of the outstanding public shares and thereafter liquidate and dissolve our company;
● we may not consummate any other business combination, merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction prior to our initial business combination;
and
● prior to our initial business combination, we may not issue
additional stock that participates in any manner in the proceeds of the trust account, or that votes as a class with the common stock
sold in our IPO on an initial business combination.
Competition
In identifying, evaluating and selecting a target
business, we may encounter intense competition from other entities having a business objective similar to ours. Many of these entities
are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many
of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited
when contrasted with those of many of these competitors. While we believe there may be numerous potential target businesses that we could
acquire with the net proceeds of our IPO, our ability to compete in acquiring certain sizable target businesses may be limited by our
available financial resources.
The following also may not be viewed favorably
by certain target businesses:
● our obligation to seek stockholder approval of a business
combination or engage in a tender offer may delay the completion of a transaction;
● our obligation to convert or repurchase shares of common
stock held by our public stockholders may reduce the resources available to us for a business combination; and
● our outstanding warrants, as well as the rights to one-fifth
(1/5) of one share of common stock upon consummation of our initial business combination included within our units, and the potential
future dilution they represent.
Any of these factors may place us at a competitive
disadvantage in successfully negotiating a business combination. Our management believes, however, that our status as a public entity
and potential access to the United States public equity markets may give us a competitive advantage over privately held entities having
a similar business objective as ours in acquiring a target business with significant growth potential on favorable terms.
If we succeed in effecting a business combination,
there will be, in all likelihood, intense competition from competitors of the target business, including from companies that may be subject
to less stringent disclosure and other securities law requirements as the surviving company in our business combination and that therefore
may have a competitive advantage. We cannot assure you that, subsequent to a business combination, we will have the resources or ability
to compete effectively.
Financial Position
With funds available for an initial business
combination initially in the amount of $66,481,500 assuming no redemptions before non-reimbursable fees and expenses associated with
our initial business combination and after payment of $2,518,500 of deferred underwriting fees and any offering costs, we offer a target
business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion
of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial
business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the
most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires.
However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.
12
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 the IPO. We intend to effectuate our initial business combination
using cash from the proceeds of the IPO and the private placement of the private placement warrants, the proceeds of the sale of our
shares in connection with our initial business combination (pursuant to backstop agreements we may enter into following the consummation
of the IPO or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target,
or a combination of the foregoing. We may seek to complete our initial business combination with a company or business that may be financially
unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and
businesses.
We will either (1) seek stockholder approval
of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless
of whether they vote for or against the proposed business combination or don’t vote at all, into their pro rata share of the aggregate
amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their
shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share
of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described
herein and in our amended and restated certificate of incorporation. The decision as to whether we will seek stockholder approval of
our proposed business combination or allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our
discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction
would otherwise require us to seek stockholder approval. If we decide to allow stockholders to sell their shares to us in a tender offer,
we will file tender offer documents with the SEC which will contain substantially the same financial and other information about the
initial business combination as is required under the SEC’s proxy rules. If we seek stockholder approval, we will complete our
initial business combination only if a majority of the outstanding shares of common stock are voted in favor of the initial business
combination. We have no specified maximum percentage threshold for redemptions in our amended and restated certificate of incorporation
and even those public stockholders who vote in favor of our initial business combination have the right to convert their public shares.
As a result, this may make it easier for us to consummate our initial business combination.
We will have up to 12 months from the closing
of our IPO to consummate an initial business combination. In addition, if we anticipate that we may not be able to consummate our initial
business combination within 12 months, our sponsor may, but are not obligated to, extend the period of time to consummate a business
combination two times by an additional three months each time (for a total of up to 18 months to complete a business combination), provided
that, pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement to be entered into between
us and Continental Stock Transfer & Trust Company on the date of this Annual Report, the only way to extend the time available for
us to consummate our initial business combination in the absence of a charter amendment, is for our insiders or their affiliates or designees,
upon at least five days’ advance notice prior to the applicable deadline, to deposit into the trust account $229,770 ($0.0333 per
unit), or an aggregate of $459,540, for each three-month extension, on or prior to the date of the applicable deadline. In the event
that they elected to extend the time to complete a business combination and deposited the applicable amount of money into trust, the
insiders would receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid
in the event that we are unable to close a business combination unless there are funds available outside the trust account to do so.
Such notes would either be paid upon consummation of our initial business combination, or, at the lender’s discretion, at closing
of our IPO. Our stockholders have approved the issuance of the private warrants upon conversion of such notes, to the extent the holder
wishes to so convert such notes at the time of the consummation of our initial business combination. In the event that we receive notice
from our insiders five days prior to the applicable deadline of their intent to effect an extension, we intend to issue a press release
announcing such intention at least three days prior to the applicable deadline. In addition, we intend to issue a press release the day
after the applicable deadline announcing whether or not the funds had been timely deposited. Our insiders and their affiliates or designees
are not obligated to fund the trust account to extend the time for us to complete our initial business combination. To the extent that
some, but not all, of our insiders, decide to extend the period of time to consummate our initial business combination, such insiders
(or their affiliates or designees) may deposit the entire amount required. If we are unable to consummate an initial business combination
within such time period, we will redeem 100% of our outstanding public shares for a pro rata portion of the funds held in the trust account,
equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and
not previously released to us for taxes as described herein (and less up to $100,000 of interest which can be used for liquidation expenses),
divided by the number of then outstanding public shares, subject to applicable law and as further described herein, and then seek to
dissolve and liquidate. We expect the pro rata redemption price to be approximately $10.00 per share of common stock, without taking
into account any interest earned on such funds or any increase as a result of our extending the time to consummate a business combination
as described herein. However, we cannot assure you that we will in fact be able to distribute such amounts as a result of claims of creditors
which may take priority over the claims of our public stockholders.
13
NASDAQ listing rules require that our initial
business combination must occur with one or more target businesses that together have a fair market value of at least 80% of the assets
held in the trust account at the time of the agreement to enter into the initial business combination (excluding deferred underwriting
commissions and taxes payable). The fair market value of the target or targets will be determined by our Board of Directors based upon
one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book
value). Although our Board of Directors will rely on generally accepted standards, our Board of Directors 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 of Directors in evaluating the fair market value of the target or targets.
The proxy solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide public
stockholders with our analysis of the fair market value of the target business, as well as the basis for our determinations. If our Board
is not able independently to determine the fair market value of the target business or businesses, we will obtain an opinion from an
independent investment banking firm, or another independent entity that commonly renders valuation opinions, with respect to the satisfaction
of such criteria. Notwithstanding the foregoing, if we are not then listed on NASDAQ for whatever reason, we would no longer be required
to meet the foregoing 80% fair market value test.
We currently anticipate structuring a business
combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination where we merge directly with the target business or a newly formed subsidiary or where we acquire less than 100%
of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders
or for other reasons, but we intend to only complete such business combination if the post-transaction company owns or acquires 50% or
more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it
not to be required to register as an investment company under the Investment Company Act of 1940, as amended. Even if the post-transaction
company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively
own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination
transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the
outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result
of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own
less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests
or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses
that is owned or acquired is what will be valued for purposes of the 80% fair market value test.
Employees
We have three executive officers. These individuals
are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they deem necessary
to our affairs. The amount of time they will devote in any time period will vary based on whether a target business has been selected
for the business combination and the stage of the business combination process the company is in. Accordingly, once a suitable target
business has been located, management may spend more time investigating such target business and negotiating and processing the business
combination (and consequently spend more time on our affairs) than had been spent prior to locating a suitable target business. We presently
expect our executive officers to devote such amount of time as they reasonably believe is necessary to our business. We do not intend
to have any full-time employees prior to the consummation of a business combination.
ITEM 1A. RISK FACTORS
As a smaller reporting company we are not required
to make disclosures under this Item.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.