Introduction
We are a blank check company formed pursuant to the laws of
the State of Delaware on April 27, 2017 for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization, recapitalization, exchangeable share transaction or other similar business transaction, one or
more businesses or assets that we have not yet identified. While our efforts in identifying a prospective target business for
our initial business combination are not limited to a particular industry or geographic region, we intend to focus our search
on identifying a prospective target business in the technology industry in North America, as described below.
We believe that the experience and capabilities of our combined
team will make us an attractive partner to prospective target businesses, enhance our ability to complete a successful business
combination and bring value to the business post-business combination. Not only does our combined team bring a combination of
operating, investing, financial and transaction experience, they have also worked together previously on multiple investments,
consulting assignments and boards of directors.
Objective and Business Opportunity
We intend to focus our efforts on seeking and completing an
initial business combination with a company that has an enterprise value above $200 million, although a target entity with a smaller
or larger enterprise value may be considered. We may use common or preferred equity to fund a material portion of the purchase
price of our initial business combination. While we may pursue an acquisition opportunity in any business industry or sector we
choose, we intend to capitalize on the ability of our combined team to identify and acquire a business in the technology sector
in the United States (which may include a business based in the United States which has operations or opportunities outside of
the United States), that is backed by institutional venture capitalists.
Our sponsor, Draper Oakwood Investments LLC, is affiliated
with Mr. Timothy C. Draper, our Senior Advisor. For over 30 years, Mr. Draper has been one of the most prominent venture capital
investors in the world. Mr. Draper has established numerous investment vehicles, including the Draper Associates family of early-stage
venture capital funds, or collectively, Draper Associates. Since 1985, Draper Associates has provided early-stage investment to
entrepreneurs with a mission to transform industries with new technologies, and to build platforms for extraordinary growth, jobs,
and wealth creation. Draper Associates targets businesses in the consumer technology, financial technology, healthcare, manufacturing,
education, and government technology sectors. Well-known past portfolio companies include Skype, Hotmail, Tesla, Baidu, Athenahealth,
Solar City, Box, TwitchTV, SpaceX, Cruise Automation, Parametric Technology and others. Mr. Draper is also a founder of Draper
Fisher Jurvetson, a venture capital firm that that has backed a significant number of companies. As an advocate for entrepreneurs
and free markets, Mr. Draper is regularly featured as a keynote speaker in entrepreneurial conferences throughout the world and
has frequent TV, radio and headline appearances. He has been recognized as a leader in his field through numerous awards and honors,
including the Entrepreneurship Forum’s “Entrepreneur of the World” in 2015, the Commonwealth Club’s Distinguished
Citizen Award for achievements in green and sustainable energy in 2007, and he was listed as one of the top 100 most influential
people in finance by Worth Magazine in 2014 and #7 on the Forbes Midas List in 2006.
We currently expect Mr. Draper to (i) assist us in sourcing
potential business combination targets and (ii) provide his business insights when we assess potential business combination targets.
However, Mr. Draper will not be a member of the board, nor will he have any voting or decision making capacity on our behalf.
Mr. Draper will also not be subject to the fiduciary requirements to which our board members are subject and will have no contractual
commitments to us.
We are a member of the Draper Venture Network. Founded by Mr.
Draper, the Draper Venture Network is a global alliance of 11 independent venture capital funds across four continents that collaborate
on opportunity sourcing, due diligence, corporate relationships and co-investment, and value creation for their investments. Draper
Venture Network funds are currently invested in a significant number of portfolio companies and have a deep collective knowledge
base in venture capital investing. The Draper Venture Network is a member of our sponsor. Pursuant to the agreement we entered
into with the Draper Venture Network, the Draper Venture Network will provide us with, among other things, business and corporate
development introductions, service provider introductions and research database subscriptions. We will not be obligated to provide
any contractual services to the Draper Venture Network.
We believe our relationship with the Draper Venture Network
will give us a unique ability to source opportunities from the network of member funds, as well as the large number of entrepreneurs
and management teams in their portfolios. The Draper Venture Network employs three full time individuals in their office in the
Silicon Valley, including our director, Mr. Gabe Turner, who is also Executive Director of the Draper Venture Network. The Draper
Venture Network’s full-time team hosts network and ecosystem events, connecting portfolio companies to corporate partners
and other venture capitalists, builds and manages the network’s CEO community, and serves as the network’s collaboration
hub, through a set of shared tools and resources. Our combined team has considerable expertise in the evaluation of technology
investments, with the benefit of further diligence support from the Draper Venture Network.
Our Management Team
Our management team is led by our Executive Chairman, Mr. Roderick
Perry, who has over 30 years of experience in investment management. For 20 years, Mr. Perry was employed by 3i Group plc, one
of the oldest private equity firms in the world, listed on the London Stock Exchange. From 1996 to the end of 2001 Mr. Perry was
responsible for developing the 3i investment business in Asia Pacific, and from 2001 to 2005, he was Global Head of Venture Capital
for 3i. Mr. Perry was involved in the origination, execution and disposal of numerous technology venture capital investments internationally.
Furthermore, Mr. Perry was a Non-Executive Director of PartyGaming plc from 2005, and became Chairman in 2008. PartyGaming plc
went public on the London Stock Exchange in 2005 at a valuation of £4.76 billion. He became Deputy Chairman, Senior Independent
Director and Chairman of Remuneration Committee of BWIN.Party (then the largest publicly traded online gaming business in the
world) when BWIN.Party and PartyGaming merged in 2011 and retired from that Board in 2015.
Our Chief Executive Officer, Mr. Aamer A. Sarfraz, has 12 years
of experience in the investment industry, as well as in building and operating businesses internationally. He worked together
with Mr. Perry in various roles over this time, including as part of the venture capital team at 3i Group plc. In addition, in
2011, Mr. Sarfraz founded an agricultural technology business backed by Mr. Draper, and in October 2015 founded Draper Oakwood
Royalty Capital together with Mr. Draper. From 2006 to 2014, Mr. Sarfraz served as Managing Director of The Electrum Group (UK)
LLP, which was part of The Electrum Group, a global private equity business investing in natural resources, headquartered in New
York.
Several members of our management team and directors have considerable
professional experience working together on previous investments and assignments. Mr. Erfan has worked together with Mr. Perry
since 2000, including at the venture capital team at 3i Group, where Mr. Erfan was a senior partner while Mr. Perry was Global
Head of Venture Capital, as well as on subsequent investments and consulting assignments. Mr. Erfan has worked with Mr. Sarfraz
since 2004, including at the venture capital team at 3i Group plc and at The Electrum Group. Mr. Perry, Mr. Sarfraz and Mr. Erfan
have worked together with our director, Mr. Richard Atterbury, since 2015 on the board of Draper Oakwood Royalty Capital. In addition,
Mr. Atterbury and Mr. Erfan have been board members of an agricultural technology business founded by Mr. Sarfraz. Mr. Perry and
Mr. Sarfraz have worked together with our director, Mr. Gabe Turner, at the Draper Venture Network since 2015.
Our combined team’s network and investing and operating
experience do not guarantee a successful initial business combination. The members of our management team are not required to
devote any significant amount of time to our business and are concurrently involved with other businesses. There is no guarantee
that our current officers and directors will continue in their respective roles, or in any other role, after our initial business
combination, and their expertise may only be of benefit to us until our initial business combination is completed. Past performance
by our combined team is not a guarantee of success with respect to any business combination we may consummate.
Investment Thesis
It is our belief that the North American venture capital industry
remains strong, and will continue to drive innovation in technology throughout the world. According to the National Venture Capital
Association (NVCA), at the end of 2016 there were 898 venture capital firms in existence in the United States, managing 1,562
venture capital funds. In 2016, US venture capital funds raised $41.6 billion, a ten-year high. The same year, more than 7,750
venture-backed companies received $69.1 billion in funding. In the first quarter of 2017, US venture capital funds have deployed
$16.5 billion in funding into approximately 1800 companies. Separately, the NVCA estimates that approximately 1,000 financings
will be completed in 2017 by Corporate Venture Capital firms (CVC), a subset of venture capital firms in which large operating
companies invest in innovative companies, with 267 completed in the first quarter of 2017.
Acquisitions remain the primary exit route for venture capital
investors in the United States. According to the NVCA, 787 venture-backed companies had exits in 2016 at a combined exit value
of $52.5 billion. Of those, only 39 were initial public offerings. While 2016 was the slowest year from venture capital-backed
IPO’s since 2009, there are signs of increased IPO activity in the first quarter of 2017, with 15 venture capital companies
filing completed offerings.
It is our belief that very few venture-backed companies choose
to go public, or are able to go public, for a number of reasons, including: the financial costs of going public, the ongoing regulatory
requirements for public companies, and a perception that a company needs to be very large before getting sufficient interest from
investment banks and analysts. As a result, staying private for as long as possible has become part of Silicon Valley’s
startup culture.
We believe that there are certain types of venture-backed businesses
that can benefit greatly from earlier access to public markets. It is our belief that our combined team has the experience and
relationships to identify such venture-backed companies that would benefit from going public through a business combination with
our company.
Investment Criteria
We have identified the following criteria that we intend to
use in evaluating business transaction opportunities. We expect that no individual criterion will entirely determine a decision
to pursue a particular opportunity. Further, any particular business transaction opportunity which we ultimately determine to
pursue may not meet one or more of these criteria. We intend to seek a business combination with a business that:
|
●
|
is based in the United States (which may include a
business based in the United States which has operations or opportunities outside of the United States);
|
|
●
|
is backed by institutional venture capital investors;
|
|
●
|
has proven and established technology;
|
|
●
|
has verifiable customers and revenue;
|
|
●
|
is seeking to grow, including internationally; and
|
|
●
|
is technology driven, including, but not limited to,
the following sub-sectors: robotics, consumer technology, retail technology, education technology, cybersecurity, food technology,
mobile technology, energy technology, financial technology, marketing technology, real estate technology, automative technology
and logistics technology.
|
Competitive Strengths
We believe we have the following competitive strengths:
Status as a public company
We believe our structure will make us an attractive business
combination partner to target businesses. As an existing public company, we offer a target business an alternative to the traditional
initial public offering through a merger or other business combination. In this situation, the owners of the target business would
exchange their shares of stock in the target business for shares of our stock or for a combination of shares of our stock and
cash, allowing us to tailor the consideration to the specific needs of the sellers. We believe target businesses might find this
method a more certain and cost effective method to becoming a public company than the typical initial public offering. In a typical
initial public offering, there are additional expenses incurred in marketing, roadshow and public reporting efforts that will
likely not be present to the same extent in connection with a business combination with us. Furthermore, once the business combination
is consummated, the target business will have effectively become public, whereas an initial public offering is always subject
to the underwriters’ ability to complete the offering, as well as general market conditions, that could prevent the offering
from occurring. Once public, we believe the target business would then have greater access to capital and an additional means
of providing management incentives consistent with stockholders’ interests than it would have as a privately-held company.
It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting
talented employees. However there is currently no market for our securities and a market for our securities may not develop. As
a result, this purported benefit may not be realized.
While we believe that our status as a public company will make
us an attractive business partner, some potential target businesses may view the inherent limitations in our status as a blank
check company as a deterrent and may prefer to effect a business combination with a more established entity or with a private
company. These inherent limitations include limitations on our available financial resources, which may be inferior to those of
other entities pursuing the acquisition of similar target businesses; the requirement that we seek stockholder approval of a business
combination or conduct a tender offer in relation thereto, which may delay the consummation of a transaction; and the existence
of our outstanding warrants, which may represent a source of future dilution.
Financial position
With funds in the trust account of approximately $57,500,000
available to use for a business combination (assuming no stockholder seeks conversion of their shares or seeks to sell their shares
to us in a tender offer in relation to such business combination), we offer a target business a variety of options such as providing
the owners of a target business with shares in a public company and a public means to sell such shares, 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 consummate 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.
Effecting a Business Combination
General
We are not presently engaged in, and we will not engage in,
any substantive commercial business for an indefinite period of time. We intend to utilize cash derived from the proceeds of our
initial public offering and the private placement of founders’ units, our capital stock, debt or a combination of these
in effecting a business combination. Accordingly, investors are investing without first having an opportunity to evaluate the
specific merits or risks of any one or more business combination. A business combination may involve the acquisition of, or merger
with, a company which does not need substantial additional capital but which desires to establish a public trading market for
its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include
time delays, significant expense, loss of voting control and compliance with various federal and state securities laws. In the
alternative, we may seek to consummate a business combination with a company that may be financially unstable or in its early
stages of development or growth. While we may seek to effect simultaneous business combinations with more than one target business,
we will probably have the ability, as a result of our limited resources, to effect only a single business combination.
We will have until September 19, 2018 to consummate a business
combination (or until March 19, 2019 if we extend the period of time to consummate a business combination by the full amount of
time). If we are unable to consummate our initial business combination within the applicable time period, we will, as promptly
as reasonably possible but not more than ten business days thereafter, redeem the public shares for a pro rata portion of the
funds held in the trust account and 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 each case to our obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable law. We cannot assure you that we will be able
to locate a target business or that we will be able to engage in a business combination with a target business on favorable terms
or at all.
Subject to our officers’ and directors’ pre-existing
fiduciary duties and the limitation that a target business have a fair market value of at least 80% of the balance in the trust
account (excluding franchise and income taxes payable) at the time of the execution of a definitive agreement
for our initial business combination, as described below in more detail, we have virtually unrestricted flexibility in identifying
and selecting a prospective acquisition candidate. Except for the general criteria and guidelines set forth above under the caption
“
Investment Criteria
,” we have not established any other specific attributes or criteria (financial or otherwise)
for prospective target businesses. Accordingly, there is no basis for investors to evaluate the possible merits or risks of the
target business with which we may ultimately complete a business combination. To the extent we effect a business combination with
a financially unstable company or an entity in its early stage of development or growth, including entities without established
records of sales or earnings, we may be affected by numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. 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.
Sources of Target Businesses
We have evaluated and expect to continue to evaluate opportunities
that are sourced through the relationship networks of our combined team, which includes numerous entrepreneurs, management teams,
intermediaries and venture capital funds.
Our combined team has considerable expertise in the evaluation
of technology investments, with the benefit of further diligence support from the Draper Venture Network.
We believe based on our combined team’s business knowledge
and past experience that there are numerous acquisition candidates. We expect that our principal means of identifying potential
target businesses will be through the extensive contacts and relationships of our combined team. While our officers and directors
are not required to commit any specific amount of time in identifying or performing due diligence on potential target businesses,
our officers and directors believe that the relationships they have developed over their careers and their access to their contacts
and resources will generate a number of potential business combination opportunities that will warrant further investigation.
We also anticipate that target business candidates will continue to 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 this Report and know what types of
businesses we are targeting. Our officers and directors, as well as their affiliates, may also bring to our attention target business
candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions
they may have, as well as attending trade shows or conventions. They must present to us all target business opportunities that
have a fair market value of at least 80% of the assets held in the trust account (excluding franchise and income taxes payable) at the time of the agreement to enter into the initial business combination, subject to any pre-existing
fiduciary or contractual obligations. We may engage these firms or other individuals in the future, in which event we may pay
a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the
terms of the transaction. In no event, however, will our sponsor, officers, directors or their respective affiliates be paid any
finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the
consummation of an initial business combination (regardless of the type of transaction that it is) other than the $10,000 administrative
services fee, the repayment of any loans from our sponsor, officers and directors for working capital purposes and reimbursement
of any out-of-pocket expenses. Our audit committee will review and approve all reimbursements and payments made to our sponsor,
officers, directors or our or their respective affiliates, with any interested director abstaining from such review and approval.
We have no present intention to enter into a business combination with a target business that is affiliated with any of our officers,
directors or sponsor. However, we are not restricted from entering into any such transactions and may do so if (i) such transaction
is approved by a majority of our disinterested independent directors and (ii) we obtain an opinion from an independent investment
banking firm, or another independent entity that commonly renders valuation opinions on the type of target business we are seeking
to acquire, that the business combination is fair to our unaffiliated stockholders from a financial point of view.
Selection of a Target Business and Structuring of a Business
Combination
Subject to our officers’ and directors’ pre-existing
fiduciary duties and the limitations that a target business have a fair market value of at least 80% of the balance in the trust
account (excluding franchise and income 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 have virtually unrestricted flexibility in identifying and selecting a prospective target business.
Except for the general criteria and guidelines set forth above under the caption “
Investment Criteria
,” we
have not established any specific attributes or criteria (financial or otherwise) for prospective target businesses. In evaluating
a prospective target business, our management may consider a variety of factors, including one or more of the following:
|
●
|
financial condition and results of operation;
|
|
●
|
brand recognition and potential;
|
|
●
|
experience and skill of management and availability
of additional personnel;
|
|
●
|
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 products and the extent of intellectual
property or other protection for products or formulas;
|
|
●
|
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 market 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 is based, to the extent relevant, on the above factors as well as
other considerations deemed relevant by our management in effecting a business combination consistent with our business objective.
In evaluating a prospective target business, we conduct an extensive due diligence review which encompasses, among other things,
meetings with incumbent management and inspection of facilities, as well as review of financial and other information which is
made available to us. This due diligence review will be conducted either by our management or by unaffiliated third parties we
may engage.
The time and costs required to select and evaluate a target
business and to structure and complete the business combination cannot presently be ascertained with any degree of certainty.
Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination
is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business
combination.
Fair Market Value of Target Business
The target business or businesses that we acquire must collectively
have a fair market value equal to at least 80% of the balance of the funds in the trust account (excluding franchise and income taxes payable) at the time of the execution of a definitive agreement for our initial business combination,
although we may acquire a target business whose fair market value significantly exceeds 80% of the trust account balance.
We currently anticipate structuring a business combination
to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination where we merge directly with the target business or where we acquire less than 100% of such interests or
assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons,
but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act. 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. In order
to consummate such an acquisition, we may issue a significant amount of our debt or equity securities to the sellers of such businesses
and/or seek to raise additional funds through a private offering of debt or equity securities. We have not entered into any such
fund raising arrangement. 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 on the type of target business we are seeking to acquire, 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, and there is no required minimum valuation standard for any target at the time of such acquisition. We expect
to complete only a single business combination, although this process may entail the simultaneous acquisitions of several operating
businesses. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance
of a single business operation. Unlike other entities which may have the resources to complete several business combinations of
entities operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources
to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. By consummating a business
combination with only a single entity, our lack of diversification may:
|
●
|
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.
Limited Ability to Evaluate the Target Business’
Management
Although we intend to scrutinize the management of a prospective
target business when evaluating the desirability of effecting a business combination, we cannot assure you that our assessment
of the target business’ management will prove to be correct. In addition, we cannot assure you that the future management
will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of our officers
and directors, if any, in the target business following a business combination cannot presently be stated with any certainty.
While it is possible that some of our key personnel will remain associated in senior management or advisory positions with us
following a business combination, it is unlikely that they will devote their full time efforts to our affairs subsequent to a
business combination. Moreover, they would only be able to remain with the company after the consummation of a business combination
if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations
would take place simultaneously with the negotiation of the business combination and could provide for them to receive compensation
in the form of cash payments and/or our securities for services they would render to the company after the consummation of the
business combination. While the personal and financial interests of our key personnel may influence their motivation in identifying
and selecting a target business, their ability to remain with the company after the consummation of a business combination will
not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. Additionally,
we cannot assure you that our officers and directors will have significant experience or knowledge relating to the operations
of the particular target business.
Following a business combination, we may seek to recruit additional
managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to
recruit additional managers, or that any such additional managers we do recruit will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management.
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, into their
pro rata share of the aggregate amount then on deposit in the trust account (net of franchise and income 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 franchise and income taxes payable), in each case subject to the limitations described herein. If we determine to engage
in a tender offer, such tender offer will be structured so that each stockholder may tender any or all of his, her or its shares
rather than some pro rata portion of his, her or its shares. The decision as to whether we will seek stockholder approval of a
proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely
in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the
transaction would otherwise require us to seek stockholder approval. Unlike other blank check companies which require stockholder
votes and conduct proxy solicitations in conjunction with their initial business combinations and related conversions of public
shares for cash upon consummation of such initial business combination even when a vote is not required by law, we will have the
flexibility to avoid such stockholder vote and allow our stockholders to sell their shares pursuant to Rule 13e-4 and Regulation
14E of the Exchange Act which regulate issuer tender offers. In that case, we will file tender offer documents with the SEC which
will contain substantially the same financial and other information about the initial business combination as is required under
the SEC’s proxy rules. We will consummate our initial business combination only if we have net tangible assets of at least
$5,000,001 upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted
are voted in favor of the business combination.
We chose our net tangible asset threshold of $5,000,001 to
ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act of 1933, as amended. However, if we
seek to consummate an initial business combination with a target business that imposes any type of working capital closing condition
or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination,
we may need to have more than $5,000,001 in net tangible assets upon consummation and this may force us to seek third party financing
which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial business
combination and we may not be able to locate another suitable target within the applicable time period, if at all. Public stockholders
may therefore have to wait until September 19, 2018 (or until March 19, 2019 if we extend the period of time to consummate a business
combination by the full amount of time) in order to be able to receive a pro rata share of the trust account.
Our sponsor and our officers and directors have agreed (1)
to vote any shares of common stock owned by them in favor of any proposed business combination, including the founders’
shares and the shares of Class A common stock underlying the founders’ units, (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 to sell any shares of common
stock in any tender in connection with a proposed initial business combination. As a result, we would need only 2,132,001, or
approximately 37.1%, of the 5,750,000 public shares sold in our initial public offering to be voted in favor of a transaction
in order to have our initial business combination approved (assuming (i) all shares were present and entitled to vote at the meeting
and (ii) the 115,000 shares issued to EarlyBirdCapital, and the 54,500 shares underlying the EBC units purchased by EarlyBirdCapital
(and its designees) upon the consummation of our initial public offering are issued and outstanding but not voted).
None of our officers, directors, sponsor or their affiliates
has indicated any intention to purchase units or shares of Class A common stock 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, our officers, directors, sponsor or their affiliates could make
such purchases in the open market or in private transactions in order to influence the vote. Notwithstanding the foregoing, our
officers, directors, sponsor and their affiliates will not make purchases of shares of Class A common stock if the purchases would
violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s
stock.
Conversion Rights
At any meeting called to approve an initial business combination,
public stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination,
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 franchise and income taxes then due but not yet paid (which taxes may be paid only
from the interest earned on the funds in the trust account). Alternatively, we may provide our public stockholders with the opportunity
to sell their shares of our Class A 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 franchise and
income taxes then due but not yet paid.
Our stockholders prior to our initial public offering will
not have conversion rights with respect to any shares of Class F common stock owned by them, directly or indirectly, whether acquired
prior to our initial public offering or purchased by them in our initial public offering or in the aftermarket.
We may also require public stockholders seeking conversion,
whether they are a record holder or hold their shares in “street name,” to either (i) tender their certificates to
our transfer agent or (ii) deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case prior to a date set forth in the proxy materials
sent in connection with the proposal to approve the business combination.
There is a nominal cost associated with the above-referenced
delivery process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically
charge the tendering broker $45.00 and it would be up to the broker whether or not to pass this cost on to the holder. However,
this fee would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to
deliver shares is a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated.
However, in the event we require stockholders seeking to exercise conversion rights to deliver their shares prior to the consummation
of the proposed business combination and the proposed business combination is not consummated, this may result in an increased
cost to stockholders.
Any proxy solicitation materials we furnish to stockholders
in connection with a vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy
such certification and delivery requirements. Accordingly, a stockholder would have from the time the stockholder received our
proxy statement up until the vote on the proposal to approve the business combination to deliver his shares if he wishes to seek
to exercise his conversion rights. This time period varies depending on the specific facts of each transaction. However, as the
delivery process can be accomplished by the stockholder, whether or not he is a record holder or his shares are held in “street
name,” in a matter of hours by simply contacting the transfer agent or his broker and requesting delivery of his shares
through the DWAC System, we believe this time period is sufficient for an average investor. However, we cannot assure you of this
fact. Please see the risk factor titled “
In connection with any stockholder meeting called to approve a proposed initial
business combination, we may require stockholders who wish to convert their shares in connection with a proposed business combination
to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights
prior to the deadline for exercising their rights.
” for further information on the risks of failing to comply with these
requirements.
The foregoing is different from the procedures historically
used by some blank check companies. Traditionally, in order to perfect conversion rights in connection with a blank check company’s
business combination, the company would distribute proxy materials for the stockholders’ vote on an initial business combination,
and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating such holder
was seeking to exercise his conversion rights. After the business combination was approved, the company would contact such stockholder
to arrange for him to deliver his certificate to verify ownership. As a result, the stockholder then had an “option window”
after the consummation of the business combination during which he could monitor the price of the company’s stock in the
market. If the price rose above the conversion price, he could sell his shares in the open market before actually delivering his
shares to the company for cancellation. As a result, the conversion rights, to which stockholders were aware they needed to commit
before the stockholder meeting, would become a “continuing” right surviving past the consummation of the business
combination until the holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting
ensures that a holder’s election to convert his shares is irrevocable once the business combination is approved.
Any request to convert such shares once made, may be withdrawn
at any time up to the vote on the proposed business combination. Furthermore, if a holder of a public share of Class A common
stock delivered his certificate in connection with an election of their conversion and subsequently decides prior to the vote
on the proposed business combination not to elect to exercise such rights, he may simply request that the transfer agent return
the certificate (physically or electronically).
If the initial business combination is not approved or completed
for any reason, then our public stockholders who elected to exercise their conversion rights would not be entitled to convert
their shares for the applicable pro rata share of the trust account as of two business days prior to the consummation of the initial
business combination. In such case, we will promptly return any shares delivered by public holders.
Ability to Extend Time to Complete Business Combination
We will have until September 19, 2018 to consummate an initial
business combination. However, if we anticipate that we may not be able to consummate our initial business combination by September
19, 2018, we may extend the period of time to consummate a business combination up to two times, each by an additional three months
(or until March 19, 2019 to complete a business combination). Pursuant to the terms of our amended and restated certificate of
incorporation and the trust agreement between us and Continental Stock Transfer & Trust Company, in order to extend the time
available for us to consummate our initial business combination, our sponsor or its affiliates or designees, upon five days advance
notice prior to the applicable deadline, must deposit into the trust account $575,000 ($0.10 per share) on or prior to the date
of the applicable deadline, for each three month extension (or up to $1,150,000 or $0.20 per share, if we extend for the full
six months). In the event that we receive notice from our sponsor five days prior to the applicable deadline of its 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 sponsor and its affiliates or designees are not obligated to fund the trust account to extend
the time for us to complete our initial business combination.
Liquidation if No Business Combination
Our amended and restated certificate of incorporation provides
that we will have only until September 19, 2018 (or until March 19, 2019 if we extend the period of time to consummate a business
combination by the full amount of time) to complete an initial business combination. If we have not completed an initial business
combination by such date, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the trust account, including any interest earned on the funds held in
the trust account net of interest that may be used by us to pay our franchise and income taxes payable, divided by the number
of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders
(including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors,
dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
Our sponsor, officers and directors have agreed (pursuant to
written letter agreements with us filed as exhibits to our Current Report on Form 8-k filed on September 20, 2017) that they will
not propose any amendment to our amended and restated certificate of incorporation that would stop our public stockholders from
converting or selling their shares to us in connection with a business combination or affect the substance or timing of our obligation
to redeem 100% of our public shares if we do not complete a business combination by September 19, 2018 (or by March 19, 2019 if
we extend the period of time to consummate a business combination by the full amount of time) unless we provide our public stockholders
with the opportunity to convert their shares of Class A 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, net of franchise and income taxes payable, divided by the
number of then outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment,
whether proposed by our sponsor, any executive officer or director, or any other person.
Under the Delaware General Corporation Law, stockholders may
be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding
public shares in the event we do not complete our initial business combination within the required time period may be considered
a liquidation distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of
the Delaware General Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including
a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which
the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are
made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such
stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder
would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed
to our public stockholders upon the redemption of 100% of our public shares in the event we do not complete our initial business
combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption
distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations
for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the
case of a liquidation distribution. If we are unable to complete a business combination within the prescribed time frame, we will
(i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account, including any interest earned on the funds held in the trust account net of interest that
may be used by us to pay our franchise and income taxes payable, divided by the number of then outstanding public shares, which
redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case
of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other
applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following September
19, 2018 (or March 19, 2019 if we extend the period of time to consummate a business combination by the full amount of time) anniversary
of the closing of our initial public offering, 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 of the Delaware
General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based on facts known
to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought
against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and
our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would
be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We are required to use our reasonable best efforts to have
all third parties 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, we cannot assure you of this fact as there
is no guarantee that vendors, service providers and prospective target businesses will execute such agreements. 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.
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 management is unable to find a service provider willing
to execute a waiver. Our underwriters and auditor are the only third parties we are currently aware of that may not execute a
waiver. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse against the
trust account. Mr. Sarfraz has agreed that he will be personally 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 he will be able to satisfy its
indemnification obligations if he is required to do so. Additionally, the agreement Mr. Sarfraz entered into specifically provides
for two exceptions to the indemnity he has given: he will have no liability (1) as to any claimed amounts owed to a target business
or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may
have in or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of our initial
public offering against certain liabilities, including liabilities under the Securities Act. We have not independently verified
whether Mr. Sarfraz has sufficient funds to satisfy his indemnity obligations. We have not asked Mr. Sarfraz to reserve for such
indemnification obligations. 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. We will distribute to all of our public stockholders, in proportion to
their respective equity interests, an aggregate amount then on deposit in the trust account, including any interest earned on
the funds held in the trust account net of interest that may be used by us to pay our franchise and income taxes payable.
We anticipate notifying the trustee of the trust account to
begin liquidating such assets promptly after such date and anticipate it will take no more than 10 business days to effectuate
such distribution. The holders of the founders’ shares and the shares of Class A common stock underlying the founders’
units, the founders’ rights and the founders’ warrants have waived their rights to participate in any liquidation
distribution with respect to such founders’ 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 and the interest earned on the funds held in the trust account that we are permitted to withdraw
to pay such expenses.
If we are unable to complete an initial business combination
and expend all of the net proceeds of our initial public offering, other than the proceeds deposited in the trust account, and
without taking into account interest, if any, earned on the trust account, the initial per-share redemption price would be $10.00.
The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference to
the claims of public stockholders.
Our public stockholders shall be entitled to receive funds
from the trust account only in the event of our failure to complete a business combination within the required time period or
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 as described elsewhere herein.
In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.
The holders of the founders’ shares, the shares of Class
A common stock underlying the founders’ units, the founders’ rights or the founders’ warrants will not participate
in any redemption distribution from our trust account with respect to such shares. Additionally, any loans made by our officers,
directors, sponsors or their affiliates for working capital needs will be forgiven and not repaid if we are unable to complete
an initial business combination.
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 expiration of the time we have
to complete an initial business combination, 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 initial public offering 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 stop our public stockholders
from converting or selling their shares to us in connection with a business combination or affect the substance or timing of our
obligation to redeem 100% of our public shares if we do not complete a business combination by September 19, 2018 (or by March
19, 2019 if we extend the period of time to consummate a business combination by the full amount of time), we will provide dissenting
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 our sponsor, any executive officer, director
or director nominee, or any other person. Our sponsor, officers and directors, and other holders of our founders’ units
have agreed to waive any conversion rights with respect to any founders’ shares, shares of Class A common stock underlying
the founders’ units, the founders’ rights and the founders’ warrants, 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, into their pro rata share of the aggregate amount then
on deposit in the trust account (net of franchise and income 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 franchise and income taxes payable),
in each case subject to the limitations described herein;
|
|
●
|
we will consummate our initial business combination
only if we have net tangible assets of at least $5,000,001 upon such consummation and, if we seek stockholder approval, a majority
of the outstanding shares of common stock voted are voted in favor of the business combination;
|
|
●
|
if our initial business combination is not consummated
by September 19, 2018 (or by March 19, 2019 if we extend the period of time to consummate a business combination by the full amount
of time), then we will redeem all of the outstanding public shares and thereafter liquidate and dissolve our company;
|
|
●
|
our shares of Class F common stock will automatically
convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to
adjustment as provided herein;
|
|
●
|
upon the consummation of our initial public offering,
$57.5 million shall be placed into the trust account;
|
|
●
|
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
Class A common stock sold in our initial public offering on any matter.
|
Competition
In identifying, evaluating and selecting a target business,
we have encountered, and may continue to 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 initial public offering, 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 Class
A common stock held by our public stockholders may reduce the resources available to us for a business combination;
|
|
●
|
our Class F stock converting into shares of Class A
common stock as described herein; and
|
|
●
|
our outstanding rights, warrants and unit purchase
options, 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. We cannot assure you that, subsequent to a
business combination, we will have the resources or ability to compete effectively.
Employees
We have two executive officers. These individuals are not obligated
to devote any specific number of hours to our matters and devote only as much time as they deem necessary to our affairs. The
amount of time they will devote in any time period varies 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
to acquire has been located, management will 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.
Periodic Reporting and Audited Financial Statements
Our units, common stock, rights and warrants are registered
under the Exchange Act and we 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, this Report contains financial statements audited
and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements
of the prospective target business as part of any proxy solicitation materials or tender offer documents sent to stockholders
to assist them in assessing the target business. These financial statements will need to be prepared in accordance with or reconciled
to United States generally accepted accounting principles or international financial reporting standards, as issued by the International
Accounting Standards Board. We cannot assure you that any particular target business identified by us as a potential acquisition
candidate will have the necessary financial statements. To the extent that this requirement cannot be met, we may not be able
to acquire the proposed target business.
We may be required to have our internal control procedures
audited for the fiscal year ending December 31, 2018 as required by the Sarbanes-Oxley Act. A target company 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.
You should carefully consider the following risk factors
and all the other information contained in this Report, including the financial statements. This Report also contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking
statements as a result of specific factors, including the risks described below. 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.
Risks Associated with Our Business
We are a recently formed company with no operating history
and, accordingly, you do not have any basis on which to evaluate our ability to achieve our business objective.
We are a recently formed company with no operating results
to date. Since we do not have an operating history, you have no basis upon which to evaluate our ability to achieve our business
objective, which is to consummate an initial business combination. We will not generate any revenues until, at the earliest, after
the consummation of a business combination.
If we are unable to consummate a business combination,
our public stockholders may be forced to wait until September 19, 2018 (or until March 19, 2019 if we extend the period of time
to consummate a business combination by the full amount of time) before receiving distributions from the trust account.
We have until September 19, 2018 (or until March 19, 2019 if
we extend the period of time to consummate a business combination by the full amount of time) in which to complete a business
combination. We have no obligation to return funds to investors prior to such date unless (i) we consummate a business combination
prior thereto or (ii) we seek to amend our amended and restated certificate of incorporation prior to consummation of a business
combination, and only then in cases where investors have sought to convert or sell their shares to us. Only after the expiration
of this full time period will public security holders be entitled to distributions from the trust account if we are unable to
complete a business combination. Accordingly, investors’ funds may be unavailable to them until after such date and to liquidate
their investment, public security holders may be forced to sell their public shares or warrants, potentially at a loss.
Our public stockholders may not be afforded an opportunity
to vote on our proposed business combination.
We will either (1) seek stockholder approval of our initial
business combination at a meeting called for such purpose at which public stockholders may seek to convert their shares, regardless
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 (net of franchise and income taxes payable), or (2) provide our public 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 franchise and income taxes payable),
in each case subject to the limitations described herein. Accordingly, it is possible that we will consummate our initial business
combination even if holders of a majority of our public shares do not approve of the business combination we consummate. 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. For instance,
Nasdaq 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 instead of conducting a tender offer.
If we seek stockholder approval of our initial business
combination, after approval of our board, our sponsor has agreed to vote in favor of such initial business combination, regardless
of how our public stockholders vote.
Unlike some other blank check companies in which the initial
stockholders agree to vote their founders’ shares in accordance with the majority of the votes cast by the public stockholders
in connection with an initial business combination, our sponsor has agreed (i) to vote any of the founders’ shares and shares
of Class A common stock underlying the founders’ units held by the sponsor in favor of any proposed business combination,
(ii) not to convert any such shares in connection with a stockholder vote to approve a proposed initial business combination and
(iii) not to sell any such shares to us in a tender offer in connection with any proposed business combination. As a result, we
would need only 2,132,001, or approximately 37.1%, of the 5,750,000 public shares sold in our initial public offering to be voted
in favor of a transaction in order to have our initial business combination approved (assuming (i) all shares were present and
entitled to vote at the meeting and (ii) the 115,000 shares issued to EarlyBirdCapital, and the 54,500 shares underlying the EBC
units purchased by EarlyBirdCapital (and its designees) upon the consummation of our initial public offering are issued and outstanding
but not voted). Accordingly, if we seek stockholder approval of our initial business combination, it is more likely that the necessary
stockholder approval will be received than would be the case if our sponsor agreed to vote its founders’ shares and shares
of Class A common stock underlying the founders’ units in accordance with the majority of the votes cast by our public stockholders.
You will not be entitled to protections normally afforded
to investors of blank check companies.
We may be deemed to be a “blank check” company
under the United States securities laws. However, since we had net tangible assets in excess of $5,000,000, we are exempt from
rules promulgated by the SEC to protect investors of blank check companies such as Rule 419. Accordingly, investors are not afforded
the benefits or protections of those rules which would, for example, completely restrict the transferability of our securities
and restrict the use of interest earned on the funds held in the trust account. Because we are not subject to Rule 419, we are
entitled to withdraw amounts from the funds held in the trust account prior to the completion of a business combination.
If we seek stockholder approval of our initial business
combination and we do not conduct redemptions pursuant to the tender offer rules, a stockholder or a “group” of stockholders
holding a substantial portion of our Class A common stock may influence our ability to complete our business combination.
Unlike other blank check companies, 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 does not provide 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), holding in excess of a certain percentage of shares offered in our initial
public offering will be restricted from seeking redemption rights with respect to any shares they hold in excess of such percentage.
The ability of any such stockholder to redeem all their shares will increase their influence over our ability to complete our
business combination and could make it more difficult for us to complete such business combination.
If we determine to change our acquisition criteria or
guidelines, many of the disclosures contained in this Report would be rendered irrelevant and you would be investing in our company
without any basis on which to evaluate the potential target business we may acquire.
We could seek to deviate from the acquisition criteria or guidelines
disclosed in this Report although we have no current intention to do so. For instance, we currently anticipate acquiring a target
business with a consistent historical financial performance. However, we are not obligated to do so and may determine to merge
with or acquire a company with no operating history if the terms of the transaction are determined by us to be favorable to our
public stockholders. In such event, many of the acquisition criteria and guidelines set forth in this Report would be rendered
irrelevant. We could also seek to amend our amended and restated certificate of incorporation to provide us with more time to
complete an initial business combination. Accordingly, investors may be making an investment in our company without any basis
on which to evaluate the potential target business we may acquire.
We may issue shares of our capital stock or debt securities
to complete a business combination, which would reduce the equity interest of our stockholders and likely cause a change in control
of our ownership.
Our amended and restated certificate of incorporation authorizes
the issuance of up to 15,000,000 shares of Class A common stock, par value $0.0001 per share, 3,000,000 shares of Class F common
stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. There are currently
4,449,000 and 1,562,500 authorized but unissued shares of Class A and Class F common stock available, respectively, for issuance,
which amount takes into account shares reserved for issuance upon conversion of outstanding rights (including founders’
rights) and exercise of outstanding warrants (including insiders’ warrants) and the underwriters’ unit purchase option
but not upon the conversion of the Class F common stock. Shares of Class F 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. There are no shares of preferred stock issued and outstanding. Although we have no commitment as of the date
hereof, we may issue a substantial number of additional shares of common stock or shares of preferred stock, or a combination
of common stock and preferred stock, to complete a business combination. We may also issue shares of Class A common stock upon
conversion of the Class F 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 contained therein. The issuance of additional shares of common stock will not reduce the
per-share conversion amount in the trust account. The issuance of additional shares of common stock or preferred stock:
|
●
|
may significantly reduce the equity interest of existing
investors;
|
|
●
|
may subordinate the rights of holders of shares of
common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of common stock;
|
|
●
|
may cause a change in control if a substantial number
of shares of common stock are 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; and
|
|
●
|
may adversely affect prevailing market prices for our
shares of common stock.
|
Similarly, if we issue debt securities, it could result in:
|
●
|
default and foreclosure on our assets if our operating
revenues after a 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 security is payable on demand; and
|
|
●
|
our inability to obtain necessary additional financing
if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding.
|
If we incur indebtedness, our lenders will not have a claim
on the cash in the trust account and such indebtedness will not decrease the per-share conversion amount in the trust account.
If the net proceeds of our initial public offering not
being held in trust are insufficient to allow us to operate until September 19, 2018 (or until March 19, 2019 if we extend the
period of time to consummate a business combination by the full amount of time), we may be unable to complete a business combination.
We believe that the funds available to us outside of the trust
account will be sufficient to allow us to operate until September 19, 2018 (or until March 19, 2019 if we extend the period of
time to consummate a business combination by the full amount of time), assuming that a business combination is not consummated
during that time. However, we cannot assure you that our estimates will be accurate. Accordingly, if we use all of the funds held
outside of the trust account, we may not have sufficient funds available with which to structure, negotiate or close an initial
business combination. In such event, we would need to borrow funds from our sponsor, officers or directors or their affiliates
to operate or may be forced to liquidate. Our sponsor, officers, directors and their affiliates may, but are not obligated to,
loan us funds, from time to time or at any time, in whatever amount that they deem reasonable in their sole discretion for our
working capital needs. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of
our initial business combination, without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted
into units at a price of $10.00 per unit (which, for example, would result in the holders being issued 165,000 shares of Class
A common stock if $1,500,000 of notes were so converted since the 150,000 rights included in such units would result in the issuance
of 15,000 shares upon the closing of our business combination, as well as 75,000 warrants to purchase 75,000 shares).
We do not have a specified maximum conversion threshold.
The absence of such a conversion threshold may make it possible for us to complete a 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 conversion threshold. Accordingly, as long as our net tangible assets are at least $5,000,001
upon consummation of our initial business combination (such that we are not subject to the SEC’s “penny stock”
rules) or such greater amount as required by the terms in the agreement relating to our initial business combination, we may be
able to complete our business combination even though a substantial majority of our public stockholders do not agree with the
transaction.
If third parties bring claims against us, the proceeds
held in trust could be reduced and the per-share redemption price received by stockholders may be less than $10.00.
Our placing of funds in trust may not protect those funds from
third party claims against us. Although we seek to have all vendors and service providers we engage and prospective target businesses
we negotiate with 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, they may not execute such agreements. Furthermore, even if such
entities execute such agreements with us, they may seek recourse against the trust account. A court may not uphold the validity
of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of
our public stockholders. If we are unable to complete a business combination and distribute the proceeds held in trust to our
public stockholders, our Chief Executive Officer, Aamer Sarfraz, has agreed (subject to certain exceptions described elsewhere
in this Report) that he 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. However, he may not be able to meet such obligation. Therefore, the per-share distribution from the
trust account may be less than $10.00, plus interest, due to such claims.
Additionally, 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 may not be able to return
to our public stockholders at least $10.00. We have not independently verified whether Mr. Sarfraz has sufficient funds to satisfy
his indemnity obligations. We have not asked Mr. Sarfraz to reserve for such indemnification obligations. 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 $10.00 per public share.
Our stockholders may be held liable for claims by third
parties against us to the extent of distributions received by them.
Our amended and restated certificate of incorporation provides
that we will continue in existence only until September 19, 2018 (or until March 19, 2019 if we extend the period of time to consummate
a business combination by the full amount of time). If we have not completed a business combination by such date, we will (i)
cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account, including any interest earned on the funds held in the trust account net of interest that
may be used by us to pay our franchise and income taxes payable, divided by the number of then outstanding public shares, which
redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further
liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case
of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other
applicable law. 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 well beyond the third anniversary of the date of distribution. Accordingly, we cannot
assure you that third parties will not seek to recover from our stockholders amounts owed to them by us.
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 expiration of the time we have
to complete an initial business combination, 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.
Our directors may decide not to enforce Mr. Sarfraz’s
indemnification obligations, 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 $10.00 per public share and Mr. Sarfraz asserts that he is unable to satisfy his obligations or that he has no indemnification
obligations related to a particular claim, our independent directors would determine whether to take legal action against Mr.
Sarfraz to enforce such indemnification obligations. While we currently expect that our independent directors would take legal
action on our behalf against Mr. Sarfraz to enforce such indemnification obligations to us, it is possible that our independent
directors in exercising their business judgment may choose not to do so in any particular instance. If our independent directors
choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to
our public stockholders may be reduced below $10.00 per share.
If we do not file and maintain a current and effective
prospectus relating to the Class A common stock issuable upon exercise of the warrants, holders will only be able to exercise
such warrants on a “cashless basis.”
If we do not file and maintain a current and effective prospectus
relating to the Class A common stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants,
they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available.
As a result, the number of shares of Class A common stock that holders will receive upon exercise of the warrants will be fewer
than it would have been had such holder exercised his warrant for cash. Further, if an exemption from registration is not available,
holders would not be able to exercise on a cashless basis and would only be able to exercise their warrants for cash if a current
and effective prospectus relating to the Class A common stock issuable upon exercise of the warrants is available. Under the terms
of the warrant agreement, we have agreed to use our best efforts to meet these conditions and to file and maintain a current and
effective prospectus relating to the Class A common stock issuable upon exercise of the warrants until the expiration of the warrants.
However, we cannot assure you that we will be able to do so. If we are unable to do so, the potential “upside” of
the holder’s investment in our company may be reduced or the warrants may expire worthless.
An investor will only be able to exercise a warrant if
the issuance of shares of Class A common stock upon such exercise has been registered or qualified or is deemed exempt under the
securities laws of the state of residence of the holder of the warrants.
No warrants will be exercisable and we will not be obligated
to issue shares of Class A common stock unless the shares of Class A common stock issuable upon such exercise have been registered
or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. If the
shares of Class A common stock issuable upon exercise of the warrants are not qualified or exempt from qualification in the jurisdictions
in which the holders of the warrants reside, the warrants may be deprived of any value, the market for the warrants may be limited
and they may expire worthless if they cannot be sold and may be subject to redemption.
We may amend the terms of the warrants in a manner that
may be adverse to holders with the approval by the holders of at least 50% of the then outstanding warrants.
Our warrants are 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.
The warrant agreement requires the approval by the holders of at least 50% of the then outstanding warrants in order to make any
change that adversely affects the interests of the registered holders.
We may amend the terms of the rights in a manner that
may be adverse to holders with the approval by the holders of at least 50% of the then outstanding rights.
Our rights are issued in registered form under a right agreement
between Continental Stock Transfer & Trust Company, as rights agent, and us. The right agreement provides that the terms of
the rights may be amended without the consent of any holder to cure any ambiguity or correct any defective provision. The right
agreement requires the approval by the holders of at least 50% of the then outstanding rights in order to make any change that
adversely affects the interests of the registered holders.
Unlike other similarly structured blank check companies,
our initial stockholder will receive additional Class A common stock if we issue shares to consummate an initial business combination.
The founders’ shares will automatically convert into
Class A common stock on the first business day following the consummation of our initial business combination on a one-for-one
basis, subject to adjustment as provided herein. In the case that additional 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 initial
public offering and related to the closing of the initial business combination, the ratio at which founders’ shares shall
convert into Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class F common
stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of Class A common
stock issuable upon conversion of all founders’ 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 (not including the
shares of Class A common stock underlying the founders’ units or the 115,000 shares of common stock issued to EarlyBirdCapital,
Inc. upon the consummation of our initial public offering), excluding any shares or equity-linked securities issued, or to be
issued, to any seller in the initial business combination and any founders’ units (and underlying securities) issued upon
conversion of working capital loans, after taking into account Class A common stock redeemed in connection with the business combination.
This is different from 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. This may make it more
difficult and expensive for us to consummate an initial business combination.
Because we are not limited to a particular industry or
target business with which to complete a business combination, you are unable to currently ascertain the merits or risks of the
industry or business in which we may ultimately operate.
We may consummate a business combination with a company in
any industry we choose and are not limited to any particular industry or type of business, although we intend to focus on companies
in the technology industry in North America. Accordingly, there is no current basis for you to evaluate the possible merits or
risks of the particular industry in which we may ultimately operate or the target business which we may ultimately acquire. To
the extent we complete a business combination with a financially unstable company or an entity in its development stage, we may
be affected by numerous risks inherent in the business operations of those entities. If we complete a business combination with
an entity in an industry characterized by a high level of risk, we may be affected by the currently unascertainable risks of that
industry. Although our management will endeavor to evaluate the risks inherent in a particular industry or target business, we
cannot assure you that we will properly ascertain or assess all of the significant risk factors. We also cannot assure you that
an investment in our units will not ultimately prove to be less favorable to investors than a direct investment, if an opportunity
were available, in a target business.
Our ability to successfully effect a 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
a business combination. While we intend to closely scrutinize any individuals we engage after a business combination, we cannot
assure you that our assessment of these individuals will prove to be correct.
Our ability to successfully effect a business combination is
dependent upon the efforts of our key personnel. We believe that our success depends on the continued service of our key personnel,
at least until we have consummated our initial business combination. We cannot assure you that any of our key personnel will remain
with us for the immediate or foreseeable future. In addition, none of our officers are required to commit any specified amount
of time to our affairs and, accordingly, our officers have conflicts of interest in allocating management time among various business
activities, including identifying potential business combinations and monitoring the related due diligence. We do not have employment
agreements with, or key-man insurance on the life of, any of our officers. The unexpected loss of the services of our key personnel
could have a detrimental effect on us.
The role of our key personnel after a business combination,
however, cannot presently be ascertained. Although some of our key personnel may serve in senior management or advisory positions
following a business combination, it is likely that most, if not all, of the management of the target business will remain in
place. While we intend to closely scrutinize any individuals we engage after a 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 public company which could cause us to have to expend time and resources helping them become familiar with such requirements.
This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
Our officers and directors may not have significant experience
or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.
We may consummate a business combination with a target business
in any geographic location or industry we choose, although we intend to focus on companies in the technology industry in North
America. We cannot assure you that our officers and directors will have enough experience or have sufficient knowledge relating
to the jurisdiction of the target or its industry to make an informed decision regarding a 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 a 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 will be able to remain with the company after
the consummation of a business combination only if they are able to negotiate employment or consulting agreements or other appropriate
arrangements 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 the company after the consummation of the business combination. The personal
and financial interests of such individuals may influence their motivation in identifying and selecting a target business.
Our officers and directors 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 consummate a business combination.
Our officers and directors are not required to commit their
full time to our affairs, which could create a conflict of interest when allocating their time between our operations and their
other commitments. We presently expect each of our employees 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 our initial business combination.
All of our officers and directors are engaged in other business endeavors and are not obligated to devote any specific number
of hours to our affairs. If our officers’ and directors’ other business affairs require them to devote more substantial
amounts of time to such affairs, it could limit their ability to devote time to our affairs and could have a negative impact on
our ability to consummate our initial business combination. We cannot assure you that these conflicts will be resolved in our
favor.
Our officers and directors may have a conflict of interest
in determining whether a particular target business is appropriate for a business combination.
Our sponsor, which is affiliated with certain of our officers
and directors, has agreed to waive its right to convert its founders’ shares, the shares of Class A common stock underlying
the founders’ units, the founders’ rights, the founders’ warrants or any other shares purchased in our initial
public offering or thereafter, or to receive distributions from the trust account with respect to its founders’ shares or
the shares of Class A common stock underlying the founders’ units, the founders’ rights or the founders’ warrants
upon our liquidation if we are unable to consummate a business combination. Accordingly, the shares acquired prior to our initial
public offering, as well as the founders’ units and the securities underlying the founders’ units, the founders’
rights and the founders’ warrants will be worthless if we do not consummate a business combination. The personal and financial
interests of our directors and officers, through their interests in our sponsor, may influence their motivation in timely identifying
and selecting a target business and completing a business combination. Consequently, our directors’ and officers’
discretion in identifying and selecting a suitable target business may result in a conflict of interest when determining whether
the terms, conditions and timing of a particular business combination are appropriate and in our stockholders’ best interest.
Certain of our officers have, and any of our officers
and directors or their affiliates may in the future have, fiduciary and contractual obligations and accordingly, may have conflicts
of interest in determining to which entity a particular business opportunity should be presented.
Certain of our directors have, and any of our officers and
directors or their affiliates may in the future have, fiduciary and contractual obligations to other companies. Accordingly, they
may participate in transactions and have obligations that may be in conflict or competition with our consummation of our initial
business combination. As a result, a potential target business may be presented by our management team to another entity prior
to its presentation to us and we may not be afforded the opportunity to engage in a transaction with such target business.
Our executive officers, directors, senior advisor, security
holders 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,
executive officers, senior advisor, security holders 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, our directors, executive
officers or our senior advisor. 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. We will be required to obtain a fairness opinion with respect to the target business that we seek to
acquire if it is an entity that is affiliated with any of our officers, directors or sponsor.
Nasdaq may delist our securities from quotation on its
exchange which could limit investors’ ability to make transactions in our securities and subject us to additional trading
restrictions.
Our securities are currently listed on Nasdaq, a national securities
exchange. However, we cannot assure you that our securities will continue to be listed on Nasdaq in the future prior to an initial
business combination. In order to continue listing our securities on Nasdaq prior to our initial business combination, we must
maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’
equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally,
in connection with our initial business combination, it is likely that Nasdaq will require us to file a new initial listing application
and meet its initial listing requirements as opposed to its more lenient continued listing requirements. For instance, our stock
price would generally be required to be at least $4 per share, our stockholders’ equity would generally be required to be
at least $5 million and we would be required to have 300 round lot holders. We cannot assure you that we will be able to meet
those initial listing requirements at that time.
If Nasdaq delists our securities from trading on its exchange,
we could face significant material adverse consequences, including:
|
●
|
a limited availability of market quotations for our
securities;
|
|
●
|
reduced liquidity with respect to our securities;
|
|
●
|
a determination that our shares of common stock are
“penny stock” which will require brokers trading in our shares of common stock to adhere to more stringent rules,
possibly resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock;
|
|
●
|
a limited amount of news and analyst coverage for our
company; and
|
|
●
|
a decreased ability to issue additional securities
or obtain additional financing in the future.
|
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, rights and warrants are listed on Nasdaq, our units,
Class A common stock, rights and warrants are covered securities. Although the states are preempted from regulating the sale of
our 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, 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 Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which
we offer our securities.
We are an “emerging growth company” and we
cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our shares of common
stock less attractive to investors.
We are an “emerging growth company,” as defined
in the JOBS Act. We will remain an “emerging growth company” for up to five years. However, if our non-convertible
debt issued within a three year period exceeds $1 billion or revenues exceeds $1.07 billion, or the market value of our shares
of common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given
fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, we
are not required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, we have reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements and we are exempt from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or
revised accounting standards that have different effective dates for public and private companies until those standards apply
to private companies. As such, our financial statements may not be comparable to companies that comply with public company effective
dates. We cannot predict if investors will find our shares of common stock less attractive because we may rely on these provisions.
If some investors find our shares of common stock less attractive as a result, there may be a less active trading market for our
shares and our share price may be more volatile.
We may only be able to complete one business combination
with the proceeds of our initial public offering, which will cause us to be solely dependent on a single business which may have
a limited number of products or services.
It is likely we will consummate a business combination with
a single target business, although we have the ability to simultaneously acquire several target businesses. By consummating a
business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and
regulatory developments.
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:
|
●
|
solely dependent upon the performance of a single business,
or
|
|
●
|
dependent upon the development or market acceptance
of a single or limited number of products, processes or services.
|
This 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.
Alternatively, 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 business combinations, which may make it more difficult
for us, and delay our ability, to complete the 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.
The ability of our stockholders to exercise their conversion
rights or sell their shares to us in a tender offer may not allow us to effectuate the most desirable business combination or
optimize our capital structure.
If our business combination requires us to use substantially
all of our cash to pay the purchase price, because we will not know how many stockholders may exercise conversion rights or seek
to sell their shares to us in a tender offer, we may either need to reserve part of the trust account for possible payment upon
such conversion, or we may need to arrange third party financing to help fund our business combination. In the event that the
acquisition involves the issuance of our stock as consideration, we may be required to issue a higher percentage of our stock
to make up for a shortfall in funds. Raising additional funds to cover any shortfall may involve dilutive equity financing or
incurring indebtedness at higher than desirable levels. This may limit our ability to effectuate the most attractive business
combination available to us.
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.
In connection with any stockholder meeting called to approve
a proposed initial business combination, each public stockholder will have the right, regardless of whether he is voting for or
against such proposed business combination, to demand that we convert his shares into a pro rata share of the trust account as
of two business days prior to the consummation of the initial business combination. We may require public stockholders who wish
to convert their shares in connection with a proposed business combination to either (i) tender their certificates to our transfer
agent or (ii) deliver their shares to the transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal
At Custodian) System, at the holders’ 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. In order to obtain a physical stock certificate, a stockholder’s
broker and/or clearing broker, DTC and our transfer agent will need to act to facilitate this request. It is our understanding
that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However,
because we do not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks
to obtain a physical stock certificate. While we have been advised that it takes a short time to deliver shares through the DWAC
System, we cannot assure you of this fact. Accordingly, if it takes longer than we anticipate for stockholders to deliver their
shares, stockholders who wish to convert may be unable to meet the deadline for exercising their conversion rights and thus may
be unable to convert their shares.
If, in connection with any stockholder meeting called to approve
a proposed business combination, we require public stockholders who wish to convert their shares to comply with specific requirements
for conversion, such converting stockholders may be unable to sell their securities when they wish to in the event that the proposed
business combination is not approved.
If we require public stockholders who wish to convert their
shares to either (i) tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically
using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System as described above and such proposed
business combination is not consummated, we will promptly return such certificates to the tendering public stockholders. Accordingly,
investors who attempted to convert their shares in such a circumstance will be unable to sell their securities after the failed
acquisition until we have returned their securities to them. The market price for our shares of common stock may decline during
this time and you may not be able to sell your securities when you wish to, even while other stockholders that did not seek conversion
may be able to sell their securities.
Because of our structure, other companies may have a
competitive advantage and we may not be able to consummate an attractive business combination.
We have encountered and expect to encounter intense competition
from entities other than blank check companies having a business objective similar to ours, including venture capital funds, leveraged
buyout funds and operating businesses competing for acquisitions. Many of these entities are well established and have extensive
experience in identifying and effecting business combinations directly or through affiliates. Many of these competitors possess
greater technical, human and other resources than we do and our financial resources are relatively limited when contrasted with
those of many of these competitors. While we believe that there are numerous potential target businesses that we could acquire
with the net proceeds of our initial public offering, our ability to compete in acquiring certain sizable target businesses is
limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition
of certain target businesses. Furthermore, seeking stockholder approval or engaging in a tender offer in connection with any proposed
business combination may delay the consummation of such a transaction. Additionally, our outstanding rights and warrants, and
the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Any of the foregoing
may place us at a competitive disadvantage in successfully negotiating a business combination.
We may be unable to obtain additional financing, if required,
to complete a business combination or to fund the operations and growth of the target business, which could compel us to restructure
or abandon a particular business combination.
We believe that the net proceeds of our initial public offering
will be sufficient to allow us to consummate a business combination. We may use common or preferred equity to fund a material
portion of the purchase price of our initial business combination. However, because we have not yet executed a definitive agreement
with any specific target business with respect to a business combination, we cannot ascertain the capital requirements for any
particular transaction. If the net proceeds of our initial public offering prove to be insufficient, either because of the size
of the business combination, the depletion of the available net proceeds in search of a target business, or the obligation to
convert into cash a significant number of shares from dissenting stockholders, we will be required to seek additional financing.
Such financing may not be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable
when needed to consummate a particular 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, if we consummate a business
combination, we may require additional 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 sponsor, officers, directors or stockholders is required to provide any financing to us in connection with or after a business
combination.
Our initial stockholder controls a substantial interest
in us and thus may influence certain actions requiring a stockholder vote.
Our initial stockholder owns approximately 22.0% of our issued
and outstanding shares of common stock. None of our sponsor, officers, directors or their affiliates has indicated any intention
to purchase any units or shares of Class A common stock from persons in the open market or in private transactions. However, our
sponsor, officers, directors or their affiliates could determine in the future to make such purchases in the open market or in
private transactions, to the extent permitted by law, in order to influence the vote or magnitude of the number of stockholders
seeking to tender their shares to us. In connection with any vote for a proposed business combination, our sponsor, as well as
all of our officers and directors, have agreed to vote the shares of Class F common stock owned by them immediately before our
initial public offering, the shares of Class A common stock underlying the founders’ units, as well as any shares of Class
A common stock acquired in the aftermarket in favor of such proposed business combination.
Our board of directors is divided into two classes, each of
which generally serves for a term of two years with only one class of directors being elected in each year. There may not be an
annual meeting of stockholders to elect new directors prior to the consummation of a business combination, in which case all of
the current directors will continue in office until at least the consummation of the business combination. If there is an annual
meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be
considered for election and our sponsor, because of their ownership position, will have considerable influence regarding the outcome.
Accordingly, our initial stockholder will continue to exert control at least until the consummation of a business combination.
Our outstanding rights, warrants and unit purchase options
may have an adverse effect on the market price of our Class A common stock and make it more difficult to effect a business combination.
We issued rights to receive 575,000 shares of Class A common
Stock and warrants to purchase 2,875,000 shares of Class A common stock in our initial public offering, founders’ rights
to purchase 27,250 shares of Class A common stock and founders’ warrants to purchase 136,250 shares of Class A common stock
and 250,000 warrants and rights to receive 50,000 shares of Class A common stock underlying the unit purchase options. We may
also issue other units containing rights and warrants to our sponsor, officers or directors in payment of working capital loans
made to us as described in this Report. To the extent we issue shares of Class A common stock to effect a business combination,
the potential for the issuance of a substantial number of additional shares upon exercise of these rights, warrants and unit purchase
options could make us a less attractive acquisition vehicle in the eyes of a target business. Such securities, when exercised,
will increase the number of issued and outstanding shares of common stock and reduce the value of the shares issued to complete
the business combination. Accordingly, our rights, warrants and unit purchase options may make it more difficult to effectuate
a business combination or increase the cost of acquiring the target business. Additionally, the sale, or even the possibility
of sale, of the shares underlying the rights, warrants or unit purchase options could have an adverse effect on the market price
for our securities or on our ability to obtain future financing. If and to the extent these rights are converted or warrants and
options are exercised, you may experience dilution to your holdings.
Because each unit contains one-half of one warrant and
one right to receive one-tenth of one share of Class A common stock, the units may be worth less than units of other blank check
companies.
Each unit contains one-half of one warrant and one right to
receive one-tenth (1/10) of one share of Class A common stock upon consummation of our initial business combination. This is different
from other blank check companies similar to ours whose units include one share of common stock and one warrant to purchase one
whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants
and rights upon completion of a business combination since the warrants will be exercisable for, and the rights will be convertible
into, a fraction of the number of shares in the aggregate, compared to units that each contain a warrant to purchase one whole
share, thus making us, we believe, a more attractive business combination partner for target businesses. Nevertheless, this unit
structure may cause our units to be worth less than if they included a warrant to purchase one whole share.
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 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
sales price of the common stock equals or exceeds $24.00 per share (as adjusted for stock splits, stock dividends, reorganizations
and recapitalizations) for any 20 trading days within a 30 trading-day period ending on the third business day prior to proper
notice of such redemption provided that on the date we give notice of redemption and during the entire period thereafter until
the time we redeem the warrants, we have an effective registration statement under the Securities Act covering the shares of Class
A common stock issuable upon exercise of the warrants and a current prospectus relating to them is available. 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. Redemption of the outstanding warrants could force you (i) to
exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to
sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the
nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially
less than the market value of your warrants. None of the founders’ warrants will be redeemable by us so long as they are
held by the initial purchasers or their permitted transferees.
Our management’s ability to require holders of
our warrants to exercise such warrants on a cashless basis will cause holders to receive fewer shares of Class A common stock
upon their exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If we call our public warrants for redemption after the redemption
criteria described elsewhere in this Report have been satisfied, our management will have the option to require any holder that
wishes to exercise his warrant (including any warrants held by our sponsor, officers or directors, other purchasers of our founders’
units, or their permitted transferees) to do so on a “cashless basis.” If our management chooses to require holders
to exercise their warrants on a cashless basis, the number of shares of Class A common stock received by a holder upon exercise
will be fewer than it would have been had such holder exercised his warrant for cash. This will have the effect of reducing the
potential “upside” of the holder’s investment in our company.
We have no obligation to net cash settle the rights or
warrants.
In no event will we have any obligation to net cash settle
the rights or warrants. Furthermore, there are no contractual penalties for failure to deliver securities to the holders of the
rights or warrants upon consummation of an initial business combination or exercise of the warrants. Accordingly, you might not
receive the shares of Class A common stock underlying the rights and warrants.
If our security holders exercise their registration rights,
it may have an adverse effect on the market price of our shares of Class A common stock and the existence of these rights may
make it more difficult to effect a business combination.
Our stockholders prior to our initial public offering are entitled
to make a demand that we register the resale of the founders’ shares at any time commencing three months prior to the date
on which their shares may be released from escrow. Additionally, the holders of the founders’ units and any units our sponsor,
officers, directors, or their affiliates may be issued in payment of working capital loans made to us are entitled to demand that
we register the resale of the founders’ units and any other units we issue to them (and the underlying shares of Class A
common stock) commencing at any time after we consummate an initial business combination, as well as any securities underlying
any such units. The presence of these additional shares of Class A common stock trading in the public market may have an adverse
effect on the market price of our securities. In addition, the existence of these rights may make it more difficult to effectuate
a business combination or increase the cost of acquiring the target business, as the stockholders of the target business may be
discouraged from entering into a business combination with us or will request a higher price for their securities because of the
potential effect the exercise of such rights may have on the trading market for our shares of Class A common stock.
If we are deemed to be an investment company, we may
be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult
for us to complete a business combination.
A company that, among other things, is or holds itself out
as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, owning, trading or holding
certain types of securities would be deemed an investment company under the Investment Company Act, as amended, or the Investment
Company Act. Since we invested the proceeds held in the trust account, it is possible that we could be deemed an investment company.
Notwithstanding the foregoing, we do not believe that our principal activities subject us to the Investment Company Act. To this
end, the proceeds held in trust may be invested by the trustee only 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. By restricting the investment of the proceeds to these instruments, we intend to meet the requirements for the exemption
provided in Rule 3a-1 promulgated under the Investment Company Act.
If we are nevertheless deemed to be an investment company under
the Investment Company Act, we may be subject to certain restrictions that may make it more difficult for us to complete a business
combination, including:
|
●
|
restrictions on the nature of our investments; and
|
|
●
|
restrictions on the issuance of securities.
|
In addition, we may have imposed upon us certain burdensome
requirements, including:
|
●
|
registration as an investment company;
|
|
●
|
adoption of a specific form of corporate structure;
and
|
|
●
|
reporting, record keeping, voting, proxy, compliance
policies and procedures and disclosure requirements and other rules and regulations.
|
Compliance with these additional regulatory burdens would require
additional expense for which we have not allotted.
If we do not conduct an adequate due diligence investigation
of a target business, we may be required to subsequently 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 our stock price, which
could cause you to lose some or all of your investment.
We must conduct a due diligence investigation of the target
businesses we intend to acquire. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance
and legal professionals who must be involved in the due diligence process. Even if we conduct extensive due diligence on a target
business, this diligence may not reveal all material issues that may affect a particular target business, and factors outside
the control of the target business and outside of our control may later arise. If our diligence fails to identify issues specific
to a target business, industry or the environment in which the target business operates, 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 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 common stock. 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.
Our sponsor may decide not to extend the term we have
to consummate our initial business combination, in which case we would cease all operations except for the purpose of winding
up and we would redeem our public shares and liquidate, and the warrants and rights will be worthless.
We have until September 19, 2018 to consummate an initial business
combination. However, if we anticipate that we may not be able to consummate our initial business combination by September 19,
2018, we may extend the period of time to consummate a business combination up to two times, each by an additional three months
(or until March 19, 2019 if we extend the period of time to consummate a business combination by the full amount of time). Pursuant
to the terms of our amended and restated certificate of incorporation and the trust agreement between us and Continental Stock
Transfer & Trust Company, in order to extend the time available for us to consummate our initial business combination, our
sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the
trust account $575,000 ($0.10 per share) on or prior to the date of the applicable deadline, for each three month extension (or
up to $1,150,000 or $0.20 per share, if we extend for the full six months). Any such payments would be made in the form of a loan.
Any such loans will be non-interest bearing and payable upon the consummation of our initial business combination. If we complete
our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us to
pay our franchise and income taxes payable. If we do not complete a business combination, we will not repay such loans. Furthermore,
the letter agreement with our initial stockholders contains a provision pursuant to which our sponsor has agreed to waive its
right to be repaid for such loans out of the funds held in the trust account in the event that we do not complete a business combination.
Our sponsor and its affiliates or designees are not obligated to fund the trust account to extend the time for us to complete
our initial business combination. If we are unable to consummate our initial business combination within the applicable time period,
we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares for a pro
rata portion of the funds held in the trust account and 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 each case to our
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such event,
the warrants and rights will be worthless.
The requirement that we complete an initial business
combination by September 19, 2018 (or by March 19, 2019 if we extend the period of time to consummate a business combination by
the full amount of time) may give potential target businesses leverage over us in negotiating a business combination.
We have until September 19, 2018 (or until March 19, 2019 if
we extend the period of time to consummate a business combination by the full amount of time) to complete an initial business
combination. Any potential target business with which we enter into negotiations concerning a business combination will be aware
of this requirement. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing
that if we do not complete a business combination with that particular target business, we may be unable to complete a business
combination with any other target business. This risk will increase as we get closer to the time limit referenced above.
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.
We must complete our initial business combination by September
19, 2018 (or by March 19, 2019 if we extend the period of time to consummate a business combination by the full amount of time).
We may not be able to find a suitable target business and complete our initial business combination within such time period or
we may be unable to consummate a business combination due to a downturn in industry or economic conditions or due to other factors
that may occur. If we have not completed our initial business combination by September 19, 2018 (or by March 19, 2019 if we extend
the period of time to consummate a business combination by the full amount of time), 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 earned on the funds held in the trust account net of interest that may be used by us to
pay our franchise and income taxes payable, divided by the number of then outstanding public shares, which redemption will completely
extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above)
to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
We may not obtain a fairness opinion with respect to
the target business that we seek to acquire and therefore you may be relying solely on the judgment of our board of directors
in approving a proposed business combination.
We will only be required to obtain a fairness opinion with
respect to the target business that we seek to acquire if it is an entity that is affiliated with any of our officers, directors
or sponsor. In all other instances, we will have no obligation to obtain an opinion. Accordingly, investors will be relying solely
on the judgment of our board of directors in approving a proposed business combination.
Resources could be spent researching acquisitions that
are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.
The investigation of each specific target business and the
negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments require substantial management
time and attention and substantial costs for accountants, attorneys and others. If a decision is made not to complete a specific
business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore,
even if an agreement is reached relating to a specific target business, we may fail to consummate the 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.
Compliance with the Sarbanes-Oxley Act of 2002 requires
substantial financial and management resources and may increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that
we evaluate and report on our system of internal controls and may require that we have such system of internal controls audited
beginning with our Annual Report on Form 10-K for the year ending December 31, 2018. If we fail to maintain the adequacy of our
internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or stockholder litigation. Any
inability to provide reliable financial reports could harm our business. Section 404 of the Sarbanes-Oxley Act also requires that
our independent registered public accounting firm report on management’s evaluation of our system of internal controls.
A target company 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. Furthermore, any failure to implement required new or improved controls,
or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future,
could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also
cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price
of our stock.
If we effect a business combination with a company located
outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
We may effect a business combination with a company located
outside of the United States. If we did, we would be subject to any special considerations or risks associated with companies
operating in the target business’ home jurisdiction, including any of the following:
|
●
|
rules and regulations or currency conversion or corporate
withholding taxes on individuals;
|
|
●
|
tariffs and trade barriers;
|
|
●
|
regulations related to customs and import/export matters;
|
|
●
|
tax issues, such as tax law changes and variations
in tax laws as compared to the United States;
|
|
●
|
currency fluctuations and exchange controls;
|
|
●
|
challenges in collecting accounts receivable;
|
|
●
|
cultural and language differences;
|
|
●
|
employment regulations;
|
|
●
|
crime, strikes, riots, civil disturbances, terrorist
attacks and wars; and
|
|
●
|
deterioration of political relations with the United
States.
|
We cannot assure you that we would be able to adequately address
these additional risks. If we were unable to do so, our operations might suffer.
If we effect a business combination with a company located
outside of the United States, the laws applicable to such company will likely govern all of our material agreements and we may
not be able to enforce our legal rights.
If we effect a business combination with a company located
outside of the United States, the laws of the country in which such company operates will govern almost all of the material agreements
relating to its operations. We cannot assure you that the target business will be able to enforce any of its material agreements
or that remedies will be available in this new jurisdiction. The system of laws and the enforcement of existing laws in such jurisdiction
may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy
under any of our future agreements could result in a significant loss of business, business opportunities or capital. Additionally,
if we acquire a company located outside of the United States, it is likely that substantially all of our assets would be located
outside of the United States and some of our officers and directors might reside outside of the United States. As a result, it
may not be possible for investors in the United States to enforce their legal rights, to effect service of process upon our directors
or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors
and officers under federal securities laws.
Provisions in our amended and restated certificate of
incorporation and bylaws 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 common stock and could entrench management.
Our amended and restated certificate of incorporation and bylaws
contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.
Our board of directors will be divided into two classes, each of which will generally serve for a term of two years with only
one class of directors being elected in each year. As a result, at a given annual meeting only a minority of the board of directors
may be considered for election. Since our “staggered board” may prevent our stockholders from replacing a majority
of our board of directors at any given annual meeting, it may entrench management and discourage unsolicited stockholder proposals
that may be in the best interests of stockholders. Moreover, our board of directors has the ability to designate the terms of
and issue new series of preferred stock.
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.
Because we must furnish our stockholders with target
business financial statements prepared in accordance with U.S. generally accepted accounting principles or international financial
reporting standards, we will not be able to complete a business combination with prospective target businesses unless their financial
statements are prepared in accordance with U.S. generally accepted accounting principles.
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. 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. We will include the same financial statement disclosure in connection with any tender offer documents
we use, whether or not they are required under the tender offer rules. Additionally, to the extent we furnish our stockholders
with financial statements prepared in accordance with IFRS, such financial statements will need to be audited in accordance with
U.S. GAAP at the time of the consummation of the business combination. These financial statement requirements may limit the pool
of potential target businesses we may acquire.
A market for our securities may not develop, which would
adversely affect the liquidity and price of our securities.
The price of our securities may vary significantly due to one
or more potential business combinations and general market or economic conditions. Furthermore, an active trading market for our
securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market
can be established and sustained.
Changes in laws or regulations, or a failure to comply
with any laws and regulations, may adversely affect our business, investments 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 and results of operations.
An investment in our securities may involve adverse U.S.
federal income tax consequences.
An investment in our securities may involve adverse U.S. federal
income tax consequences. For instance:
|
●
|
because there are no authorities that directly address
instruments similar to the units we are issuing in our initial public offering, the allocation an investor makes with respect
to the purchase price of the unit among the share of Class A common stock, right and warrant included in the units could be challenged
by the IRS or the courts.
|
|
●
|
if we make distributions on our common stock, such
distributions generally will be treated as dividends for U.S. federal income tax purposes to the extent of our current or accumulated
earnings and profits. The ability of a holder to seek conversion of their shares may be viewed as a position with respect to substantially
similar or related property which diminishes your risk of loss and thereby affects your ability to satisfy the holding period
requirements for the dividends received deduction or the preferential tax rate on qualified dividend income with respect to the
time period prior to the approval of an initial business combination.
|
|
●
|
our warrants may be exercised on a cashless basis in
certain situations as described herein. Although there is no direct legal authority as to the U.S. federal income tax treatment
of an exercise of a warrant on a cashless basis, we intend to take the position that such exercise will not be taxable, either
because the exercise is not a gain realization event or because it qualifies as a tax-free recapitalization. In the former case,
the holding period of the common stock should commence on the day after the warrant is exercised. In the latter case, the holding
period of the common stock would include the holding period of the exercised warrants. However, our position is not binding on
the IRS and the IRS may treat a cashless exercise of a warrant as a taxable exchange.
|
|
●
|
any capital gain or loss you realize on a sale or other
disposition of our common stock will generally be long-term capital gain or loss if your holding period for the common stock is
more than one year. However, the conversion feature of the common stock could affect your ability to satisfy the holding period
requirements for the long-term capital gain tax rate with respect to the time period prior to the approval of an initial business
combination.
|
We may be subject to an increased rate of tax on our
income if we are treated as a personal holding company.
Depending on the date and size of our initial business combination,
it is possible that we could be treated as a “personal holding company” for U.S. federal income tax purposes. A U.S.
corporation generally will be classified as a personal holding company for U.S. federal income tax purposes in a given taxable
year if more than 50% of its ownership (by value) is concentrated, within a certain period of time, in five or fewer individuals
(without regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain
tax-exempt organizations, pension funds, and charitable trusts), and at least 60% of its income is comprised of certain passive
items.
There may be tax consequences to our business combination
that may adversely affect us.
While we expect to undertake any merger or acquisition so as
to minimize taxes both to the acquired business and/or asset and us, such business combination might not meet the statutory
requirements of a tax-free reorganization, or the parties might not obtain the intended tax-free treatment upon a transfer of
shares or assets. A non-qualifying reorganization could result in the imposition of substantial taxes.
Our amended and restated certificate of incorporation
provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum
for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us or our directors, officers, employees or stockholders.
Our amended and restated certificate of incorporation requires,
to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees
for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and,
if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such
stockholder’s counsel. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock
shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.
This choice of forum provision may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other
employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the
choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our
business, operating results and financial condition.
There are risks related to the technology industry to
which we may be subject.
Business combinations with companies with operations in the
technology industry entail special considerations and risks. If we are successful in completing a business combination with a
target business with operations in the technology industry, we will be subject to, and possibly adversely affected by, the following
risks:
|
●
|
if we do not develop successful new products or improve
existing ones, our business will suffer;
|
|
●
|
we may invest in new lines of business that could fail
to attract or retain users or generate revenue;
|
|
●
|
we will face significant competition and if we are
not able to maintain or improve our market share, our business could suffer;
|
|
●
|
the loss of one or more of our key personnel, or our
failure to attract and retain other highly qualified personnel in the future, could seriously harm our business;
|
|
●
|
if our security is compromised or if our platform is
subjected to attacks that frustrate or thwart our users’ ability to access our products and services, our users, advertisers,
and partners may cut back on or stop using our products and services altogether, which could seriously harm our business;
|
|
●
|
mobile malware, viruses, hacking and phishing attacks,
spamming, and improper or illegal use of our products could seriously harm our business and reputation;
|
|
●
|
if we are unable to successfully grow our user base
and further monetize our products, our business will suffer;
|
|
●
|
if we are unable to protect our intellectual property,
the value of our brand and other intangible assets may be diminished, and our business may be seriously harmed;
|
|
●
|
we may be subject to regulatory investigations and
proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a
way that could seriously harm our business; and
|
|
●
|
components used in our products may fail as a result
of a manufacturing, design, or other defect over which we have no control, and render our devices inoperable.
|
Any of the foregoing could have an adverse impact on our operations
following a business combination. However, our efforts in identifying prospective target businesses will not be limited to the
technology sector. Accordingly, if we acquire a target business in another industry, these risks will likely not affect us and
we will be subject to other risks attendant with the specific industry in which we operate or target business which we acquire,
none of which can be presently ascertained.