Introduction
We are a blank check company formed for the purpose
of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination
with one or more operating businesses. We have neither engaged in any operations nor generated any operating revenue to date. Based on
our business activities, the Company is a “shell company” as defined under the Exchange Act because we have no operations
and nominal assets consisting almost entirely of cash.
Our founder, Michael Klein, is also the founder
and managing partner of M. Klein and Company, which he founded in 2012. M. Klein and Company is a global strategic advisory firm that
provides its clients a variety of advice tailored to their objectives. M. Klein and Company has established an entity within the firm,
Archimedes Advisors, which will invest in our sponsor and which consists of operating partners (“operating partners”) who
will assist Mr. Klein in sourcing potential acquisition targets, and creating long-term value in the business combination for us.
M. Klein and Company’s operating partners are comprised of former senior operating executives of leading S&P 500 companies
across multiple sectors and industries, including consumer, industrial, materials, energy, mining, chemicals, finance, data, software,
enterprise technology, and media.
Our
executive offices are located at 640 Fifth Avenue, 12th Floor, New York, NY 10019 and our telephone number is (212)
380-7500. Our corporate website address is www.churchillcapitalcorp.com. Our website and the information contained on, or that
can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this annual report.
You should not rely on any such information in making your decision whether to invest in our securities.
Company History
In May 2019, our sponsor purchased an aggregate
of 8,625,000 shares of Class B common stock (our “founder shares”) for an aggregate purchase price of $25,000, or approximately
$0.003 per share. Our Class B common stock will automatically convert into shares of Class A common stock, on a one-for-one
basis, upon the completion of a business combination. On June 7, 2019, we effected a stock dividend at one-third of one share of
Class B common stock for each outstanding share of Class B common stock, resulting in an aggregate of 11,500,000 founder shares
outstanding. On June 26, 2019, we effected a further stock dividend of one-half of a share of Class B common stock for each
outstanding share of Class B common stock, resulting in our sponsor holding an aggregate of 17,250,000 founder Shares. The number
of founder shares issued was based on the expectation that the founder shares would represent 20% of the outstanding shares of our Class A
common stock and our Class B common stock (collectively, our “common stock’) upon completion of the initial public offering
(the “IPO”).
On July 1, 2019, we completed our IPO of
69,000,000 units at a price of $10.00 per unit (the “units”), generating gross proceeds of $690,000,000. Each unit consists
of one of the Company’s shares of Class A common stock, par value $0.0001 per share, and one-third of one warrant. Each whole
warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share, subject to certain
adjustments.
Concurrently with the completion of the IPO, our
sponsor purchased an aggregate of 15,800,000 warrants (the “private placement warrants”) at a price of $1.00 per warrant,
or $15,800,000 in the aggregate. An aggregate of $690,000,000 from the proceeds of the IPO and the private placement warrants was placed
in a trust account (the “trust account”) such that the trust account held $690,000,000 at the time of closing of the IPO.
Each whole private placement warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50
per share, subject to certain adjustments.
On July 23, 2019, we announced that, commencing
July 26, 2019, holders of the 69,000,000 units sold in the IPO may elect to separately trade the shares of Class A common stock
and the warrants included in the units. Those units not separated continued to trade on the New York Stock Exchange (the “NYSE”)
under the symbol “CCX.U” and the shares of Class A common stock and warrants that were separated trade under the symbols
“CCX” and “CCX WS,” respectively.
Recent Developments
Skillsoft Merger Agreement
On October 12, 2020, we entered into an Agreement
and Plan of Merger (the “Skillsoft Merger Agreement”) with Software Luxembourg Holding S.A., a public limited liability company
(société anonyme) incorporated and organized under the laws of the Grand Duchy of Luxembourg (“Skillsoft”).
Pursuant to the terms of the Skillsoft Merger
Agreement, a business combination between Churchill and Skillsoft will be effected through the merger of Skillsoft with and into Churchill,
with Churchill surviving as the surviving company (the “Skillsoft Merger”). At the effective time of the Skillsoft Merger
(the “Effective Time”), (a) each Class A share of Skillsoft, with nominal value of $0.01 per share (“Skillsoft
Class A Shares”), outstanding immediately prior to the Effective Time, will be automatically canceled and Churchill will issue
as consideration therefor (i) such number of shares of Churchill’s Class A common stock, par value $0.0001 per share
(the “Churchill Class A Common Stock”) equal to the Class A First Lien Exchange Ratio (as defined in the Skillsoft
Merger Agreement), and (ii) Churchill’s Class C common stock, par value $0.0001 per share (the “Churchill Class C
Common Stock”), equal to the Class C Exchange Ratio (as defined in the Skillsoft Merger Agreement), and (b) each Class B
share of Skillsoft, with nominal value of $0.01 per share (“Skillsoft Class B Shares”), will be automatically canceled
and Churchill will issue as consideration therefor such number of shares of Churchill Class A common stock equal to the Per Class B
Share Merger Consideration (as defined in the Skillsoft Merger Agreement). Pursuant to the terms of the Skillsoft Merger Agreement, Churchill
is required to use commercially reasonable efforts to cause the Churchill Class A Common Stock to be issued in connection with the
transactions contemplated by the Skillsoft Merger Agreement (the “Skillsoft Transactions”) to be listed on the New York Stock
Exchange (“NYSE”) prior to the closing of the Skillsoft Merger (the “Skillsoft Closing”). Immediately following
the Effective Time, Churchill will redeem all of the shares of Class C Common Stock issued to the holders of Skillsoft Class A
Shares for an aggregate redemption price of (i) $505,000,000 in cash and (ii) indebtedness under the Existing Second Out Credit
Agreement (as defined in the Skillsoft Merger Agreement), as amended by the Existing Second Out Credit Agreement Amendment (as defined
in the Skillsoft Merger Agreement), in the aggregate principal amount equal to the sum of $20,000,000 to be issued by the Surviving Corporation
(as defined in the Skillsoft Merger Agreement) or one of its subsidiaries, in each case, pro rata among the holders of Churchill Class C
Common Stock issued in connection with the Skillsoft Merger.
The consummation of the proposed Skillsoft Transactions
is subject to the receipt of the requisite approval of (i) the stockholders of Churchill (the “Churchill Stockholder Approval”)
and (ii) the shareholders of Skillsoft (the “Skillsoft Shareholder Approval”) and the fulfillment of certain other conditions.
Global Knowledge Merger Agreement
Concurrently with its entry into the Skillsoft
Merger Agreement, Churchill also entered into an Agreement and Plan of Merger (the “Global Knowledge Merger Agreement”) by
and among Churchill, Magnet Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Churchill (“Merger Sub”),
and Albert DE Holdings Inc., a Delaware corporation owned by investment funds affiliated with Rhône Capital L.L.C.
Pursuant to the Global Knowledge Merger Agreement,
Merger Sub will merge with and into Global Knowledge, with Global Knowledge surviving the transaction as a wholly-owned subsidiary of
Churchill (the “Global Knowledge Merger”). At the effective time (the “Global Knowledge Effective Time”) of the
Global Knowledge Merger, as consideration for the Global Knowledge Merger, 100% of the issued and outstanding equity interests of Global
Knowledge will be converted, in the aggregate, into the right to receive warrants, each of which shall entitle the holders thereof to
purchase one share of Class A Churchill Common Stock at an exercise price of $11.50 per share. The aggregate number of warrants
to be received by the equity holders of Global Knowledge as consideration in the Global Knowledge Merger will be 5,000,000. The warrants
to be issued to the equity holders of Global Knowledge will be non-redeemable and otherwise substantially similar to the private placement
warrants issued to the Churchill Sponsor in connection with Churchill’s initial public offering.
The consummation of the proposed Global Knowledge
Merger (the “Global Knowledge Closing”) is subject to the consummation of the Skillsoft Merger, among other conditions contained
in the Global Knowledge Merger Agreement.
Restructuring Support Agreement
On October 12, 2020, Global Knowledge entered
into a Restructuring Support Agreement (the “Global Knowledge RSA”) with (i) 100% of its lenders under that certain
Amended and Restated First Lien Credit and Guaranty Agreement, dated as of January 30, 2015, as amended from time to time, by and
among, inter alios, GK Holdings, as borrower, the guarantors from time to time party thereto, the lenders from time to time party thereto
and Credit Suisse, acting in its capacity as administrative agent and collateral agent (the “First Lien Credit Agreement,”
and the lenders thereto, the “First Lien Lenders”); and (ii) 100% of its lenders under that certain Amended and Restated
Second Lien Credit and Guaranty Agreement, dated as of January 30, 2015, as amended from time to time, by and among, inter alios,
GK Holdings, as borrower, the guarantors from time to time party thereto, the lenders from time to time party thereto and Wilmington
Trust, acting in its capacity as administrative agent and collateral agent (the “Second Lien Credit Agreement,” and there
lenders thereto, the “Second Lien Lenders,” together with the First Lien Lenders, the “Secured Lenders”). The
Global Knowledge RSA contemplates an out-of-court restructuring (the “Restructuring”) that provides meaningful recoveries,
funded by Churchill, to all Secured Lenders. Churchill is a third-party beneficiary of the Global Knowledge RSA with respect to enforcement
of certain specific provisions and its explicit rights under the Global Knowledge RSA and not a direct party.
On the Out-of-Court Transaction Effective Date
(as defined in the Global Knowledge RSA), which shall occur concurrently with the Global Knowledge Closing (and only upon such closing),
(a) the First Lien Lenders will receive (i) $143.5 million of cash and (ii) $50 million in aggregate principal amount
of new term loans (or an equivalent amount of cash in lieu thereof), and (b) the Second Lien Lenders will receive (i) $12.5
million of cash and (ii) $20 million in aggregate principal amount of new term loans (or an equivalent amount of cash in lieu thereof)
(both (a) and (b) as set forth in the term sheet attached to the Global Knowledge RSA (the “Restructuring Term Sheet”)).
On the Out-of-Court Transaction Effective Date,
which shall occur concurrently with the Global Knowledge Closing (and only upon such closing), each holder of a claim arising under that
certain Credit and Guaranty Agreement, dated as of November 26, 2019, by and among, inter alios, Global Knowledge Holdings B.V.
and Global Knowledge Network (Canada), Inc., as borrowers, the guarantors from time to time party thereto, the lenders from time
to time party thereto and Blue Torch Finance LLC, in its capacity as administrative agent, will be paid in cash, in full (including all
accrued and unpaid interest through the date of repayment), as set forth in the Restructuring Term Sheet.
Under the Global Knowledge RSA, the Secured Lenders
have agreed, subject to certain terms and conditions, to support the Restructuring of the existing debt of, existing equity interests
in, and certain other obligations of Global Knowledge, on the terms set forth in the Global Knowledge RSA.
In accordance with the Global Knowledge RSA, the
Secured Lenders agreed, among other things, to: (i) support the Restructuring as contemplated by the Global Knowledge RSA and the
definitive documents governing the Restructuring; (ii) not take any action, directly or indirectly, to interfere with acceptance,
implementation or consummation of the Restructuring; and (iii) not transfer their claims under the First Lien Credit Agreement and
Second Lien Credit Agreement, as applicable, except with respect to limited and customary exceptions, including requiring any transferee
to either already be bound or become bound by the terms of the Global Knowledge RSA.
In accordance with the Global Knowledge RSA, Global
Knowledge agreed, among other things, to: (i) support and take all steps reasonably necessary and desirable to consummate the Restructuring
in accordance with the Global Knowledge RSA; and (ii) not, directly or indirectly, object to, delay, impede, or take any other action
to interfere with acceptance, implementation or consummation of the Restructuring.
Subscription Agreements
Prosus Agreements
On October 12, 2020, in connection with the
execution of the Skillsoft Merger Agreement, MIH Ventures B.V. (“Prosus”) entered into a subscription agreement (the “Prosus
Agreement”) with Churchill and the Sponsor, pursuant to which Prosus subscribed for 10,000,000 newly-issued shares of Churchill
Class A common stock, at a purchase price of $10.00 per share, to be issued at the closing (the “First Step Prosus Investment”),
and Churchill granted Prosus a 30-day option (the “Option”) to subscribe for up to the lesser of (i) an additional 40,000,000
newly-issued shares of Churchill Class A common stock, at a purchase price of $10.00 per share or (ii) such additional number
of shares that would result in Prosus beneficially owning shares of Class A common stock representing 35% of the issued and outstanding
shares of Churchill Class A common stock on a fully-diluted and as-converted basis (excluding any warrants issued to Prosus pursuant
to the Prosus Agreement) immediately following the consummation of the Skillsoft Merger (the “Prosus Maximum Ownership Amount”)
(the “Second Step Prosus Investment” and together with the First Step Prosus Investment, the “Prosus PIPE Investment”).
On November 10, 2020, Prosus exercised the Option to subscribe for an additional 40,000,000 shares of Churchill Class A common
stock in the Second Step Prosus Investment (or such number of shares as may be reduced pursuant to the Prosus Agreement). Churchill and
Prosus also agreed that following the consummation of the Skillsoft Merger, to the extent that following the Prosus Second Step Investment,
Prosus beneficially owns less than the Prosus Maximum Ownership Amount, Prosus will have the concurrent right to purchase a number of
additional shares of Churchill Class A common stock, at $10.00 per share, that would result in Prosus maintaining beneficial ownership
of at least, but no more than, the Prosus Maximum Ownership Amount (the “Prosus Top-Up Right”).
As part of the Prosus Agreement, Prosus and the
Company agreed to a strategic support agreement, pursuant to which Prosus will provide certain business development and investor relations
support services in the event it exercises the Option and beneficially owns at least 20% of the outstanding Churchill Class A common
stock following closing of the Prosus PIPE Investment on a fully-diluted and as-converted basis. If Prosus exercises the Option and consummates
the Prosus PIPE Investment, it will also nominate an individual to serve as the chairman of Churchill’s Board. Pursuant to the
Prosus Agreement, in connection with Prosus’s exercise of the Option and following the consummation of the Second Step Prosus Investment,
Churchill will issue to Prosus warrants to purchase a number of shares of Churchill Class A common stock equal to one-third of the
number of shares of Churchill Class A common stock purchased in the Prosus PIPE Investment (the “Prosus Warrants”).
The Prosus Warrants will have terms substantively identical to those included in the units offered in Churchill’s IPO.
The issuance of the shares of Churchill Class A
common stock pursuant to the Prosus Agreement are subject to approval by Churchill’s stockholders. The obligations to consummate
the Prosus PIPE Investment are conditioned upon, among other things, customary closing conditions, expiration or termination of the waiting
period under the HSR Act, satisfaction of the closing conditions under the Skillsoft Merger Agreement, the consummation of the Skillsoft
Merger and, with respect to the Second Step Prosus Investment, (i) a written notification issued by the Committee on Foreign Investment
in the United States (“CFIUS”) that it has determined that the Prosus PIPE Investment is not a “covered transaction”
and not subject to review by CFIUS under applicable law, (ii) a written notification issued by CFIUS that it has concluded all action
under Section 721 of the Defense Production Act of 1950 (codified at 50 U.S.C. § 4565) and all rules and regulations promulgated
thereunder, including those codified at 31 C.F.R. Parts 800 and 801 (the “DPA”) and determined that there are no unresolved
national security concerns with respect to the Prosus PIPE Investment or (iii) if CFIUS has sent a report to the President of the
United States (the “President”) requesting the President’s decision and either (a) the President shall have notified
the parties hereto of his determination not to use his powers pursuant to the DPA to suspend or prohibit the consummation of the Subscription
or (B) the fifteen (15) days allotted for presidential action under the DPA shall have passed without any determination by the President.
Prosus received notice of early termination of the waiting period under the HSR Act in respect of the Prosus PIPE Investment on December 15,
2020. Due to the CFIUS condition, among other closing conditions, there can be no assurance that the Second Step Prosus Investment will
be consummated at the closing of the Merger or thereafter. The consummation of the Prosus PIPE Investment is not a condition to the closing
of the Merger.
SuRo Subscription Agreement
On October 14, 2020, in connection with the
execution of the Skillsoft Merger Agreement, Churchill entered into a subscription agreement with SuRo Capital Corp. (“SuRo”)
pursuant to which SuRo subscribed for 1,000,000 newly-issued shares of Churchill Class A common stock, at a purchase price of $10.00
per share, to be issued at the closing of the Merger (the “SuRo Subscription Agreement”). The obligations to consummate the
transactions contemplated by the SuRo Subscription Agreement are conditioned upon, among other things, customary closing conditions and
the consummation of the Skillsoft Merger. The agreement is based on a stated purchase price for a fixed number of shares, therefore the
agreement is equity classified.
Lodbrok Subscription Agreement
On October 13, 2020, in connection with the
execution of the Global Knowledge Merger Agreement, Churchill entered into a subscription agreement with Lodbrok Capital LLP (“Lodbrok”)
pursuant to which Lodbrok subscribed for 2,000,000 newly-issued shares of Churchill Class A common stock, at a purchase price of
$10.00 per share, to be issued at the closing of the Global Knowledge Merger (the “Lodbrok Subscription Agreement”). The obligations
to consummate the transactions contemplated by the Lodbrok Subscription Agreement are conditioned upon, among other things, customary
closing conditions and the consummation of the Global Knowledge Merger. The agreement is based on a stated purchase price for a fixed
number of shares, therefore the agreement is equity classified.
Rhône Subscription Agreement
On October 12, 2020, in connection with the execution
of the Skillsoft Merger Agreement, Churchill entered into a subscription agreement with Albert UK Holdings 1 Limited, a company owned
by investment funds affiliated with Rhône Capital L.L.C. (“Rhône”), pursuant to which Rhône has agreed to
subscribe for 5,000,000 newly-issued shares of Churchill Class A Common Stock at a purchase price of $10.00 per share at be issued at
the closing of the Global Knowledge Merger (the “Rhône Subscription Agreement”). The obligations to consummate the transactions
contemplated by the Rhône Subscription Agreement are conditioned upon, among other things, customary closing conditions and the
consummation of the Global Knowledge Merger. The agreement is based on a stated purchase price for a fixed number of shares, therefore
the agreement is equity classified.
CEO Employment Agreement
On October 13, 2020, Churchill entered into
an employment agreement with Jeffrey Tarr (the “Employment Agreement”) which will become effective upon the closing of the
Merger, and pursuant to which Mr. Tarr will serve as Churchill’s chief executive officer and a member of Churchill’s
Board. The Employment Agreement provides for a two-year initial term, which will be automatically extended for successive one-year periods
unless either party provides at least six months’ notice of non-renewal. Pursuant to the Employment Agreement, Mr. Tarr will
receive a base salary of $750,000, be eligible to earn an annual cash incentive bonus with a target and maximum equal to 100% and 200%
of base salary, respectively, and be eligible to participate in health, welfare and other benefits consistent with those offered to other
senior executives of Churchill. The Employment Agreement also provides that within 30 days following the closing of the Merger, Mr. Tarr
will receive (i) an award of 1,000,000 options (the “Tarr Options”), each having an exercise price equal to the fair
market value of a share of Churchill Class A common stock on the date of grant, which vest ratably on a quarterly basis over a four-year
period commencing on the closing of the Merger and (ii) an award of 2,000,000 restricted stock units (the “Tarr RSUs) which
will vest ratably on a quarterly basis over a three year period commencing on the closing of the Merger, in each case, subject to Mr. Tarr’s
continued employment through the applicable vesting date, provided, that, upon a change in control or upon a termination due to death
or disability, the Tarr Options and the Tarr RSUs shall become fully vested as of the date of such change in control or qualifying termination,
as applicable, and provided, further, that the Tarr Options and Tarr RSUs shall be subject to continued vesting upon certain other termination
events as described below. The Employment Agreement further provides that upon a termination by Mr. Tarr for good reason or by Churchill
without cause (which shall include a termination due to Churchill’s nonrenewal of the employment term), Mr. Tarr will be entitled
to receive, in exchange for a release of claims against Churchill and subject to Mr. Tarr’s continued compliance with the
restrictive covenants set forth in the Employment Agreement, severance and benefits consisting of: (i) a payment equal to two times
the sum of (A) the base salary and (B) target annual cash incentive for the year in which termination occurs, payable in substantially
equal installments over the twenty-four month period following the date of termination in accordance with Churchill’s normal payroll
practices, (ii) a bonus payment equal to the annual cash incentive for the year in which termination occurs based on actual performance
and prorated to reflect the period of the fiscal year that has lapsed as of the date of termination, payable at the same time when bonuses
are ordinarily paid by Churchill and (iii) continued vesting of Mr. Tarr’s then outstanding equity awards for the twelve-month
period following the date of termination. The Employment Agreement contains restrictive covenants including: (i) a perpetual confidentiality
covenant, (ii) a nonsolicitation of employees and customers covenant, a non-hire of employees covenant and a non-competition covenant,
each of which applies during the employment term and for twelve months thereafter and (iii) a mutual non-disparagement covenant
that applies during the employment term and for five years thereafter.
Concurrent with the entry into the Employment
Agreement, Churchill also entered into a securities assignment agreement with Mr. Tarr on October 12, 2020 (the “Tarr
Warrant Agreement”) pursuant to which the Sponsor will assign to Mr. Tarr (i) 500,000 private placement warrants effective
on, and subject to, the closing of the Merger, at a price of $0.000001 per warrant and (ii) 500,000 private placement warrants effective
on, and subject to, the closing of the Global Knowledge Merger, at a price of $0.000001 per warrant. Each private placement warrant entitles
Mr. Tarr to purchase one share of Churchill Class A common stock at an exercise price of $11.50 per share and the private placement
warrants are subject to the lock-up provisions included in the Sponsor Agreement. In the event Mr. Tarr does not commence employment
on the Start Date (as defined in the Employment Agreement) pursuant to the Employment Agreement, the Tarr Warrant Agreement immediately
becomes null and void ab initio and will be of no further force and effect.
Additional Information Regarding the Proposed Initial Business
Combination and Churchill
Churchill has filed a registration statement on
Form S-4 with the SEC, which includes a proxy statement of Churchill and a prospectus of Churchill, and Churchill will file other
documents regarding the Skillsoft Merger the Global Knowledge Merger and the related proposed transaction with the SEC. A definitive
proxy statement/prospectus will also be sent to the stockholders of Churchill and Skillsoft, seeking any required stockholder approvals.
We urge you to carefully read the entire registration statement and proxy statement/prospectus and any other relevant documents filed
with the SEC, including any amendments or supplements to these documents, because they contain important information about the proposed
transactions, including detailed descriptions of the Skillsoft Merger and the Global Knowledge Merger and related transaction and a discussion
of historical information and risks relating to the Skillsoft and Global Knowledge businesses. The documents filed by Churchill with
the SEC may be obtained free of charge at the SEC’s website at www.sec.gov.
Other than as specifically discussed, this report
does not assume the closing of the proposed transactions described above.
Our units, Class A common stock 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. The SEC’s internet site (http://www.sec.gov) contains such reports, proxy and information
statements and other information regarding issuers that file electronically with the SEC. In accordance with the requirements of the
Exchange Act, our annual reports contain financial statements audited and reported on by our independent registered public accounting
firm.
Facilities
We currently maintain our executive offices at
640 Fifth Avenue, 12th Floor, New York, NY 10019. The cost for this space is included in the $20,000 per month fee that we will pay an
affiliate of our sponsor for office space, administrative and support services.
Employees
We currently have two officers and do not intend
to have any full-time employees prior to the completion of our initial business combination. Members of our management team are not obligated
to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs
until we have completed our initial business combination. The amount of time that any such person will devote in any time period to our
company will vary based on whether a target business has been selected for our initial business combination and the current stage of
the business combination process.
Emerging Growth Company
We are an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of
certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth
companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404
of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,
and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any
golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a
less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act
also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can
delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take
advantage of the benefits of this extended transition period.
We will remain an emerging growth company until
the earlier of: (1) the last day of the fiscal year (a) following July 1, 2024, (b) in which we have total annual
gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value
of our common stock that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal
quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt during the prior three-year period.
References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
An investment in our securities involves a
high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in
this annual report, the prospectus relating to our IPO and the registration statement relating to our proposed initial business combination
before making a decision to invest in our securities. See “Item 1 Business - Additional Information Regarding the Proposed Initial
Business Combination and Churchill.” If any of the following events occur, our business, financial condition and operating results
may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part
of your investment.
Summary of Risk Factors
Our business is subject to numerous risks and
uncertainties. These risks include, but are not limited to, risks associated with:
| |
· |
being a newly incorporated company
with no operating history and no revenues; |
| |
· |
our ability to complete our initial
business combination, including risks arising from the uncertainty resulting from the COVID-19 pandemic; |
| |
· |
our public shareholders’ ability
to exercise redemption rights; |
| |
· |
the requirement that we complete
our initial business combination within the completion window; |
| |
· |
the possibility that NYSE may delist
our securities from trading on its exchange; |
| |
· |
being declared an investment company
under the Investment Company Act; |
| |
· |
complying with changing laws and
regulations; |
| |
· |
the performance of the prospective
target business or businesses; |
| |
· |
our ability to select an appropriate
target business or businesses; |
| |
· |
the pool of prospective target businesses
available to us and the ability of our officers and directors |
| |
· |
to generate a number of potential
business combination opportunities; |
| |
· |
the issuance of additional Class A
common stock in connection with a business combination that may dilute the interest of our shareholders; |
| |
· |
the incentives to our sponsor, officers
and directors to complete a business combination to avoid losing their entire investment in us if our initial business combination
is not completed; |
| |
· |
our officers and directors allocating
their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business
combination; |
| |
· |
our success in retaining or recruiting,
or changes required in, our officers, key employees or directors following our initial business combination; |
| |
· |
our ability to obtain additional
financing to complete our initial business combination; |
| |
· |
our ability to amend the terms of
warrants in a manner that may be adverse to the holders of public warrants; |
| |
· |
our ability to redeem your unexpired
warrants prior to their exercise; |
| |
· |
our public securities’ potential
liquidity and trading; and |
| |
· |
provisions in our amended and restated
certificate of incorporation and Delaware law that may have the effect of inhibiting a takeover of us and discouraging lawsuits against
our directors and officers. |
Risks Relating to Our Search for, and Consummation of or Inability
to Consummate, an Initial Business Combination
Our public stockholders may not be afforded an opportunity to vote
on our proposed initial business combination, and even if we hold a vote, holders of our founder shares will participate in such vote,
which means we may complete our initial business combination even though a majority of our public stockholders do not support such a
combination.
We may not hold a stockholder vote to approve
our initial business combination unless the business combination would require stockholder approval under applicable law or stock exchange
listing requirements or if we decide to hold a stockholder vote for business or other reasons. For instance, the NYSE rules currently
allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we
were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore,
if we were structuring a business combination that required us to issue more than 20% of our outstanding shares, we would seek stockholder
approval of such business combination. However, except as required by applicable law or stock exchange rules, the decision as to whether
we will seek stockholder approval of a proposed business combination or 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. Even if we seek stockholder approval,
the holders of our founder shares will participate in the vote on such approval. Accordingly, we may consummate our initial business
combination even if holders of a majority of our outstanding public shares do not approve of the business combination we consummate.
Please see “Proposed Business — Stockholders may not have the ability to approve our initial business combination”
for additional information.
If we seek stockholder approval of our initial business combination,
our sponsor, officers and directors have agreed to vote in favor of such initial business combination, regardless of how our public stockholders
vote.
Our initial stockholders, officers and directors
have agreed (and their permitted transferees will agree) to vote any founder shares and any public shares held by them in favor of our
initial business combination. As a result, in addition to our initial stockholders’ founder shares, we would need 25,875,001, or
37.5%, of the 69,000,000 public shares sold in the IPO to be voted in favor of a transaction (assuming all issued and outstanding shares
are voted) in order to have such initial business combination approved. We expect that our initial stockholders and their permitted transferees
will own at least 20% of our outstanding shares of common stock at the time of any such stockholder vote. 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 initial stockholders and their permitted transferees agreed to vote their founder shares in accordance with the majority
of the votes cast by our public stockholders.
Your only opportunity to affect the investment decision regarding
a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek
stockholder approval of such business combination.
At the time of your investment in us, you will
not be provided with an opportunity to evaluate the specific merits or risks of any target businesses. Additionally, since our board
of directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right or
opportunity to vote on the business combination. Accordingly, if we do not seek stockholder approval, your only opportunity to affect
the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period
of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which
we describe our initial business combination.
The ability of our public stockholders to redeem their shares for
cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter
into a business combination with a target.
We may seek to enter into a business combination
transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount
of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as
a result, would not be able to proceed with the business combination. The amount of the deferred underwriting commissions payable to
the underwriters will not be adjusted for any shares that are redeemed in connection with a business combination and such amount of deferred
underwriting discount is not available for us to use as consideration in an initial business combination. Furthermore, in no event will
we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we do not then
become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be
contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption
requests would cause our net tangible assets to be less than $5,000,001 or such greater amount necessary to satisfy a closing condition
as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate
business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a business combination
transaction with us. If we are able to consummate an initial business combination, the per-share value of shares held by non-redeeming
stockholders will reflect our obligation to pay the deferred underwriting commissions.
The ability of our public stockholders to exercise redemption rights
with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital
structure.
At the time we enter into an agreement for our
initial business combination, we will not know how many stockholders may exercise their redemption rights and, therefore, we will need
to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial
business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price or requires us
to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements
or arrange for third-party financing. In addition, if a larger number of shares is submitted for redemption than we initially expected,
we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing.
Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable
levels. Furthermore, this dilution would increase to the extent that the anti-dilution provision of the Class B common stock results
in the issuance of shares of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common
stock at the time of our initial business combination. In addition, the amount of deferred underwriting commissions payable to the underwriters
is not required to be adjusted for any shares that are redeemed in connection with an initial business combination. The above considerations
may limit our ability to complete the most desirable business combination available to us or optimize our capital structure.
The ability of our public stockholders to exercise redemption rights
with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful
and that you would have to wait for liquidation in order to redeem your stock.
If our initial business combination agreement
requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash
at closing, the probability that our initial business combination would be unsuccessful increases. If our initial business combination
is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in
need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a
discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment
or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the
open market.
The requirement that we complete our initial business combination
within the completion window may give potential target businesses leverage over us in negotiating a business combination and may limit
the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution
deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter
into negotiations concerning a business combination will be aware that we must complete our initial business combination within the completion
window.
Consequently, such target business may obtain
leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that
particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase
as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into
our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
We may not be able to complete our initial business combination
within the completion window, in which case we would cease all operations except for the purpose of winding up and we would redeem our
public shares and liquidate, in which case our public stockholders may receive only $10.00 per share, or less than such amount in certain
circumstances, and our warrants will expire worthless.
Our sponsor, officers and directors have agreed
that we must complete our initial business combination within the completion window. We may not be able to find a suitable target business
and complete our initial business combination within such time period. Our ability to complete our initial business combination may be
negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein.
If we have not completed our initial business
combination within such time period, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly
as reasonably possible but not more than 10 business days thereafter, redeem the public shares, at a per share price, payable in cash,
equal to the aggregate amount then on deposit in the trust account, including interest (net of permitted withdrawals and up to $100,000
of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject
to applicable law; and (3) 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 case, our public stockholders may receive only $10.00 per
share, or less than $10.00 per share, on the redemption of their shares, and our warrants will expire worthless. Please see “If
third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received
by stockholders may be less than $10.00 per share” and other risk factors herein.
If the net proceeds of the IPO and the sale of
the private placement warrants not being held in the trust account are insufficient, it could limit the amount available to fund our
search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor
or management team to fund our search, to pay our taxes and to complete our initial business combination. If we are unable to obtain
such loans, we may be unable to complete our initial business combination.
If we are required to seek additional capital,
we would need to borrow funds from our sponsor, management team or other third parties to operate or may be forced to liquidate. Neither
our sponsor, members of our management team nor any of their respective affiliates is under any obligation or other duty to loan funds
to us in such circumstances. Any such loans would be repaid only from funds held outside the trust account or from funds released to
us upon completion of our initial business combination. If we are unable to complete our initial business combination because we do not
have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In such case, our public
stockholders may receive only $10.00 per share, or less in certain circumstances, and our warrants will expire worthless.
The securities in which we invest the funds held in the trust account
could bear a negative rate of interest, which could reduce the aggregate value of the assets held in the trust account such that the
per share redemption amount received by public stockholders may be less than your anticipated per share redemption amount.
The funds in the trust account will be invested
only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds that meet certain conditions under
Rule 2a-7 under the Investment Company Act and that invest only in direct U.S. government obligations. While short-term U.S. government
treasury bills currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central
banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has
not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable
to complete our initial business combination or make certain amendments to our amended and restated certificate of incorporation, our
public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income
not released to us, net of taxes payable. Negative interest rates could impact the per share redemption amount that may be received by
public stockholders.
If we seek stockholder approval of our initial business combination,
our sponsor, directors, officers, advisors or any of their respective affiliates may elect to purchase shares or warrants from the public,
which may influence a vote on a proposed business combination and reduce the public “float” of our common stock.
If we seek stockholder approval of our initial
business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer
rules, our sponsor, directors, officers, advisors or any of their respective affiliates may purchase public shares or public warrants
or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our
initial business combination, although they are under no obligation or other duty to do so. Such a purchase may include a contractual
acknowledgement that such public stockholder, although still the record holder of our shares is no longer the beneficial owner thereof
and therefore agrees not to exercise its redemption rights.
In the event that our sponsor, directors, officers,
advisors or any of their respective affiliates purchase public shares in privately negotiated transactions from public stockholders who
have already elected to exercise their redemption rights, such selling public stockholders would be required to revoke their prior elections
to redeem their shares. The price per share paid in any such transaction may be different than the amount per share a public stockholder
would receive if it elected to redeem its shares in connection with our initial business combination. The purpose of such purchases could
be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of
our initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net
worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise
not be met. The purpose of such purchases could be to vote such shares in favor of the business combination and thereby increase the
likelihood of obtaining stockholder approval of our initial business combination or to satisfy a closing condition in an agreement with
a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination,
where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce
the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection
with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination
that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the
Exchange Act to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public
“float” of our Class A common stock and the number of beneficial holders of our securities may be reduced, possibly
making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem
our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares,
such shares may not be redeemed.
We will comply with the tender offer rules or
proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance with
these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware
of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will furnish
to holders of our public shares in connection with our initial business combination will describe the various procedures that must be
complied with in order to validly tender or redeem public shares. For example, we may require our public stockholders seeking to exercise
their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates
to our transfer agent prior to the date set forth in the tender offer or proxy materials documents mailed to such holders, or up to two
business days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials,
or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these procedures,
its shares may not be redeemed. You will not have any rights or interests in funds from the trust account, except under certain limited
circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive
funds from the trust account only upon the earlier to occur of: (1) the completion of our initial business combination, and then
only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations
described herein; (2) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our
amended and restated certificate of incorporation to modify the substance or timing of our obligation to provide for the redemption of
our public shares in connection with an initial business combination or to redeem 100% of our public shares if we do not complete our
initial business combination within the completion window; and (3) the redemption of all of our public shares if we are unable to
complete our initial business combination within the completion window, subject to applicable law and as further described herein. In
addition, if we are unable to complete an initial business combination within the completion window for any reason, compliance with Delaware
law may require that we submit a plan of dissolution to our then-existing stockholders for approval prior to the distribution of the
proceeds held in our trust account. In that case, public stockholders may be forced to wait beyond the completion window before they
receive funds from our trust account. In no other circumstances will a public stockholder have any right or interest of any kind in the
trust account. Holders of warrants will not have any right to the proceeds held in the trust account with respect to the warrants. Accordingly,
to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
Because of our limited resources and the significant competition
for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable
to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain
circumstances, on our redemption of their stock, and our warrants will expire worthless.
We expect to encounter intense competition from
other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships),
other blank check companies and other entities, domestic and international, including, without limitation, M. Klein and Company and our
Strategic and Operating Partners, competing for the types of businesses we intend to acquire. Many of these individuals and entities
are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating
in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more
local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these
competitors. While we believe there will be numerous target businesses we could potentially acquire with the net proceeds of the IPO
and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that
are sizable will be limited by our available financial resources. Our sponsor, any of its affiliates or any of their respective clients
may make additional investments in us, although our sponsor and its affiliates have no obligation or other duty to do so.
This inherent competitive limitation gives others
an advantage in pursuing the acquisition of certain target businesses. Furthermore, in the event we seek stockholder approval of our
initial business combination and we are obligated to pay cash for public shares that are redeemed, it will potentially reduce the resources
available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully
negotiating and completing a business combination. If we are unable to complete our initial business combination, our public stockholders
may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants
will expire worthless.
If the funds available to us outside of the trust account are insufficient
to allow us to operate for at least the completion window, we may be unable to complete our initial business combination.
The funds available to us outside of the trust
account may not be sufficient to allow us to operate for at least the completion window, assuming that our initial business combination
is not completed during that time. We expect to incur significant costs in pursuit of our acquisition plans. However, our affiliates
are not obligated to make loans to us in the future, and we may not be able to raise additional financing from unaffiliated parties necessary
to fund our expenses. Any such event in the future may negatively impact the analysis regarding our ability to continue as a going concern
at such time.
We believe that the funds available to us outside
of the trust account, including permitted withdrawals and loans or additional investments from our sponsor, will be sufficient to allow
us to operate for at least the completion window; however, we cannot assure you that our estimate is accurate. Of the funds available
to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business.
We could also use a portion of the funds as a down payment or to fund a “no- shop” provision (a provision in letters of intent
or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies or investors
on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have
any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to receive exclusivity
from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might
not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to
complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain
circumstances, on the liquidation of our trust account and our warrants will expire worthless.
Subsequent to our completion of our initial business combination,
we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative
effect on our financial condition, results of operations and the price of our securities, which could cause you to lose some or all of
your investment.
Even if we conduct extensive due diligence on
a target business with which we combine, we cannot assure you that this diligence will identify all material issues that may be present
with a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence,
or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may
be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result
in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known
risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items
and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market
perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which
we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination
debt financing. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial
business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to
have a remedy for such reduction in value.
If third parties bring claims against us, the proceeds held in
the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share.
Our placing of funds in the trust account may
not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than
our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute
agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit
of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented
from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility
or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with
respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement
waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to
it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s
engagement would be significantly more beneficial to us than any alternative. Making such a request of potential target businesses may
make our acquisition proposal less attractive to them and, to the extent prospective target businesses refuse to execute such a waiver,
it may limit the field of potential target businesses that we might pursue. Examples of possible instances where we may engage a third
party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed
by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are
unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive
any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will
not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are unable to complete our initial
business combination within the completion window, or upon the exercise of a redemption right in connection with our initial business
combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within
the 10 years following redemption. Accordingly, the per share redemption amount received by public stockholders could be less than the
per share amount initially held in the trust account, due to claims of such creditors.
Our sponsor has agreed that it will be liable
to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered
or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the
amount of funds in the trust account to below: (1) $10.00 per public share; or (2) the actual amount per public share held
in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value
of the trust assets, in each case net of permitted withdrawals, except as to any claims by a third party that executed a waiver of any
and all rights to the monies held in the trust account (whether any such waiver is enforceable) and except as to any claims under our
indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. We have not independently
verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and we have not asked our sponsor to reserve for
such indemnification obligations. We have not asked our sponsor to reserve for such 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. In such event, we may not be able to complete our initial business combination, and you would receive
such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify
us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our independent directors may decide not to enforce the indemnification
obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public
stockholders.
In the event that the proceeds in the trust account
are reduced below the lesser of: (1) $10.00 per public share; or (2) the actual amount per share held in the trust account
as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets,
in each case net of permitted withdrawals, and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification
obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor
to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf
against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their
business judgment may choose not to do so in certain instances. For example, the cost of such legal action may be deemed by the independent
directors to be too high relative to the amount recoverable or the independent directors may determine that a favorable outcome is not
likely. 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, after we distribute the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a
bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their
fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.
If, after we distribute the proceeds in the trust
account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not
dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either
a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover
some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary
duty to our creditors and/or having acted in bad faith by paying public stockholders from the trust account prior to addressing the claims
of creditors, thereby exposing itself and us to claims of punitive damages.
If, before distributing the proceeds in the trust account to our
public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the
claims of creditors in such proceeding may have priority over the claims of our stockholders and the per share amount that would otherwise
be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust
account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not
dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims
deplete the trust account, the per share amount that would otherwise be received by our public stockholders in connection with our liquidation
would be reduced.
If we are deemed to be an investment company under the Investment
Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make
it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under
the Investment Company Act, our activities may be restricted, including, without limitation, restrictions on the nature of our investments,
and restrictions on the issuance of our securities, each of which may make it difficult for us to complete our business combination.
In addition, we may have imposed upon us burdensome requirements, including, without limitation, registration as an investment company;
adoption of a specific form of corporate structure; and reporting, record keeping, voting, proxy and disclosure requirements and other
rules and regulations.
In order not to be regulated as an investment
company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business
other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding
or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities
and cash items) on an unconsolidated basis. Our business will be to identify and complete a business combination and thereafter to operate
the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit
from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
We do not believe that our anticipated principal
activities will subject us to the Investment Company Act. The proceeds held in the trust account may be invested by the trustee only
in United States government treasury bills with a maturity of 180 days or less or in money market funds investing solely in United States
Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Because the investment of the proceeds
will be restricted to these instruments, we believe we will meet the requirements for the exemption provided in Rule 3a-1 promulgated
under the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory
burdens would require additional expenses for which we have not allotted funds and may hinder our ability to consummate a business combination.
If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share
on the liquidation of our trust account and our warrants will expire worthless.
Changes in laws or regulations, or a failure to comply with any
laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination,
and results of operations.
We are subject to laws and regulations enacted
by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements.
Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations
and their interpretation and application may also change from time to time and those changes could have a material adverse effect on
our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted
and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business
combination, and results of operations.
Because we are neither limited to evaluating target businesses
in a particular industry nor have we selected any specific target businesses with which to pursue our initial business combination, you
will be unable to ascertain the merits or risks of any particular target business’s operations.
We may seek to complete a business combination
with an operating company in any industry or sector. However, we will not, under our amended and restated certificate of incorporation,
be permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations.
Because we have not yet selected or approached any specific target business with respect to a business combination, there is no basis
to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity,
financial condition or prospects. To the extent we complete our initial business combination, we may be affected by numerous risks inherent
in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking
an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially
unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular
target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have
adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability
to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment
in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in
a business combination target. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder
following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders
are unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that
we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target
that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination
may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and
guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business
combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not
meet some or all of these criteria and guidelines, such combination may not be as successful as a combination with a business that does
meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does
not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it
difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount
of cash. In addition, if stockholder approval of the transaction is required by applicable law or stock exchange rules, or we decide
to obtain stockholder approval for business or other reasons, it may be more difficult for us to attain stockholder approval of our initial
business combination if the target business does not meet our general criteria and guidelines. If we are unable to complete our initial
business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the
liquidation of our trust account and our warrants will expire worthless.
We may seek acquisition opportunities in acquisition targets that
may be outside of our management’s areas of expertise.
We will consider a business combination in sectors
which may be outside of our management’s areas of expertise if such business combination candidate is presented to us and we determine
that such candidate offers an attractive acquisition opportunity for our company. In the event we elect to pursue an acquisition outside
of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or
operation, and the information regarding the areas of our management’s expertise would not be relevant to an understanding of the
business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant
risk factors relevant to such acquisition. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant
holder following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant
holders are unlikely to have a remedy for such reduction in value.
We may seek acquisition opportunities with an early stage company,
a financially unstable business or an entity lacking an established record of revenue or earnings, which could subject us to volatile
revenues or earnings, intense competition and difficulties in obtaining and retaining key personnel.
To the extent we complete our initial business
combination with an early stage company, a financially unstable business or an entity lacking an established record of sales or earnings,
we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include investing
in a business without a proven business model and with limited historical financial data, volatile revenues or earnings, intense competition
and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent
in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not
have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability
to control or reduce the chances that those risks will adversely impact a target business.
We are not required to obtain an opinion from an independent investment
banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the
price we are paying for the business is fair to our stockholders from a financial point of view.
Unless we complete our initial business combination
with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA
or from an independent accounting firm that the price we are paying is fair to our stockholders from a financial point of view.
In addition, if our board of directors is not
able to determine the fair market value of the target business or businesses, in connection with the NYSE rules that require that
an initial business combination be with one or more operating businesses or assets with a fair market value equal to at least 80% of
the net assets held in the trust account (net of amounts disbursed to management for working capital purposes, if applicable, and excluding
the amount of any deferred underwriting discount), we will obtain an opinion from an independent investment banking firm that is a member
of FINRA or from an independent accounting firm with respect to the satisfaction of such criteria.
Other than the two circumstances described above,
we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent
accounting firm. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine
fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our tender
offer documents or proxy solicitation materials, as applicable, related to our initial business combination.
We may issue additional shares of Class A common stock or
preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business
combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater
than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions described herein. Any such
issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation
authorizes the issuance of up to 200,000,000 shares of Class A common stock, par value $0.0001 per share, and 20,000,000 shares
of Class B common stock, par value $0.0001 per share and 1,000,000 shares of undesignated preferred stock, par value $0.0001 per
share. There are 92,200,000 and 2,750,000 authorized but unissued shares of Class A and Class B common stock, respectively,
available for issuance, which amount takes into account shares reserved for issuance upon exercise of outstanding warrants but not upon
the conversion of the Class B common stock. Shares of Class B common stock are automatically convertible into shares of our
Class A common stock at the time of our initial business combination, initially at a one-for-one ratio but subject to adjustment
as set forth herein. There are no shares of preferred stock issued and outstanding.
We may issue a substantial number of additional
shares of Class A common stock, and may issue shares of preferred stock, in order to complete our initial business combination or
under an employee incentive plan after completion of our initial business combination (although our amended and restated certificate
of incorporation will provide that we may not issue additional securities that can vote on amendments to our amended and restated certificate
of incorporation or on our initial business combination or that would entitle holders thereof to receive funds from the trust account).
We may also issue shares upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial
business combination as a result of the anti-dilution provisions described herein. However, our amended and restated certificate of incorporation
will provide, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock
that would entitle the holders thereof to receive funds from the trust account or (2) vote on any initial business combination.
The issuance of additional shares of common or preferred stock:
| |
· |
may significantly dilute the equity
interest of investors in the IPO; |
| |
· |
may subordinate the rights of holders
of common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| |
· |
could cause
a change in control if a substantial number of shares of 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 units, common stock and/or warrants. |
Resources could be wasted in researching initial business combinations
that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.
If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share,
or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
We anticipate that the investigation of each specific
target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a
specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable.
Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination
for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred
which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to
complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain
circumstances, on the liquidation of our trust account and our warrants will expire worthless.
We may attempt to simultaneously complete business combinations
with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased
costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several
businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent
on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete
our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens
and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional
risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating
business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete our initial business combination with
a private company about which little information is available, which may result in a business combination with a company that is not
as profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek
to effectuate our initial business combination with a privately held company. Very little public information generally exists about private
companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of
limited information, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
Our management may not be able to maintain control of a target
business after our initial business combination. We cannot provide assurance that, upon loss of control of a target business, new management
will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure our initial business combination
so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets
of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more
of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for
us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that
does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders
prior to our initial business combination may collectively own a minority interest in the post business combination company, depending
on valuations ascribed to the target and us in our initial business combination. For example, we could pursue a transaction in which
we issue a substantial number of new shares of common stock in exchange for all of the outstanding capital stock of a target. In this
case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common
stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock
subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single
person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more
likely that our management will not be able to maintain our control of the target business.
We do not have a specified maximum redemption threshold. The absence
of such a redemption threshold may make it possible for us to complete our initial business combination with which a substantial majority
of our stockholders do not agree.
Our amended and restated certificate of incorporation
does not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that
would cause our net tangible assets to be less than $5,000,001 (such that we do not then become subject to the SEC’s “penny
stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial
business combination. As a result, we may be able to complete our initial business combination even though a substantial majority of
our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial
business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer
rules, have entered into privately negotiated agreements to sell their shares to our sponsor, officers, directors, advisors or any of
their respective affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of common stock
that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business
combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares,
all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate
business combination.
In order to effectuate an initial business combination, blank check
companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their
warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing
instruments, including our warrant agreement, in a manner that will make it easier for us to complete our initial business combination
that some of our stockholders or warrant holders may not support.
In order to effectuate an initial business combination,
blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including
their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption
thresholds extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant
agreements to require the warrants to be exchanged for cash and/or other securities. We cannot assure you that we will not seek to amend
our charter or governing instruments or extend the time to consummate an initial business combination in order to effectuate our initial
business combination.
Certain provisions of our amended and restated certificate of incorporation
that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from
our trust account) may be amended with the approval of holders of not less than 65% of our common stock, which is a lower amendment threshold
than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation
and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders may not support.
Our amended and restated certificate of incorporation
will provide that any of its provisions (other than amendments relating to the appointment of directors, which require the approval by
a majority of at least 90% of our common stock voting at a stockholder meeting) related to pre-business combination activity (including
the requirement to fund the trust account and not release such amounts except in specified circumstances and to provide redemption rights
to public stockholders as described herein) may be amended if approved by holders of at least 65% of our common stock, and corresponding
provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65%
of our common stock. In all other instances, our amended and restated certificate of incorporation will provide that it may be amended
by holders of a majority of our common stock, subject to applicable provisions of the DGCL, or applicable stock exchange rules. We may
not issue additional securities that can vote on amendments to our amended and restated certificate of incorporation or on our initial
business combination. Our initial stockholders, who will beneficially own 20% of our common stock, may participate in any vote to amend
our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they
choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which will govern
our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete
our initial business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended
and restated certificate of incorporation.
Our sponsor, officers and directors have agreed,
pursuant to a written agreement, that they will not propose any amendment to our amended and restated certificate of incorporation to
modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business
combination or to redeem 100% of our public shares if we do not complete our initial business combination within the completion window,
unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any
such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by
the number of then outstanding public shares. These agreements are contained in a letter agreement that we have entered into with our
sponsor, officers and directors. Our stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result,
will not have the ability to pursue remedies against our sponsor, officers or directors for any breach of these agreements. As a result,
in the event of a breach, our stockholders would need to pursue a stockholder derivative action, subject to applicable law.
We may be unable to obtain additional financing to complete our
initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon
a particular business combination.
Although we believe that the net proceeds of the
IPO and the sale of the private placement warrants will be sufficient to allow us to complete our initial business combination, because
we have not yet selected any prospective target business we cannot ascertain the capital requirements for any particular transaction.
If the net proceeds of the IPO and the sale of the private placement warrants prove to be insufficient, either because of the size of
our initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem
for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination or
the terms of negotiated transactions to purchase shares in connection with our initial business combination, we may be required to seek
additional financing (including from M. Klein and Company) or to abandon the proposed business combination. We cannot assure you that
such financing will be available on acceptable terms, if at all. M. Klein and Company is not obligated to provide, or seek, any such
financing or, except as expressly set forth herein, to provide any other services to us. To the extent that additional financing proves
to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction
or abandon that particular business combination and seek an alternative target business candidate. In addition, even if we do not need
additional financing to complete our initial business combination, we may require such financing to fund the operations or growth of
the target business. The failure to secure additional financing could have a material adverse effect on the continued development or
growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection
with or after our initial business combination. If we are unable to complete our initial business combination, our public stockholders
may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account, and our warrants
will expire worthless.
Our search for a business combination, and any target business
with which we ultimately consummate a business combination, may be materially adversely affected by the recent novel coronavirus (“COVID-19”)
outbreak.
On March 11, 2020, the World Health Organization
officially declared the outbreak of the COVID-19 a “pandemic.” A significant outbreak of COVID-19 and other infectious diseases
could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business
of any potential target business with which we consummate a business combination could be materially and adversely affected. Furthermore,
we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to
have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate
and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend
on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the
severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other
matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations
of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
As the number of special purpose acquisition companies evaluating
targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase
the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business
combination.
In recent years, the number of special purpose
acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition companies
have already entered into an initial business combination, and there are still many special purpose acquisition companies seeking targets
for their initial business combination, as well as many such companies currently in registration. As a result, at times, fewer attractive
targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate
an initial business combination.
In addition, because there are more special purpose
acquisition companies seeking to enter into an initial business combination with available targets, the competition for available targets
with attractive fundamentals or business models may increase, which could cause target companies to demand improved financial terms.
Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or
increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This
could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an initial business combination,
and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
Risks Relating to Our Securities
The NYSE may delist our securities from trading on its exchange,
which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our units, Class A common stock and warrants
are listed on the NYSE. We cannot assure you that our securities will be, or will continue to be, listed on the NYSE in the future or
prior to our initial business combination. In order to continue listing our securities on the NYSE prior to our initial business combination,
we must maintain certain financial, distribution and stock price levels. In general, we must maintain a minimum number of holders of
our securities. Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with
the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements, in order
to continue to maintain the listing of our securities on the NYSE. For instance, our stock price would generally be required to be at
least $4 per share. We cannot assure you that we will be able to meet those initial listing requirements at that time.
If the NYSE delists any of our securities from
trading on its exchange and we are not able to list such securities on another national securities exchange, we expect such securities
could be quoted on an over-the- counter market. If this were to occur, we could face significant material adverse consequences, including:
| |
· |
a limited availability of market
quotations for our securities; |
| |
· |
reduced liquidity for our securities; |
| |
· |
a determination that our Class A
common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more
stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
| |
· |
a limited amount of news and analyst
coverage; 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 we expect that our units and eventually our Class A common stock and warrants will
be listed on the NYSE, our units, Class A common stock and warrants will qualify as covered securities under such statute. Although
the states are preempted from regulating the sale of 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, other than the State of Idaho, certain state securities regulators view blank check companies
unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in
their states. Further, if we were no longer listed on the NYSE, our securities would not qualify as covered securities under such statute
and we would be subject to regulation in each state in which we offer our securities.
You will not be entitled to protections normally afforded to investors
of many other blank check companies.
Since the net proceeds of the IPO and the sale
of the private placement warrants are intended to be used to complete an initial business combination with a target business, we may
be deemed to be a “blank check” company under the U.S. securities laws. However, because we have net tangible assets in excess
of $5,000,000 and filed a Current Reports on Form 8-K, including an audited balance sheet of our company demonstrating this fact,
we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly,
investors will not be afforded the benefits or protections of those rules. Among other things, this means our units will be immediately
tradable and we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419.
Moreover, if the IPO were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in
the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of our
initial business combination.
If we seek stockholder approval of our initial business combination
and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed
to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our
Class A common stock.
If we seek stockholder approval of our initial
business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer
rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such
stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13
of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold
in the IPO, without our prior consent, which we refer to as the “Excess Shares.” However, our amended and restated certificate
of incorporation does not restrict our stockholders’ ability to vote all of their shares (including Excess Shares) for or against
our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete
our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market
transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our initial
business combination. And as a result, you will continue to hold the Excess Shares and, in order to dispose of such shares, would be
required to sell your Excess Shares in open market transactions, potentially at a loss.
Our stockholders may be held liable for claims by third parties
against us to the extent of distributions received by them upon redemption of their shares.
Under the DGCL, stockholders may be held liable
for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion
of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete
our initial business combination within the completion window may be considered a liquidating distribution under Delaware law. If a corporation
complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for
all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a
90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating
distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser
of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder
would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably
possible following the 24th month from the closing of the IPO in the event we do not complete our initial business combination and, therefore,
we do not intend to comply with the foregoing procedures.
Because we do not intend to comply with Section 280,
Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment
of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution.
However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for
prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers,
consultants, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL,
any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata
share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the
third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against
us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more)
and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our
trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial
business combination within the completion window is not considered a liquidating distribution under Delaware law and such redemption
distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors
could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after we
consummate our initial business combination and you will not be entitled to any of the corporate protections provided by such a meeting.
We may not hold an annual meeting of stockholders
until after we consummate our initial business combination (unless required by the NYSE) and thus may not be in compliance with Section 211(b) of
the DGCL, which requires an annual meeting of stockholders be held for the purposes of electing directors in accordance with a company’s
bylaws unless such election is made by written consent in lieu of such a meeting. Therefore, if our stockholders want us to hold an annual
meeting prior to our consummation of our initial business combination, they may attempt to force us to hold one by submitting an application
to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL. Moreover, our Class B stockholders will
be entitled to elect all of our directors prior to the completion of our initial business combination and may elect to do so by written
consent without a meeting.
We are not registering the shares of Class A common stock
issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may
not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants
except on a “cashless basis” and potentially causing such warrants to expire worthless.
We are not registering the shares of Class A
common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under
the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the
closing of our initial business combination, we will use our reasonable best efforts to file with the SEC, and within 60 business days
following our initial business combination to have declared effective, a registration statement covering the issuance of the shares of
Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A
common stock until the warrants expire or are redeemed. We cannot assure you that we will be able to do so if, for example, any facts
or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial
statements contained or incorporated by reference therein are not current, complete or correct or the SEC issues a stop order. If the
shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise
their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated
to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered
or qualified under the securities laws of the state of the exercising holder or an exemption from registration or qualification is available.
Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities
exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities
Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or
maintain in effect a registration statement, but we will use our reasonable best efforts to register or qualify the shares under applicable
blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities
or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants
under applicable state securities laws and no exemption is available. If the issuance of the shares upon exercise of the warrants is
not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise
such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a
purchase of units will have paid the full unit purchase price solely for the shares of Class A common stock included in the units.
If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the
underlying shares of Class A common stock for sale under all applicable state securities laws.
The grant of registration rights to our initial stockholders and
their permitted transferees may make it more difficult to complete our initial business combination, and the future exercise of such
rights may adversely affect the market price of our Class A common stock.
Pursuant to an agreement entered into concurrently
with the issuance and sale of the securities in the IPO, our initial stockholders and their permitted transferees can demand that we
register the resale of their founder shares after those shares convert to shares of our Class A common stock at the time of our
initial business combination. In addition, our sponsor and its permitted transferees can demand that we register the resale of the private
placement warrants and the shares of Class A common stock issuable upon exercise of the private placement warrants, and holders
of warrants that may be issued upon conversion of working capital loans may demand that we register the resale of such warrants or the
Class A common stock issuable upon exercise of such warrants. We will bear the cost of registering these securities. The registration
and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market
price of our Class A common stock. In addition, the existence of the registration rights may make our initial business combination
more costly or difficult to complete. This is because the stockholders of the target business may increase the equity stake they seek
in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common
stock that is expected when the common stock owned by our initial stockholders or their permitted transferees, the private placement
warrants owned by our sponsor or warrants issued in connection with working capital loans are registered for resale.
We may issue notes or other debt securities, or otherwise incur
substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition and thus negatively
impact the value of our stockholders’ investment in us.
Although we have no commitments as of the date
of this annual report to issue any notes or other debt securities, or to otherwise incur outstanding debt following the IPO, we may choose
to incur substantial debt to complete our initial business combination. We have agreed that we will not incur any indebtedness unless
we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account.
As such, no issuance of debt will affect the per share amount available for redemption from the trust account. Nevertheless, the incurrence
of debt could have a variety of negative effects, including:
| |
· |
default and foreclosure on our assets
if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
| |
· |
acceleration of our obligations
to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require
the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| |
· |
our immediate payment of all principal
and accrued interest, if any, if the debt is payable on demand; |
| |
· |
our inability to obtain necessary
additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| |
· |
our inability to pay dividends on
our common stock; |
| |
· |
using a substantial portion of our
cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared,
expenses, capital expenditures, acquisitions and other general corporate purposes; |
| |
· |
limitations on our flexibility in
planning for and reacting to changes in our business and in the industry in which we operate; |
| |
· |
increased vulnerability to adverse
changes in general economic, industry and competitive conditions and adverse changes in government regulation; and limitations on
our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of
our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
Our initial stockholders will control the election of our board
of directors until consummation of our initial business combination and will hold a substantial interest in us. As a result, they will
elect all of our directors prior to the consummation of our initial business combination and may exert a substantial influence on actions
requiring a stockholder vote, potentially in a manner that you do not support.
Our initial stockholders own 20% of our outstanding
common stock. In addition, the founder shares, all of which are held by our initial stockholders, entitle the holders to elect all of
our directors prior to the consummation of our initial business combination. Holders of our public shares will have no right to vote
on the election of directors during such time. These provisions of our amended and restated certificate of incorporation may only be
amended by a majority of at least 90% of our common stock voting at a stockholder meeting. As a result, you will not have any influence
over the election of directors prior to our initial business combination.
Neither our initial stockholders nor, to our knowledge,
any of our officers or directors, have any current intention to purchase additional securities, other than as disclosed in this prospectus.
Factors that would be considered in making such additional purchases would include consideration of the current trading price of our
Class A common stock. In addition, as a result of their substantial ownership in our company, our initial stockholders may exert
a substantial influence on other actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments
to our amended and restated certificate of incorporation and approval of major corporate transactions. If our initial stockholders purchase
any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their influence
over these actions. Accordingly, our initial stockholders will exert significant influence over actions requiring a stockholder vote.
Our sponsor contributed $25,000, or approximately $0.0001 per founder
share, and, accordingly, you will experience immediate and substantial dilution from the purchase of our Class A common stock.
Our sponsor acquired the founder shares at a nominal
price, significantly contributing to the dilution of holders of our Class A common stock. This dilution would increase to the extent
that the anti-dilution provisions of the Class B common stock result in the issuance of Class A shares on a greater than one-to-one
basis upon conversion of the Class B common stock at the time of our initial business combination and would become exacerbated to
the extent that public stockholders seek redemptions from the trust. In addition, because of the anti-dilution rights of the founder
shares, any equity or equity-linked securities issued or deemed issued in connection with our initial business combination would be disproportionately
dilutive to our Class A common stock.
We may amend the terms of the warrants in a manner that may be
adverse to holders of public warrants with the approval by the holders of at least 50% of the then outstanding public warrants. As a
result, the exercise price of your warrants could be increased, the warrants could be converted into cash or stock (at a ratio different
than initially provided), the exercise period could be shortened and the number of shares of our Class A common stock purchasable
upon exercise of a warrant could be decreased, all without your approval.
Our
warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as
warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder
to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding
public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly,
we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding public
warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of
the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the
exercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise
period or decrease the number of shares of our common stock purchasable upon exercise of a warrant. Our initial stockholders may purchase
public warrants with the intention of reducing the number of public warrants outstanding or to vote such warrants on any matters submitted
to warrantholders for approval, including amending the terms of the public warrants in a manner adverse to the interests of the registered
holders of public warrants. While our initial stockholders have no current commitments, plans or intentions to engage in such transactions
and have not formulated any terms or conditions for such transactions, there is no limit on the number of our public warrants that our
initial stockholders may purchase and it is not currently known how many public warrants, if any, our initial stockholders may hold at
the time of our initial business combination or at any other time during which the terms of the public warrants may be proposed to be
amended.
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 closing price
of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date
we send the notice of redemption to the warrant holders. 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 to: (1) exercise your warrants and pay the exercise price therefor at a time when it
may be disadvantageous for you to do so (2) sell your warrants at the then-current market price when you might otherwise wish to
hold your warrants; or (3) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption,
is likely to be substantially less than the market value of your warrants.
Our warrants and founder shares may have an adverse effect on the
market price of our Class A common stock and make it more difficult to effectuate our initial business combination.
We issued warrants to purchase 23,000,000 shares
of our Class A common stock at a price of $11.50 per whole share (subject to adjustment as provided herein), as part of the units
offered in the IPO. Simultaneously with the closing of the IPO, we also issued in a private placement an aggregate of 15,800,000 private
placement warrants, each exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment
as provided herein. Our initial stockholders currently hold 17,250,000 founder shares. The founder shares are convertible into shares
of Class A common stock on a one-for-one basis, subject to adjustment as set forth herein. In addition, if our sponsor, an affiliate
of our sponsor or certain of our officers and directors make any working capital loans, up to $1,500,000 of such loans may be converted
into warrants, at the price of $1.00 per warrant, at the option of the lender. Such warrants would be identical to the private placement
warrants.
To the extent we issue shares of Class A
common stock to effectuate a business transaction, the potential for the issuance of a substantial number of additional shares of Class A
common stock upon exercise of these warrants or conversion rights could make us a less attractive acquisition vehicle to a target business.
Any such issuance will increase the number of outstanding shares of our Class A common stock and reduce the value of the Class A
common stock issued to complete the business transaction. Therefore, our warrants and founder shares may make it more difficult to effectuate
a business combination or increase the cost of acquiring the target business.
The private placement warrants are identical to
the warrants sold as part of the units in the IPO except that, so long as they are held by our sponsor or its permitted transferees:
(1) they will not be redeemable by us; (2) they (including the Class A common stock issuable upon exercise of these warrants)
may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until 30 days after the completion of
our initial business combination; (3) they may be exercised by the holders on a cashless basis; and (4) the holders thereof
(including with respect to the shares of common stock issuable upon exercise of these warrants) are entitled to registration rights.
Our Derivative Instruments are accounted for as liabilities
and the changes in value of our Derivative Instruments could have a material effect on our financial results.
On April 12, 2021, the SEC Warrant Accounting
Statement discussing the accounting implications of certain terms that are common in warrants issued by special purpose acquisition companies
was released. In light of the SEC Warrant Accounting Statement and guidance in Accounting Standards Codification (“ASC”)
815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, Churchill’s management evaluated
the terms of the warrant agreement entered into in connection with Churchill’s IPO and concluded that the public warrants and the
private placement (together, the “warrants”) include provisions that, based on the SEC Warrant Accounting Statement, preclude
the warrants from being classified as components of equity. As a result, we have classified the Derivative Instruments as liabilities.
Under this accounting treatment, we are required to measure the fair value of the Derivative Instruments at the end of each reporting
period and recognize changes in the fair value from the prior period in our operating results for the current period. As a result of
the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors which
are outside our control. We expect that we will recognize non-cash gains or losses due to the quarterly fair valuation of the Derivative
Instruments and that such gains or losses could be material.
In connection with the restatement of our financial statement
reflected in the First Amended Filing, the Company’s management, and in connection with this restatement reflected in this Amendemnt,
Skillsoft’s management, concluded that our disclosure controls and procedures and internal control over financial reporting were
not effective as of December 31, 2020 due to a material weakness in internal controls over financial reporting solely related to
our accounting for complex financial instruments. If we are unable to maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence
in us and materially and adversely affect our business and operating results.
As noted in the First Amended Filing following
the issuance of the SEC Warrant Accounting Statement, and after consultation with the Company’s independent registered public accounting
firm and our management team, the Company’s management concluded that, in light of the SEC Warrant Accounting Statement, it was
appropriate to restate our previously issued audited financial statements as of and for the year ended December 31, 2020 and the
period from April 11, 2019 (inception) through December 31, 2019. The Company also restated the financial statements as of and
for the period ended September 30, 2019, as of December 31, 2019, and as of and for the periods ended March 31, 2020, June 30,
2020 and September 30, 2020. See “—Our Derivative Instruments are accounted for as liabilities and the changes in value
of our Derivative Instruments could have a material effect on our financial results.” As part of such process, the Company’s
mangement identified a material weakness in the Company’s internal controls over financial reporting, solely related to our accounting
for warrants.
In addition, as described elsewhere in this Amendment,
in connection with the preparation of a registration statement and the requirement to include audited financial statements for the year
ended December 31, 2021, Skillsoft’s management identified a material weakness in the Churchill’s internal control over financial
reporting related to Churchill’s application of ASC 480-10-S99-3A to its accounting classification of the Public Shares the presentation
of earnings per share. As a result of this material weakness, Skillsoft’s management has concluded that Churchill’s internal
control over financial reporting was not effective as of December 31, 2020. Historically, a portion of the Public Shares was classified
as permanent equity to maintain stockholders’ equity greater than $5 million on the basis that Churchill will not redeem its Public
Shares in an amount that would cause its net tangible assets to be less than $5,000,001, as described in the Charter. Pursuant to Skillsoft’s
re-evaluation of Churchill’s application of ASC 480-10-S99-3A to its accounting classification of the Public Shares, the Skillsoft’s
management has determined that the Public Shares include certain provisions that require classification of all of the Public Shares as
temporary equity regardless of the net tangible assets redemption limitation contained in the charter. In addition, in connection with
the change in presentation for the Public Shares, Skillsoft determined it should restate Churchill’s earnings per share presentation
to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a business combination
as the most likely outcome, in which case, both classes of shares share pro rata in the income and losses of Churchill. For a discussion
of Skillsoft management’s consideration of the material weakness identified related to Churchill’s application of ASC 480-10-S99-3A
to Churchill’s accounting classification of the Public Shares and presentation of earnings per share, see “Note 2” to
the accompanying financial statements, as well as Part II, Item 9A: Controls and Procedures included in this Amendment.
A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. Effective internal
controls are necessary for us to provide reliable financial reports and prevent fraud. We expect to take steps to remediate the material
weakness, but there is no assurance that any remediation efforts will ultimately have the intended effects.
If we identify any new material weaknesses in
the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or
disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable
to maintain compliance with securities law requirements regarding timing filing of periodic reports in addition to applicable stock exchange
listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot
assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential
future material weaknesses.
The Company may face litigation and other risks as a result of the material
weakness in Churchill’s internal control over financial reporting.
Following the issuance of the SEC Warrant Accounting Statement, Skillsoft’s
Audit Committee, in consultation with management and after discussions with Skillsoft’s independent auditors, concluded that Churchill
should have classified its Private Placement Warrants as liabilities measured at fair value upon issuance in its previously issued financial
statements, and it was appropriate to correct errors in Churchill’s previously issued audited financial statements by restating
such audited financial information. As part of this Amendment, Skillsoft’s management, including Skillsoft’s principal executive
and financial officers, have evaluated the effectiveness of Churchill’s internal control over financial reporting and concluded
that Churchill did not maintain effective internal control over financial reporting as of December 31, 2020, because of a material weakness
in Churchill’s internal control over financial reporting related to the accounting for a significant and unusual transaction related
to the warrants we issued in connection with Churchill’s initial public offering in June 2019. Skillsoft’s management and
audit committee also concluded that it was appropriate to restate the previously issued financial statements for the periods indicated.
Please see “Note 2” to the accompanying financial statements, as well as Part II, Item 9A: Controls and Procedures included
in this Amendment.
As a result of such material weakness, Churchill’s restatement,
the change in accounting for the Warrants, the change in the classification of all of the Public Shares as temporary equity, the Company faces potential
for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims
or other claims arising from Churchill’s restatement and material weaknesses in Churchill’s internal control over financial
reporting and the preparation of our financial statements. As of the date of this Amendment, Skillsoft has no knowledge of any such litigation
or dispute. However, Skillsoft can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation
or dispute, whether successful or not, could have a material adverse effect on Skillsoft’s business, results of operations and financial
condition.
Because we must furnish our stockholders with target business financial
statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The federal proxy rules require that a proxy
statement with respect to a vote on a business combination include historical and/or pro forma financial statement disclosure. We will
include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under
the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting
principles generally accepted in the United States of America, or GAAP, or international financial reporting standards as issued by the
International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required
to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial
statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide
such financial statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete
our initial business combination within the completion window.
Compliance obligations under the Sarbanes-Oxley Act may make it
more difficult for us to effectuate our initial business combination, require substantial financial and management resources, and increase
the time and costs of completing an initial business combination.
In the event we are deemed to be a large accelerated
filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to comply with the independent
registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we
remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation
requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements
of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target business with which we
seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes- Oxley Act regarding adequacy
of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act
may increase the time and costs necessary to complete any such initial business combination.
Provisions in our amended and restated certificate of incorporation
and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A
common stock and could entrench management.
Our amended and restated certificate of incorporation
will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.
These provisions include three-year director terms and the ability of the board of directors to designate the terms of and issue new
series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could
involve payment of a premium over prevailing market prices for our securities.
Section 203 of the DGCL affects the ability
of an “interested stockholder” to engage in certain business combinations, for a period of three years following the time
that the stockholder becomes an “interested stockholder.” We will elect in our certificate of incorporation not to be subject
to Section 203 of the DGCL. Nevertheless, our certificate of incorporation will contain provisions that have the same effect as
Section 203 of the DGCL, except that it will provide that affiliates of our sponsor and their transferees will not be deemed to
be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and will therefore not be subject
to such restrictions. These charter provisions may limit the ability of third parties to acquire control of our company.
Risks Relating to Our Management Team
Our officers and directors will allocate their time to other businesses
thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest
could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required to,
and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our
operations and our search for a business combination and their other responsibilities. We do not intend to have any full-time employees
prior to the completion of our business combination. Each of our officers and directors is engaged in several other business endeavors
for which he or she may be entitled to substantial compensation and our officers and directors are not obligated to contribute any specific
number of hours per week to our affairs.
Mr. Klein is the founder and managing partner
of M. Klein and Company and acts as a strategic advisor to its clients. Mr. Klein has a fiduciary duty to M. Klein and Company.
As a result, Mr. Klein may have a duty to offer acquisition opportunities to clients of M. Klein and Company. Mr. Klein will
have no duty to offer acquisition opportunities to the Company unless presented to him solely in his capacity as an officer or director
of the Company.
Mr. August is the Founder and CEO of
OHA and acts as a strategic advisor to its clients. Mr. August has a fiduciary duty to OHA. As a result, Mr. August may
have a duty to offer acquisition opportunities to clients of OHA. Mr. August will have no duty to offer acquisition opportunities
to the Company unless presented to him solely in his capacity as a director of the Company.
If our officers’ and directors’ other
business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it
could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business
combination.
We are dependent upon our officers and directors and their departure
could adversely affect our ability to operate.
Our operations are dependent upon a relatively
small group of individuals. We believe that our success depends on the continued service of our officers and directors, at least until
we have completed our initial business combination. We do not have an employment agreement with, or key-man insurance on the life of
any of our other directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a
detrimental effect on us.
Our ability to successfully effect our initial business combination
and to be successful thereafter will be dependent upon the efforts of our key personnel, some of whom may join us following our initial
business combination. The loss of key personnel could negatively impact the operations and profitability of our post- combination business.
Our ability to successfully effect our initial
business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however,
cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory
positions following our initial business combination, we do not currently expect that any of them will do so. While we intend to closely
scrutinize any individuals we engage after our initial business combination, we cannot assure you that our assessment of these individuals
will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which
could cause us to have to expend time and resources helping them become familiar with such requirements.
In addition, the officers and directors of an
acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s
key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s
key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that
certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our
initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our key personnel may negotiate employment or consulting agreements
with a target business in connection with a particular business combination, and a particular business combination may be conditioned
on the retention or resignation of such key personnel. These agreements may cause our key personnel to have conflicts of interest in
determining whether to proceed with a particular business combination. However, we do not expect that any of our key personnel will remain
with us after the completion of our initial business combination.
Our key personnel may be able to remain with our
company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements
in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination
and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would
render to us after the completion of the business combination. Such negotiations also could make such key personnel’s retention
or resignation a condition to any such agreement. The personal and financial interests of such individuals may influence their motivation
in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion
of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any
potential business combination, as we do not expect that any of our key personnel will remain with us after the completion of our initial
business combination. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial
business combination.
We may have a limited ability to assess the management of a prospective
target business and, as a result, may affect our initial business combination with a target business whose management may not have the
skills, qualifications or abilities to manage a public company.
When evaluating the desirability of effecting
our initial business combination with a prospective target business, our ability to assess the target business’s management may
be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target business’s management,
therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected.
Should the target business’s management
not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination
business may be negatively impacted. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder
following our initial business combination could suffer a reduction in the value of their securities.
Such stockholders or warrant holders are unlikely
to have a remedy for such reduction in value.
The officers and directors of an initial business
combination candidate may resign upon completion of our initial business combination. The departure of a business combination target’s
key personnel could negatively impact the operations and profitability of our post-combination business. The role of an initial business
combination candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time.
Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the initial
business combination candidate following our initial business combination, it is possible that members of the management of an acquisition
candidate will not wish to remain in place. As a result, we may need to reconstitute the management team of the post-transaction company
in connection with our initial business combination, which may adversely impact our ability to complete an initial business combination
in a timely manner or at all.
Certain of our officers and directors are now, and all of them
may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and,
accordingly, may have conflicts of interest in determining to which entity a particular business opportunity or other transaction should
be presented.
Until we consummate our initial business combination,
we intend to engage in the business of identifying and combining with one or more businesses. Our sponsor and officers and directors
are, or may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a
similar business. We do not have employment contracts with our officers and directors that will limit their ability to work at other
businesses. In addition, our sponsor, officers and directors may participate in the formation of, or become an officer or director of,
any other blank check company prior to completion of our initial business combination. As a result, our sponsor, officers or directors
could have conflicts of interest in determining whether to present business combination opportunities to us or to any other blank check
company with which they may become involved. In particular, M. Klein and Company, Mr. Klein and the Operating Partners, as well
as our board of directors, have formed and are actively engaged in Churchill Capital Corp IV, Churchill Capital Corp V, Churchill Capital
Corp VI and Churchill Capital Corp VII, special purpose acquisition corporations that completed their initial public offerings in August 2020,
December 2020, February 2021 and February 2021, respectively. Churchill Capital Corp IV, Churchill Capital Corp V, Churchill
Capital Corp VI and Churchill Capital Corp VII, like us, may pursue initial business combination targets in any businesses or industries
and have until August 3, 2022, December 18, 2022, February 17, 2023 and February 17, 2023, respectively, to do so
(absent an extension in accordance with their charters). Any such companies, including Churchill Capital Corp IV, Churchill Capital Corp
V, Churchill Capital Corp VI and Churchill Capital Corp VII may present additional conflicts of interest in pursuing an acquisition target.
Each of our officers and directors presently has,
and any of them in the future may have additional, fiduciary, contractual or other obligations or duties to one or more other entities
pursuant to which such officer or director is or will be required to present a business combination opportunity to such entities. Accordingly,
if any of our officers or directors becomes aware of a business combination opportunity which is suitable for one or more entities to
which he or she has fiduciary, contractual or other obligations or duties, he or she will honor these obligations and duties to present
such business combination opportunity to such entities first, and only present it to us if such entities reject the opportunity and he
or she determines to present the opportunity to us. These conflicts may not be resolved in our favor and a potential target business
may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation will provide
that we renounce our interest in any corporate opportunity offered to any director or officer unless (i) such opportunity is expressly
offered to such person solely in his or her capacity as a director or officer of our company, (ii) such opportunity is one we are
legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue and (iii) the director or officer
is permitted to refer the opportunity to us without violating another legal obligation.
In addition, none of the Operating Partners are
officers or directors of our company and therefore owe us no fiduciary duties as such. While we expect that they will assist us in identifying
business combination targets, they have no obligation to do so and may devote a substantial portion of their business time to activities
unrelated to us. Each Operating Partner may have fiduciary, contractual or other obligations or duties to other organizations to present
business combination opportunities to such other organizations rather than to us. Accordingly, if any Operating Partner becomes aware
of a business combination opportunity which is suitable for one or more entities to which he or she has fiduciary, contractual or other
obligations or duties, he or she will honor those obligations and duties to present such business combination opportunity to such entities
first and only present it to us if such entities reject the opportunity and he or she determines to present the opportunity to us. These
conflicts may not be resolved in our favor and a potential business may be presented to another entity prior to its presentation to us.
Our officers, directors, 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, officers, 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 M. Klein and Company, our sponsor or our directors or officers. We do not
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.
In particular, affiliates of our sponsor, our
directors and our officers have invested, and may in the future invest, in a broad array of sectors, including those in which our company
may invest. As a result, there may be substantial overlap between companies that would be a suitable business combination for us and
companies that would make an attractive target for such other affiliates.
We may engage in a business combination with one or more target
businesses that have relationships with entities that may be affiliated with M. Klein and Company, our sponsor, officers or directors
which may raise potential conflicts of interest.
In light of the involvement of our sponsor, officers
and directors with other businesses, we may decide to acquire one or more businesses affiliated with or competitive with M. Klein and
Company, our sponsor, officers and directors, and their respective affiliates. Such entities may compete with us for business combination
opportunities. Our sponsor, officers and directors are not currently aware of any specific opportunities for us to complete our initial
business combination with any entities with which they are affiliated, and there have been no substantive discussions concerning a business
combination with any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction with any
affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for a business
combination and such transaction was approved by a majority of our independent and disinterested directors. Despite our agreement to
obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm, regarding
the fairness to our stockholders from a financial point of view of a business combination with one or more domestic or international
businesses affiliated with M. Klein and Company, our sponsor, officers or directors, potential conflicts of interest still may exist
and, as a result, the terms of the business combination may not be as advantageous to our public stockholders as they would be absent
any conflicts of interest.
We may engage M. Klein and Company, or another affiliate of our
sponsor, as our lead financial advisor on our business combinations and other transactions. Any fee in connection with such engagement
may be conditioned upon the completion of such transactions. This financial interest in the completion of such transactions may influence
the advice such affiliate provides.
We may engage M. Klein and Company, or another
affiliate of our sponsor, as a financial advisor in connection with our initial business combination and pay such affiliate a customary
financial advisory fee in an amount that constitutes a market standard financial advisory fee for comparable transactions. Pursuant to
any such engagement, the affiliate may earn its fee upon closing of the initial business combination. The payment of such fee would likely
be conditioned upon the completion of the initial business combination. Therefore, our sponsor may have additional financial interests
in the completion of the initial business combination. These financial interests may influence the advice any such affiliate provides
us as our financial advisor, which advice would contribute to our decision on whether to pursue a business combination with any particular
target.
Since our initial stockholders will lose their entire investment
in us if our initial business combination is not completed (other than with respect to any public shares they may hold), a conflict of
interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
In May 2019, our sponsor purchased an aggregate
of 8,625,000 shares of our founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. Our Class B
common stock will automatically convert into shares of Class A common stock, on a one-for-one basis, upon the completion of a business
combination. On June 7, 2019, we effected a stock dividend at one-third of one share of Class B common stock for each outstanding
share of Class B common stock, resulting in an aggregate of 11,500,000 founder shares outstanding. On June 26, 2019, we effected
a further stock dividend of one-half of a share of Class B common stock for each outstanding share of Class B common stock,
resulting in our sponsor holding an aggregate of 17,250,000 founder Shares. All share and per-share amounts have been retroactively restated
to reflect the stock dividends. The number of founder shares issued was determined based on the expectation that the founder shares would
represent 20% of the outstanding shares of common stock upon the completion of the IPO. The founder shares will be worthless if we do
not complete an initial business combination.
In addition, our sponsor purchased an aggregate
of 15,800,000 private placement warrants for a purchase price of $15,800,000, or $1.00 per warrant, that will also be worthless if we
do not complete our initial business combination. Each private placement warrant entitles the holder thereof to purchase one share of
our Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein.
The founder shares are identical to the shares
of Class A common stock included in the units being sold in the IPO, except that: (1) only holders of the founder shares have
the right to vote on the election of directors prior to our initial business combination; (2) the founder shares are subject to
certain transfer restrictions, as described in more detail below; (3) our sponsor, officers and directors have entered into a letter
agreement with us, pursuant to which they have agreed to: (a) waive their redemption rights with respect to any founder shares and
any public shares held by them in connection with the completion of our initial business combination, (b) waive their redemption
rights with respect to any founder shares and public shares held by them in connection with a stockholder vote to approve an amendment
to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to provide for the redemption
of our public shares in connection with an initial business combination or to redeem 100% of our public shares if we have not consummated
our initial business combination within the completion window; and (c) waive their rights to liquidating distributions from the
trust account with respect to any founder shares held by them if we fail to complete our initial business combination within the completion
window (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold
if we fail to complete our initial business combination within the completion window); (4) the founder shares are automatically
convertible into shares of our Class A common stock at the time of our initial business combination on a one-for-one basis, subject
to adjustment pursuant to certain anti-dilution rights, as described herein; and (5) the holders of founder shares are entitled
to registration rights.
The personal and financial interests of our sponsor,
officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial
business combination and influencing the operation of the business following the initial business combination. This risk may become more
acute as the deadline for completing our initial business combination nears.
Changes in the market for directors and officers liability insurance
could make it more difficult and more expensive for us to negotiate and complete an initial business combination.
In recent months, the market for directors and
officers liability insurance for special purpose acquisition companies has changed in ways adverse to us and our management team. Fewer
insurance companies are offering quotes for directors and officers liability coverage, the premiums charged for such policies have generally
increased and the terms of such policies have generally become less favorable. These trends may continue into the future.
The increased cost and decreased availability
of directors and officers liability insurance could make it more difficult and more expensive for us to negotiate an initial business
combination. In order to obtain directors and officers liability insurance or modify its coverage as a result of becoming a public company,
the post-business combination entity might need to incur greater expense, accept less favorable terms or both. However, any failure to
obtain adequate directors and officers liability insurance could have an adverse impact on the post-business combination’s ability
to attract and retain qualified officers and directors.
In addition, even after we were to complete an
initial business combination, our directors and officers could still be subject to potential liability from claims arising from conduct
alleged to have occurred prior to the initial business combination. As a result, in order to protect our directors and officers, the
post-business combination entity may need to purchase additional insurance with respect to any such claims (“run-off insurance”).
The need for run-off insurance would be an added expense for the post-business combination entity, and could interfere with or frustrate
our ability to consummate an initial business combination on terms favorable to our investors.
Risks Associated with Acquiring and
Operating a Business in Foreign Countries
If our management team pursues a company with operations or opportunities
outside of the United States for our initial business combination, we may face additional burdens in connection with investigating, agreeing
to and completing such combination, and if we effect such initial business combination, we would be subject to a variety of additional
risks that may negatively impact our operations.
If our management team pursues a company with
operations or opportunities outside of the United States for our initial business combination, we would be subject to risks associated
with cross-border business combinations, including in connection with investigating, agreeing to and completing our initial business
combination, conducting due diligence in a foreign jurisdiction, having such transaction approved by any local governments, regulators
or agencies and changes in the purchase price based on fluctuations in foreign exchange rates.
If we effect our initial business combination
with such a company, we would be subject to any special considerations or risks associated with companies operating in an international
setting, including any of the following:
| |
· |
costs and difficulties inherent
in managing cross-border business operations and complying with commercial and legal requirements of overseas markets; |
| |
· |
rules and regulations regarding
currency redemption; |
| |
· |
complex corporate withholding taxes
on individuals; |
| |
· |
laws governing the manner in which
future business combinations may be effected; |
| |
· |
tariffs and trade barriers; |
| |
· |
regulations related to customs and
import/export matters; |
| |
· |
currency fluctuations and exchange
controls; |
| |
· |
challenges in collecting accounts
receivable; |
| |
· |
cultural and language differences; |
| |
· |
employment regulations; |
| |
· |
crime, strikes, riots, civil disturbances,
terrorist attacks, natural disasters and wars; |
| |
· |
deterioration of political relations
with the United States; |
| |
· |
obligatory military service by personnel;
and government appropriation of assets. |
We may not be able to adequately address these
additional risks. If we were unable to do so, we may be unable to complete such initial business combination or, if we complete such
initial business combination, our operations might suffer, either of which may adversely impact our business, results of operations and
financial condition.
If our management following our initial business combination is
unfamiliar with U.S. securities laws, they may have to expend time and resources becoming familiar with such laws, which could lead to
various regulatory issues.
Following our initial business combination, any
or all of our management could resign from their positions as officers of the Company, and the management of the target business at the
time of the business combination could remain in place. Management of the target business may not be familiar with U.S. securities laws.
If new management is unfamiliar with U.S. securities laws, they may have to expend time and resources becoming familiar with such laws.
This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
General Risk Factors
Past performance by M. Klein and Company and members of our management
team or our Strategic and Operating Partners may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses
associated with, M. Klein and Company and other members of our management team or our Strategic and Operating Partners is presented for
informational purposes only. Any past experience and performance, including related to acquisitions, of M. Klein and Company and members
of our management team or our Strategic and Operating Partners is not a guarantee either: (1) that we will be able to successfully
identify a suitable candidate for our initial business combination; or (2) of any results with respect to any initial business combination
we may consummate. You should not rely on the historical record and performance of M. Klein and Company and members of our management
team or our Strategic and Operating Partners as indicative of the future performance of an investment in us or the returns we will, or
are likely to, generate going forward. An investment in us is not an investment in M. Klein and Company or our Strategic and Operating
Partners.
Certain agreements related to the IPO may be amended without stockholder
approval.
Certain agreements, including the underwriting
agreement relating to this offering, the letter agreement among us and our sponsor, officers and directors, and the registration rights
agreement among us and our initial stockholders, may be amended without stockholder approval. These agreements contain various provisions
that our public stockholders might deem to be material. While we do not expect our board to approve any amendment to any of these agreements
prior to our initial business combination, it may be possible that our board, in exercising its business judgment and subject to its
fiduciary duties, chooses to approve one or more amendments to any such agreement in connection with the consummation of our initial
business combination. Any such amendments would not require approval from our stockholders, may result in the completion of our initial
business combination that may not otherwise have been possible, and may have an adverse effect on the value of an investment in our securities.
Legal proceedings in connection with the initial business combination,
the outcomes of which are uncertain, could delay or prevent the completion of the initial business combination.
In connection with the initial business combination,
certain of our shareholders have filed lawsuits and other shareholders have threatened to file lawsuits alleging breaches of fiduciary
duty and violations of the disclosure requirements of the Exchange Act. We intend to defend the matters vigorously. These cases are in
the early stages and we are unable to reasonably determine the outcome or estimate any potential losses, and, as such, have not recorded
a loss contingency.
Additional lawsuits may be filed against us or
our directors and officers in connection with the initial business combination. Defending such additional lawsuits could require us to
incur significant costs and draw the attention of our management team away from the initial business combination. Further, the defense
or settlement of any lawsuit or claim that remains unresolved at the time the initial business combination is consummated may adversely
affect the post-combination company's business, financial condition, results of operations and cash flows. Such legal proceedings could
delay or prevent the business combination from becoming effective within the agreed upon timeframe.
We are an emerging growth company within the meaning of the Securities
Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make
our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company”
within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes- Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company
for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common
stock held by non-affiliates exceeds $700 million as of the end of any second quarter of a fiscal year, in which case we would no longer
be an emerging growth company as of the end of such fiscal year. We cannot predict whether investors will find our securities less attractive
because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these
exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market
for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides
that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth
companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means
that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make
comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth
company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Provisions in our amended and restated certificate of incorporation
and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
Our amended and restated certificate of incorporation
will require, 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. This provision may have the effect of discouraging lawsuits against our directors and officers.