Item 1. Business
Introduction
We are a blank check company incorporated
on September 11, 2017 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses (a “Business Combination”).
We have neither engaged in any operations nor generated any revenue to date. Based on our business activities, we are a “shell
company” as defined under the Securities Exchange Act of 1934 (the “Exchange Act”) because we have no operations
and nominal assets consisting solely of cash and/or cash equivalents.
On January 31, 2021, we entered into an
Agreement and Plan of Merger (the “Merger Agreement”), by and among us, Ensysce, and EB Merger Sub, Inc., a Delaware
corporation and wholly owned subsidiary of LACQ (“Merger Sub”), relating to a proposed business combination transaction
between our company and Ensysce (the transactions contemplated thereunder referred to as the “Transactions”). Ensysce
is a clinical stage pharmaceutical company with innovative solutions for severe pain relief while reducing the fear of and the
potential for addiction, opioid misuse, abuse and overdose. Ensysce has also incorporated a 79.2%-owned subsidiary, Covistat Inc.
(“Covistat”), a clinical stage pharmaceutical company that is developing a compound utilized in Ensysce’s overdose
protection program for the treatment of COVID-19. The Transactions are described in more detail under the section “Our Proposed
Business Combination with Ensysce” below.
Consummation of the Transactions contemplated
by the Merger Agreement is subject to customary conditions of the respective parties, including the approval of the Business Combination
by our stockholders.
The Merger Agreement and related agreements
are further described in the Form 8-K filed by us on February 2, 2021. For additional information regarding the Merger Agreement
and the Transactions, see the Registration Statement on Form S-4, as may be amended from time to time, and the Definitive
Proxy Statement on Schedule 14A, each when filed by us with the Securities and Exchange Commission.
Because the period of time we have to complete our Business
Combination (the “Combination Period”) will expire on June 30, 2021, it is likely that, if the proposed Business Combination
with Ensysce is not consummated, we will not be able to seek another Business Combination and we will be required to liquidate.
See “Redemption of Public Shares and Liquidation if No Business Combination.”
In addition, we
received a notice from Nasdaq as to our continued listing on Nasdaq due, in part, to our not meeting the requirement that a special
purpose acquisition company complete one or more business combinations within 36 months of the effectiveness of its registration
statement. We were granted an extension, subject to certain milestones, through June 1, 2021 for completion of a business combination
and we could be delisted from Nasdaq if we do not complete a business combination by that date. See “Item 1A. Risk Factors
— The Nasdaq may not continue to list our securities, which could limit investors’ ability to make transactions in
our securities and subject us to additional trading restrictions”.
Other than as specifically discussed,
this report does not assume the closing of the Business Combination.
Background
On December 5, 2017, we consummated
our initial public offering of 20,000,000 units (“Units”), with each unit consisting of one share of our common stock,
and one-half (1/2) of one warrant, each whole warrant entitling the holder to purchase one share of common stock at a price of
$11.50. Simultaneously with the closing of the initial public offering, we consummated a private placement of 6,825,000 Private
Placement Warrants at a price of $1.00 per warrant to affiliates of our sponsors, our strategic investor and certain members of
our management team (the “Concurrent Private Placement”), which generated gross proceeds of $6,825,000.
Immediately following the closing of our
initial public offering and the Concurrent Private Placement, $200,000,000 of the gross proceeds from the initial public offering
and the Concurrent Private Placement was deposited in a U.S.-based Trust Account (the “Trust Account”) with Continental
Stock Transfer and Trust Company acting as trustee (the “Trustee”). Since the completion of the initial public offering,
our activity has been limited to the evaluation of business combination candidates and seeking to complete an initial business
combination.
In connection with special stockholders
meetings at which the completion window was extended, an aggregate of 18,775,732 public shares were redeemed for cash from the
trust account, for an aggregate redemption amount of approximately $196.4 million. As of December 31, 2020, there was approximately
$12,628,170 held in the trust account.
Our charter, as amended, currently provides
that it will have until June 30, 2021 to complete a business combination.
Our Units, Common Stock and Warrants are
listed on Nasdaq Capital Market under the symbols “LACQU,” “LACQ,” and “LACQW,” respectively.
Our Proposed Business Combination with
Ensysce
Ensysce is a clinical stage pharmaceutical
company with innovative solutions for severe pain relief while reducing the fear of and the potential for addiction, opioid misuse,
abuse and overdose. Ensysce has also incorporated a 79.2%-owned subsidiary, Covistat, a clinical stage pharmaceutical company
that is developing a compound utilized in Ensysce’s overdose protection program for the treatment of COVID-19.
On January 31, 2021, we entered into the
Merger Agreement with Merger Sub, our wholly-owned subsidiary, and Ensysce, providing for, among other things, and subject to
the terms and conditions therein, a business combination between Ensysce and LACQ pursuant to the proposed merger of Merger Sub
with and into Ensysce, with Ensysce continuing as the surviving entity providing for, subject to the terms of the Merger Agreement,
total Merger consideration of no more than (i) 17,500,000 shares of our common stock (includes shares issuable on conversion of
the Ensysce convertible notes (other than up to $5,000,000 of newly issued Ensysce convertible notes (which are convertible notes
issued after the date of the Merger Agreement) and the shares underlying the Ensysce options and Ensysce warrants) plus (ii) up
to 500,000 shares of our common stock issuable in respect of the newly issued Ensysce Convertible Notes.
At the reference price of $10.00 per share
of LACQ common stock, the total Merger consideration of 17,051,830 shares of LACQ common stock (based on the number of shares
of Ensysce common stock outstanding at January 31, 2021) (excluding the shares underlying outstanding options and warrants of
Ensysce which will be automatically converted into options and warrants to acquire shares of LACQ common stock at closing of the
business combination and excluding up to 500,00 shares of LACQ common stock which may be issuable with respect to the newly issued
Ensysce convertible notes would have a value of $170,518,300.
In connection with the Merger Agreement,
officers and directors of Ensysce entered Lock-up Agreements pursuant to which they have agreed not to sell, transfer, pledge
or otherwise dispose of shares of LACQ common stock they hold or receive for certain time periods specified therein.
Further, we and sponsors entered into
a Warrant Surrender Agreement pursuant to which each of the Hydra sponsor and the Matthews Lane sponsor agreed to irrevocably
forfeit and surrender 250,000 LACQ warrants immediately prior to, and contingent upon, the closing of the Merger Agreement.
The Company is incurring significant costs
in the pursuit of its acquisition plans. LACQ may be required to seek additional resources in the future to fund general corporate
purposes. LACQ cannot assure you that its plans to complete the Transactions will be successful.
Our Acquisition Process
In evaluating a prospective target business,
our process involves conducting a thorough due diligence review that encompasses, among other things, meetings with incumbent
management and employees, document reviews, as well as a review of financial, operational, legal and other information made available
to us. We will also utilize our operational and capital planning experience. In connection with the proposed Business Combination
with Ensysce, our officers and directors primary industry experience relates to the leisure sector and they do not have experience
with companies in the biotechnology sector
We are not prohibited from pursuing a
business combination with a company that is affiliated with our sponsors, strategic investor, officers or directors. In the event
we seek to complete our Business Combination with a company that is affiliated with our sponsors, strategic investor, officers
or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm
that is a member of Financial Industry Regulatory Authority, or FINRA, or an independent accounting firm that our Business Combination
is fair to our company from a financial point of view.
Members of our management team and our
independent directors directly or indirectly own founder shares and/or private placement warrants and, accordingly, may have a
conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our
Business Combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a
particular Business Combination if the retention or resignation of any such officers and directors was included by a target business
as a condition to any agreement with respect to our Business Combination.
Each of our officers and directors presently
has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which
such officer or director is or will be required to present a Business Combination opportunity. Accordingly, if any of our officers
or directors becomes aware of a Business Combination opportunity which is suitable for an entity to which he or she has then-current
fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity
to such entity and not to us. We do not believe, however, that the fiduciary duties or contractual obligations of our officers
or directors will materially affect our ability to complete our Business Combination. Our amended and restated certificate of
incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such
opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such
opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
In addition to the above, our executive
officers, including our Executive Chairman and our Chief Executive Officer, have certain duties to Inspired Entertainment, Inc.
(“Inspired”), a global gaming technology company, including but not limited to fiduciary and/or contractual duties.
As a result, our executive officers will have certain duties to offer acquisition opportunities to Inspired before we can pursue
such opportunities. However, we do not expect these duties to present a significant conflict of interest with our search for a
Business Combination. In addition, our executive officers are not required to commit any specified amount of time to our affairs,
and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying
potential business combinations and monitoring the related due diligence. Moreover, our executive officers have time and attention
requirements with respect to their duties to Inspired.
Our officers and directors have agreed
not to participate in the formation of, or become an officer or director of, any other blank check company until we have entered
into a definitive agreement regarding our Business Combination or we have failed to complete our Business Combination within the
required timeframe.
Business Combination
The Nasdaq rules require that our Business
Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of
the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on
the Trust Account) at the time of the agreement to enter into the Business Combination. If our board is not able to independently
determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment
banking firm that is a member of FINRA or an independent accounting firm with respect to the satisfaction of such criteria.
We anticipate structuring our Business
Combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity
interests or assets of the target business or businesses. We may, however, structure our Business Combination such that the post-transaction
company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives
of the target management team or stockholders or for other reasons, but we will only complete such Business Combination if the
post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires
a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment
Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders
prior to the Business Combination may collectively own a minority interest in the post-transaction company, depending on valuations
ascribed to the target and us in the Business Combination transaction. For example, we could pursue a transaction in which we
issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would
acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares,
our stockholders immediately prior to our Business Combination could own less than a majority of our outstanding shares subsequent
to our Business Combination. If less than 100% of the equity interests or assets of a target business or businesses are owned
or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will
be valued for purposes of the 80% of net assets test. If the Business Combination involves more than one target business, the
80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses
together as the Business Combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
Our Management Team
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 Business Combination. The amount of time that any member of our management team will
devote in any time period will vary based on whether a target business has been selected for our Business Combination and the
current stage of the Business Combination process.
Status as a Public Company
We believe our structure makes us an attractive
business combination partner to target businesses. As an existing public company, we offer a target business an alternative to
the traditional initial public offering through a merger or other business combination. In this situation, the owners of the target
business would exchange their shares of stock in the target business for shares of our stock or for a combination of shares of
our stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although there are various costs
and obligations associated with being a public company, we believe target businesses will find this method a more certain and
cost effective method to becoming a public company than the typical initial public offering. In a typical initial public offering,
there are additional expenses incurred in marketing, road show and public reporting efforts that may not be present to the same
extent in connection with a Business Combination with us.
Furthermore, once a proposed business
combination is completed, the target business will have effectively become public, whereas an initial public offering is always
subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or
prevent the offering from occurring or could have negative valuation consequences. Once public, we believe the target business
would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’
interests. It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and
aid in attracting talented employees.
We are an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart
Our Business Startups Act (the “JOBS Act”). We will remain an emerging growth company until the earlier of (1) the
last day of the fiscal year (a) following the fifth anniversary of the IPO Closing Date, (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 prior June 30th, and (2) the date on which we
have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Contingent Forward Purchase Contract
On December 1, 2017, our strategic investor
entered into a Contingent Forward Purchase Contract with us to purchase, in a private placement for gross proceeds of approximately
$62,500,000 to occur concurrently with the consummation of the business combination, 6,250,000 units on substantially the same
terms as the sale of units in our initial public offering at $10.00 per unit. The Contingent Forward Purchase Contract was waived
by our strategic investor in the connection with the proposed Business Combination with Ensysce.
Effecting our Business Combination
General
We are not presently engaged in, and we
will not engage in, any operations for an indefinite period of time. We intend to effectuate our Business Combination using cash
held in the Trust Account from the proceeds of our Initial Public Offering. We may also use our capital stock, debt or a combination
of these to provide capital in connection with our Business Combination. We may seek to complete our Business Combination with
a company or business that may be financially unstable or in its early stages of development or growth, which would subject us
to the numerous risks inherent in such companies and businesses.
If our Business Combination is paid for
using equity or debt securities, or not all of the funds released from the Trust Account are used for payment of the consideration
in connection with our Business Combination or used for redemptions of purchases of our common stock, we may apply the balance
of the cash released to us from the Trust Account, for general corporate purposes, including for maintenance or expansion of operations
of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our Business
Combination or for working capital.
We may seek to raise additional funds
through a private offering of debt or equity securities in connection with the completion of our Business Combination.
Subject to compliance with applicable
securities laws, we would expect to complete such financing only simultaneously with the completion of our Business Combination.
In the case of any financing in connection with closing of a Business Combination funded our tender offer documents or proxy materials
disclosing the Business Combination would disclose the terms of the financing and, only if required by law, we would seek stockholder
approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with
our Business Combination. At this time, we are not a party to any arrangement or understanding with any third party with respect
to raising any additional funds through the sale of securities or otherwise.
Sources of Target Businesses
We are not prohibited from pursuing our
Business Combination with a target that is affiliated with our sponsors, strategic investor, officers or directors or making the
acquisition through a joint venture or other form of shared ownership with our sponsors, strategic investor, officers or directors.
In the event we seek to complete our Business Combination with a target that is affiliated with our sponsors, strategic investor,
officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking
firm that is a member of FINRA or an independent accounting firm that such an initial Business Combination is fair to our company
from a financial point of view. We are not required to obtain such an opinion in any other context.
If any of our officers or directors becomes
aware of a Business Combination opportunity that falls within the line of business of any entity to which he or she has pre-existing
fiduciary or contractual obligations, he or she may be required to present such Business Combination opportunity to such entity
prior to presenting such Business Combination opportunity to us. Our officers and directors currently have certain relevant fiduciary
duties or contractual obligations that may take priority over their duties to us. If any of our officers or directors becomes
aware of a Business Combination opportunity that is suitable for one of these entities to which he has a fiduciary or contractual
obligation, he will honor such obligation to present such opportunity to such entity rather than to us. Our directors and officers
will only have an obligation to present an opportunity to us if such opportunity is expressly offered to such person solely in
his capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to
undertake and would otherwise be reasonable for us to pursue.
Selection of a Target Business and Structuring of our Initial
Business Combination
The Nasdaq rules require that our Business
Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of
our assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on
the Trust Account) at the time of the agreement to enter into the Business Combination. The fair market value of the target or
targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community,
such as discounted cash flow valuation or value of comparable businesses. If our board is not able to independently determine
the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm
that is a member of FINRA, or from an independent accounting firm, with respect to the satisfaction of such criteria. Subject
to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective
target businesses, although we will not be permitted to effectuate our Business Combination with another blank check company or
a similar company with nominal operations.
In any case, we will only complete a Business
Combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling
interest in the target sufficient for it not to be required to register as an investment company under the Investment Company
Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of
such business or businesses that are owned or acquired by the post-transaction company is what will be valued for purposes of
the 80% of net assets test.
To the extent we effect our Business Combination
with a company or business that may be financially unstable or in its early stages of development or growth we may be affected
by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in
a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective target business,
we expect to conduct a thorough due diligence review, which will encompass, among other things, meetings with incumbent management
and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as well as a review of financial,
operational, legal and other information that will be made available to us.
The time required to select and evaluate
a target business and to structure and complete our Business Combination, and the costs associated with this process, are not
currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of
a prospective target business with which our Business Combination is not ultimately completed will result in our incurring losses
and will reduce the funds we can use to complete another Business Combination.
Lack of Business Diversification
For an indefinite period of time after
the completion of our Business Combination, the prospects for our success will depend entirely on the future performance of a
single business. Unlike other entities that have the resources to complete Business Combinations with multiple entities in one
or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of
being in a single line of business. By completing our Business Combination with only a single entity, our lack of diversification
may:
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subject us to negative
economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular
industry in which we operate after our Business Combination; and
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cause us to depend
on the marketing and sale of a single product or limited number of products or services.
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Limited Ability to Evaluate the Target’s Management Team
Although as part of our process in reviewing
potential Business Combinations, including the proposed Business Combination with Ensysce, we scrutinize the management of a prospective
target business when evaluating the desirability of effecting our Business Combination with that business, our assessment of the
target business’ management may not prove to be correct. In addition, the future management may not have the necessary skills,
qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any,
in the target business cannot presently be stated with any certainty. While it is possible that one or more of our directors will
remain associated in some capacity with us following our Business Combination, it is unlikely that any of them will devote their
full efforts to our affairs subsequent to our Business Combination. Moreover, we cannot assure you that members of our management
team will have significant experience or knowledge relating to the operations of the particular target business and, in connection
with the proposed Business Combination with Ensysce, our officers and directors do not have experience in connection with the
biotechnology sector.
We cannot assure you that any of our key
personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any
of our key personnel will remain with the combined company will be made at the time of our initial Business Combination.
Following a Business Combination, we may
seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we
will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or
experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve Our Combination
We may conduct redemptions without a stockholder
vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by law or applicable
stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons. In connection with the
proposed Business Combination with Ensysce, we have determined to seek stockholder approval and stockholder approval would be
required to comply with Nasdaq rules. Our initial stockholders and their respective affiliates, including the sponsors and the
strategic investor and directors and officers, have agreed to vote in favor of the Business Combination and have sufficient votes
to approve the Business Combination without the vote of other stockholders. Presented in the table below is a graphic explanation
of the types of initial Business Combinations we may consider and whether stockholder approval is currently required under Delaware
law for each such transaction.
Type of Transaction
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Whether Stockholder
Approval is Required
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Purchase of assets
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No
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Purchase of stock of target not involving a merger with the company
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No
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Merger of target into a subsidiary of the company
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No
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Merger of the company with a target
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Yes
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Under Nasdaq’s listing rules, stockholder approval would
be required for our Business Combination if, for example:
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we issue shares
of common stock that will be equal to or in excess of 20% of the number of shares of our common stock then outstanding;
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any of our directors,
officers or substantial stockholders (as defined by Nasdaq rules) has a 5% or greater interest (or such persons collectively
have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and
the present or potential issuance of common stock could result in an increase in outstanding common shares or voting power
of 5% or more; or
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the issuance or
potential issuance of common stock will result in our undergoing a change of control.
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Permitted Purchases of our Securities
In the event we seek stockholder approval
of our Business Combination and we do not conduct redemptions in connection with our Business Combination pursuant to the tender
offer rules, our sponsors, strategic investor, directors, officers, advisors or their affiliates may purchase shares in privately
negotiated transactions or in the open market either prior to or following the completion of our Business Combination. However,
they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions
for any such transactions. They will not make any such purchases when they are in possession of any material non-public information
not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a purchase may include
a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial
owner thereof and therefore agrees not to exercise its redemption rights. We have adopted an insider trading policy which requires
insiders to: refrain from purchasing shares during certain blackout periods and when they are in possession of any material nonpublic
information and to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders
will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited
to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant
to a Rule 10b5-1 plan or determine that such a plan is not necessary.
In the event that our sponsors, strategic
investor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders
who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior
elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer
subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under
the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such
rules, the purchasers will comply with such rules.
The purpose of such purchases would be
to (i) vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval
of the Business Combination or (ii) 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 Business Combination, where it appears that such requirement would
otherwise not be met. This may result in the completion of our Business Combination that may not otherwise have been possible.
In addition, if such purchases are made,
the public “float” of our common stock may be reduced and the number of beneficial holders of our securities may be
reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities
exchange.
Our sponsors, strategic investor, officers,
directors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsors, strategic investor,
officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly
or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with
our Business Combination. To the extent that our sponsors, strategic investor, officers, directors, advisors or their affiliates
enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election
to redeem their shares for a pro rata share of the Trust Account or vote against the Business Combination. Our sponsors, strategic
investor, officers, directors, advisors or their affiliates will only purchase shares if such purchases comply with Regulation
M under the Exchange Act and the other federal securities laws.
Any purchases by our sponsors, strategic
investor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will
only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability
for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that
must be complied with in order for the safe harbor to be available to the purchaser. Our sponsors, strategic investor, officers,
directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule
10b-5 of the Exchange Act.
None of the funds in the Trust Account
will be used to purchase shares in such transactions.
Redemption Rights for Public Stockholders
Upon Completion of our Business Combination
We will provide our public stockholders
with the opportunity to redeem all or a portion of their shares of common stock upon the completion of our Business Combination
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days
prior to the consummation of the Business Combination including interest earned on the funds held in the trust account and not
previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, subject
to the limitations described herein. The amount initially held in the Trust Account was $10.00 per public share and is expected
to increase to the extent that interest accrues in the Trust Account. The per-share amount we will distribute to public stockholders
who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters.
Manner of Conducting Redemptions
We will provide our public stockholders
with the opportunity to redeem all or a portion of their shares of common stock upon the completion of our Business Combination
either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer.
The decision as to whether we will seek stockholder approval of a proposed Business Combination or conduct a tender offer will
be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether
the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement.
Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company
where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our
amended and restated certificate of incorporation would require stockholder approval. If we structure a Business Combination transaction
with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder
vote to approve the proposed business combination. We intend to conduct redemptions without a stockholder vote pursuant to the
tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose
to seek stockholder approval for business or other legal reasons.
If a stockholder vote is not required
and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated
certificate of incorporation:
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conduct the redemptions
pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and
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file tender offer
documents with the SEC prior to completing our Business Combination which contain substantially the same financial and other
information about the Business Combination and the redemption rights as is required under Regulation 14A of the Exchange Act,
which regulates the solicitation of proxies.
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Upon the public announcement of our Business
Combination, we or our sponsors will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our common
stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange
Act.
In the event we conduct redemptions pursuant
to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a)
under the Exchange Act, and we will not be permitted to complete our Business Combination until the expiration of the tender offer
period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of
public shares which are not purchased by our sponsors or strategic investor, which number will be based on the requirement that
we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are
not 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 Business Combination. If public stockholders tender more shares than we have offered
to purchase, we will withdraw the tender offer and not complete the Business Combination.
If, however, stockholder approval of the
transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business
or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
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conduct the redemptions
in conjunction with a proxy solicitation pursuant to Regulation 14A under the Exchange Act, which regulates the solicitation
of proxies, and not pursuant to the tender offer rules; and
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file proxy materials
with the SEC.
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In the event that we seek stockholder
approval of our Business Combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders
with the redemption rights described above upon completion of the Business Combination.
If we seek stockholder approval, we will
complete our Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the
Business Combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding
capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company
entitled to vote at such meeting. Our initial stockholders will count toward this quorum and have agreed, after approval of our
board, to vote their founder shares and any public shares purchased during or after our Initial Public Offering in favor of our
Business Combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes
will have no effect on the approval of our Business Combination once a quorum is obtained. There are currently 6,224,268 shares
of our common stock outstanding so at least 3,112,135 shares must be voted in favor to pass the Transactions contemplated by the
Merger Agreement. Our Board, officers and other initial stockholders and their respective affiliates (including the Sponsors and
Strategic Investor) own of record and are entitled to vote an aggregate of 6,000,000 shares and have agreed to vote in favor of
Transaction so no additional public shares are required to be voted in favor of the Transactions for it to be approved. We intend
to give not less than 10 days nor more than 60 days prior written notice of any such meeting, if required, at which a vote shall
be taken to approve our Business Combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders,
may make it more likely that we will consummate our Business Combination. Each public stockholder may elect to redeem its public
shares irrespective of whether they vote for or against the proposed transaction. Our initial stockholders and their respective
affiliates, including the sponsors and the strategic investor and directors and officers, have agreed to vote in favor of the
Business Combination and have sufficient votes to approve the Business Combination without the vote of other stockholders
Our amended and restated certificate of
incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets
to be less than $5,000,001 (so that we are not 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 Business Combination. For example,
the proposed Business Combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be
transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other
conditions in accordance with the terms of the proposed Business Combination. In the event the aggregate cash consideration we
would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to
satisfy cash conditions pursuant to the terms of the proposed Business Combination exceed the aggregate amount of cash available
to us, we will not complete the Business Combination or redeem any shares, and all shares of common stock submitted for redemption
will be returned to the holders thereof.
Limitation on Redemption Upon Completion of our Business
Combination if We Seek Stockholder Approval
Notwithstanding the foregoing, if we seek
stockholder approval of our Business Combination and we do not conduct redemptions in connection with our 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 20% of the shares sold in our Initial Public Offering, which we refer to as the “Excess Shares.” We
believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such
holders to use their ability to exercise their redemption rights against a proposed Business Combination as a means to force us
or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms.
Absent this provision, a public stockholder holding more than an aggregate of 20% of the shares sold in our Initial Public Offering
could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our management at a
premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem
no more than 20% of the shares sold in our Initial Public Offering, we believe we will limit the ability of a small group of stockholders
to unreasonably attempt to block our ability to complete our Business Combination, particularly in connection with a business
combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However,
we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against
our Business Combination.
Tendering Stock Certificates in Connection with a Tender
Offer or Redemption Rights
We may require our public stockholders
seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,”
to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials
mailed to such holders, or up to two business days prior to the vote on the proposal to approve the Business Combination in the
event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using Depository Trust Company’s
DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. The tender offer or proxy materials, as applicable,
that we will furnish to holders of our public shares in connection with our Business Combination will indicate whether we are
requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have from the time
we send out our tender offer materials until the close of the tender offer period, or up to two days prior to the vote on the
Business Combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its
redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of
their public shares.
There is a nominal cost associated with
the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The
transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not to pass this
cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to
exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights
regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures
used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many
blank check companies would distribute proxy materials for the stockholders’ vote on a Business Combination, and a holder
could simply vote against a proposed business combination and check a box on the proxy card indicating such holder was seeking
to exercise his or her redemption rights. After the business combination was approved, the company would contact such stockholder
to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option
window” after the completion of the business combination during which he or she could monitor the price of the company’s
stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before
actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders
were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion
of the business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery
prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the business combination is
approved.
Any request to redeem such shares, once
made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the stockholder meeting
set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered its certificate in connection
with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights,
such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated
that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly
after the completion of our business combination.
If our Business Combination is not approved
or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled
to redeem their shares for the applicable pro rata share of the Trust Account. In such case, we will promptly return any certificates
delivered by public stockholders who elected to redeem their shares.
If our initial proposed Business Combination
is not completed, we may continue to try to complete a Business Combination with a different target during the Combination Period.
Redemption of Public Shares and Liquidation
if No Business Combination
Our sponsors, strategic investor, officers
and directors have agreed that we will have to complete our Business Combination during the Combination Period. If we are unable
to complete our Business Combination within such period, we will: (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds
held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $75,000 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of
our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating
distributions with respect to our warrants, which will expire worthless if we fail to complete our Business Combination during
the Combination Period.
Our initial stockholders have entered
into letter agreements with us, pursuant to which they have waived their rights to liquidating distributions from the Trust Account
with respect to any founder shares held by them if we fail to complete our Business Combination during the Combination Period.
However, our initial stockholders will be entitled to liquidating distributions from the Trust Account with respect to any public
shares they hold if we fail to complete our Business Combination during the Combination Period.
Our sponsors, strategic investor, officers
and directors have agreed, pursuant to written letter agreements with us, that they will not propose any amendment to our amended
and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public
shares if we do not complete our Business Combination during the Combination Period, unless we provide our public stockholders
with the opportunity to redeem their shares of 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 including interest earned on the funds held in the
Trust Account and not previously released to us to pay our franchise and income taxes divided by the number of then outstanding
public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than
$5,000,001 (so that we are not subject to the SEC’s “penny stock” rules). Pursuant to our amended and restated
certificate of incorporation such an amendment would need to be approved by holders of 65% of our common stock entitled to vote
thereon.
We expect that all costs and expenses associated
with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts held outside the Trust
Account ($49,202 as of December 31, 2020), or through advances available for drawdown from our sponsors and strategic investor
under our Expense Advancement Agreement ($75,000 as of December 31, 2020), although we cannot assure you that there will be sufficient
funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing
our plan of dissolution, to the extent that there is any interest accrued in the Trust Account not required to pay franchise and
income taxes on interest income earned on the Trust Account balance, we may request the trustee to release to us an additional
amount of up to $75,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds
of our Initial Public Offering and the Concurrent Private Placement, other than the proceeds deposited in the Trust Account, and
without taking into account interest, if any, earned on the Trust Account, the per-share redemption amount received by stockholders
upon our dissolution would be approximately $10.00. The proceeds deposited in the Trust Account could, however, become subject
to the claims of our creditors that would have higher priority than the claims of our public stockholders. We cannot assure you
that the actual per-share redemption amount received by stockholders will not be substantially less than $10.00. Under Section
281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments
to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any
distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that
we will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors,
service providers (other than our independent auditors), 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, there is no guarantee that they will execute such agreements or even if they execute
such agreements that they would be prevented from bringing claims against the Trust Account including but not limited to fraudulent
inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the
waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the
Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account,
our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third
party that has not executed a waiver if management believes that such third party’s engagement would be significantly more
beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute
a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to
be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable
to find a service provider willing to execute a waiver.
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. Each sponsor has agreed that
it will be liable to us, jointly and severally, if and to the extent any claims by a vendor (other than our independent public
accountants) 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 (i) $10.00 per public share or (ii) such
lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions
in value of the trust assets, in each case net, of the amount of interest which may be withdrawn to pay our franchise and income
tax obligations, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust
Account and except as to any claims under our indemnity of the underwriters of our Initial Public Offering against certain liabilities,
including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third
party, then our sponsors will not be responsible to the extent of any liability for such third party claims We have not independently
verified whether each sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsors’ only
substantive assets are securities of our company. We have not asked our sponsors to reserve for such indemnification obligations.
Therefore, we cannot assure you that our sponsors would be able to satisfy those obligations. As a result, if any such claims
were successfully made against the Trust Account, the funds available for our 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 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.
In the event that the proceeds in the
Trust Account are reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account
as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the
amount of interest which may be withdrawn to pay our franchise and income tax obligations and each sponsor asserts that it is
unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim,
our independent directors would determine whether to take legal action against our sponsors to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our sponsors 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 if, for example, the cost of such legal action is deemed by the independent directors to be too high relative
to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked
our sponsors to reserve for such indemnification obligations and we cannot assure you that our sponsors would be able to satisfy
those obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption
price will not be less than $10.00 per public share.
We will seek to reduce the possibility
that our sponsors will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service
providers (other than our independent auditors), 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 monies held in the Trust Account. Our sponsors
will also not be liable as to any claims under our indemnity of the underwriters of our Initial Public Offering against certain
liabilities, including liabilities under the Securities Act. As of December 31, 2020, we have approximately $49,000 available
to us outside the Trust Account with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently
estimated to be no more than approximately $75,000). In the event that we liquidate and it is subsequently determined that the
reserve for claims and liabilities is insufficient, stockholders who received funds from our Trust Account could be liable for
claims made by creditors.
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 Business Combination during the Combination Period may be considered a liquidating distribution under Delaware
law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes
reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought
against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day
waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a
liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed
to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of
our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete
our Business Combination during the Combination Period, is not considered a liquidating distribution under Delaware law and such
redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims
of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating
distribution. If we are unable to complete our Business Combination during the Combination Period, we will: (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter,
redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account
including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income
taxes (less up to $75,000 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 (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case
to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly,
it is our intention to redeem our public shares as soon as reasonably possible following the Combination Period and, therefore,
we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the
extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third
anniversary of such date.
Because we will not be complying with
Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide
for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent
10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited
to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as
lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained
in our underwriting agreement, we will seek to have all vendors, service providers (other than our independent auditors), 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. As a result of this obligation, the claims that could be made
against us are significantly limited and the likelihood that any claim that would result in any liability extending to the Trust
Account is remote. Further, our sponsors may be liable only to the extent necessary to ensure that the amounts in the Trust Account
are not reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of
the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount
of interest withdrawn to pay our franchise and income tax obligations and will not be liable as to any claims under our indemnity
of the underwriters of our Initial Public Offering against certain liabilities, including liabilities under the Securities Act.
In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsors will not be responsible
to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an
involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject
to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority
over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, we cannot assure you we will
be able to return $10.00 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary
bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under
applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.”
As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. Furthermore, our board may be
viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself
and our company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims
of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public stockholders will be entitled
to receive funds from the Trust Account only in the event of the redemption of our public shares if we do not complete our Business
Combination during the Combination Period or if they redeem their respective shares for cash upon the completion of the Business
Combination. In no other circumstances will a stockholder have any right or interest of any kind to or in the Trust Account. In
the event we seek stockholder approval in connection with our Business Combination, a stockholder’s voting in connection
with the Business Combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro
rata share of the Trust Account. Such stockholder must have also exercised its redemption rights described above.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate of
incorporation contains certain requirements and restrictions relating to our Initial Public Offering that will apply to us until
the consummation of our Business Combination. If we seek to amend any provisions of our amended and restated certificate of incorporation
relating to stockholders’ rights or pre-Business Combination activity, we will provide dissenting public stockholders with
the opportunity to redeem their public shares in connection with any such vote. Our initial stockholders have agreed to waive
any redemption rights with respect to their founder shares and public shares in connection with the completion of our Business
Combination. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
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prior to the consummation
of our Business Combination, we shall either (1) seek stockholder approval of our Business Combination at a meeting called
for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against the
proposed Business Combination, into their pro rata share of the aggregate amount then on deposit in our Trust Account, including
interest (which interest shall be net of taxes payable) or (2) provide our public stockholders with the opportunity to tender
their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their
pro rata share of the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net
of taxes payable) in each case subject to the limitations described herein;
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we will consummate
our Business Combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, solely if
we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the Business
Combination;
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if our Business
Combination is not consummated during the Combination Period, then our existence will terminate and we will distribute all
amounts in our Trust Account; and
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prior to our Business
Combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds
from our Trust Account or (ii) vote on any Business Combination.
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These provisions cannot be amended without
the approval of holders of 65% of our common stock. In the event we seek stockholder approval in connection with our Business
Combination, our amended and restated certificate of incorporation provides that we may consummate our Business Combination only
if approved by a majority of the shares of Capital Stock voted by our stockholders voting at a duly held stockholders meeting.
Competition
In identifying, evaluating and selecting
a target business for our Business Combination, we may encounter intense competition from other entities having a business objective
similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses
seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting
business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical,
human and other resources than we do. Our ability to acquire larger target businesses will be limited by our available financial
resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our
obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources
available to us for our Business Commination and our outstanding warrants, and the future dilution they potentially represent,
may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in
successfully negotiating a Business Combination.
If we succeed in effecting our Business
Combination, there will be, in all likelihood, intense competition from competitors of the target business. Subsequent to our
Business Combination, we may not have the resources or ability to compete effectively.
Employees
We currently have four officers. 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 Business Combination. The amount of time that
any such person will devote in any time period will vary based on whether a target business has been selected for our Business
Combination and the current stage of the Business Combination process.
Periodic Reporting and Financial Information
Our Units, Common Stock and Warrants are
registered under the Exchange Act and as a result we have reporting obligations, including the requirement that we file annual,
quarterly and current reports with the SEC. Such reports and other information filed by the Company with the SEC are available
free of charge through the Investors link on our website at www.leisureacq.com and on the SEC’s website at www.sec.gov.
The contents of these websites are not incorporated into this filing. Further, our references to the website URLs are intended
to be inactive textual references only.
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 the fifth anniversary of the IPO Closing Date, (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 Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2)
the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References
herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller
reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain
reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will
remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held
by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded
$100 million during such completed fiscal year and the market value of common stock held by non-affiliates exceeds $700 million
as of the end of that year’s second fiscal quarter.
We will provide stockholders with audited
financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials
sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need
to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America
(“GAAP”) or international financing reporting standards (“IFRS”) as promulgated by the International Accounting
Standards Board (“IASB”) 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) (“PCAOB”).
We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have financial
statements prepared in accordance with GAAP or IFRS or that the potential target business will be able to prepare its financial
statements in accordance with GAAP or IFRS. To the extent that this requirement cannot be met, we may not be able to acquire the
proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation
will be material.
We are required to evaluate our internal
control procedures beginning with the fiscal year ended December 31, 2019 as required by the Sarbanes-Oxley Act. As long as we
maintain our status as 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 company with which we seek to complete our business combination may not be in compliance with
the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. A target company’s ability to achieve
compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Item 1A. Risk Factors
You should carefully consider the following
risk factors and all other information contained in this Report, including the financial statements. If any of the following events
occur, our business, financial condition or results of operations may be materially and adversely affected. In that event, the
trading price of our securities could decline, and you could lose all or part of your investment. The risk factors described below
are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business. For
more detailed risk factors related to Ensysce and the Transactions, see the Registration Statement on Schedule S-4 to be filed
by the Company subsequent to the filing of this Form 10-K.
Summary Risk Factors
You should carefully consider the risks
set forth in the section entitled “Risk Factors below, including, but not limited to the following:
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We
are a blank check company with no operating history and no revenues, and you have no
basis on which to evaluate our ability to achieve our business objective and since the
completion of the initial public offering, our activity has been limited to the evaluation
of business combination candidates and seeking to complete an initial business combination.
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Nasdaq
may delist us if we fail to meet the requirements of a Nasdaq order relating to timing
relating to our proposed Business Combination with Ensysce or fail to meet other listing
criteria either before or after the closing of the Merger, if the Merger is consummated.
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The
proposed business combination with Ensysce is subject to certain conditions and there
can be no assurance that it will close.
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Ensysce’s
business is subject to the risk that its success is dependent on its ability to develop
and commercialize its lead product candidates and other risks commonly associated with
biotechnology companies and there can be no assurance that it will be successful.
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LACQ’s
officers’ and directors’ primary industry experience relates to the leisure
sector and they do not have experience with companies in the biotechnology sector.
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Past
performance our management team or their respective affiliates may not be indicative
of future performance of an investment in us.
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While
our proposed Business Combination will be submitted to a vote of the stockholders, our
initial stockholders and their respective affiliates, including the sponsors and the
strategic investor and directors and officers, have agreed to vote in favor of the proposed
Business Combination Ensysce with and have sufficient votes to approve the Business Combination
without the vote of other stockholders.
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Your
only opportunity to affect the investment decision regarding a potential business combination
will be limited to the exercise of your right to redeem your shares from us for cash.
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The
ability of our public stockholders to redeem their shares for cash may make our financial
condition unattractive to potential business combination targets, which may make it difficult
for us to enter into a business combination with a target.
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The
ability of our public stockholders to exercise redemption rights with respect to a large
number of our shares may not allow us to complete the most desirable business combination
or optimize our capital structure.
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The
requirement that we complete our initial business combination within the prescribed time
frame may give potential target businesses leverage over us in negotiating a business
combination and may limit the time we have in which to conduct due diligence on potential
business combination targets, in particular as we approach our dissolution deadline,
which could undermine our ability to complete our initial business combination on terms
that would produce value for our stockholders.
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Our
search for a business combination, and any target business with which we ultimately consummate
a business combination, may be materially adversely affected by COVID-19 outbreak or
any future pandemic and the status of debt and equity markets.
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If
we seek stockholder approval of our initial business combination, our sponsor, directors,
officers, advisors or any of their affiliates may elect to purchase shares or warrants
from public stockholders, which may reduce the public “float” of our Class
A common stock.
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If
a stockholder fails to receive notice of our offer to redeem our public shares in connection
with our initial business combination, or fails to comply with the procedures for tendering
its shares, such shares may not be redeemed.
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You
will not have any rights or interests in funds from the trust account, except under certain
limited circumstances. To liquidate your investment, therefore, you may be forced to
sell your public shares or warrants, potentially at a loss.
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You
will not be entitled to protections normally afforded to investors of many other blank
check companies.
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If
third parties bring claims against us, the proceeds held in the trust account could be
reduced and the per share redemption amount received by stockholders may be less than
$10.00 per share.
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If
we have not completed our initial business combination within the required time period,
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.
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We
may engage in a business combination with one or more target businesses that have relationships
with entities that may be affiliated with our sponsor, officers or directors which may
raise potential conflicts of interest.
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Risks Related to our Status as a
Blank Check Company and our Nasdaq Listing
We are a blank check company with no
operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a blank check company with no operating
results, and we will not commence operations until completing a Business Combination. Because we have no operating history and
have no operating results, you have no basis upon which to evaluate our ability to achieve our business objective of completing
our Business Combination with one or more target businesses. We may be unable to complete a Business Combination. If we fail to
complete a Business Combination, we will never generate any operating revenues.
The Nasdaq may not continue to list
our securities, which could limit investors’ ability to make transactions in our securities and subject us to additional
trading restrictions.
The LACQ common stock and Public Warrants
are currently listed on the Nasdaq and LACQ expects to apply to continue to be listed on the Nasdaq upon consummation of the business
combination.
On November 30, 2020, LACQ received a notice
(the “Nasdaq Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”)
stating that LACQ was not in compliance with Listing Rule IM-5101-2 (the “Rule”), which requires that a special purpose
acquisition company complete one or more business combinations within 36 months of the effectiveness of the registration statement
filed in connection with its initial public offering. Since LACQ’s registration statement became effective on December 1,
2017, it was required to complete an initial business combination by no later than December 1, 2020. The Rule also provides that
failure to comply with this requirement will result in the Listing Qualifications Department issuing a Staff Delisting Determination
under Rule 5810 to delist LACQ’s securities. In addition, the Nasdaq Notice stated that LACQ was not in compliance with Nasdaq’s
minimum publicly held shares requirement under Listing Rule 5550(a)(4), which requires a listed company’s primary equity
security to maintain a minimum of 500,000 publicly held shares. The Listing Qualifications Department advised LACQ that its securities
would be subject to delisting unless LACQ timely requested a hearing before an independent Hearings Panel (the “Nasdaq Panel”).
Following a hearing on LACQ’s appeal, the Nasdaq panel granted LACQ’s request for continued listing through June 1,
2021 on the condition that (i) on or before January 31, 2021, LACQ will have executed a definitive merger agreement; (ii) on or
before March 15, 2021 (which had been extended by Nasdaq from March 1, 2021), LACQ will file a joint proxy/registration statement
on Form S-4; (iii) on or before May 28, 2021, LACQ will obtain stockholder approval for the merger; and (iv) on or before June
1, 2021, LACQ will complete the merger and evidence compliance with all initial listing standards as required under Nasdaq’s
listing qualifications rules. In addition, LACQ will need to comply with and continue to maintain compliance with the requirement
as to number of public stockholders. LACQ is not currently in compliance with the listing condition.
There can be no assurance that LACQ will
be able to obtain an additional extension from Nasdaq with respect to the conditions in Nasdaq’s grant of the appeal, meet
the continued listing standards on the closing date of the business combination, or comply with the continued listing standards
of Nasdaq following the business combination. If Nasdaq delists the LACQ common stock and/or Public Warrants from trading on its
exchange for failure to meet the listing standards either prior to or after the closing date of the business combination, LACQ’s
securityholders could face significant material adverse consequences including:
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a limited availability of market quotations
for LACQ’s securities;
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reduced liquidity for LACQ’s securities;
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a determination that the LACQ common stock
is a “penny stock” which will require brokers trading in such securities to adhere to more stringent rules and possibly
result in a reduced level of trading activity in the secondary trading market for LACQ’s securities;
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a limited amount of news and analyst coverage;
and
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a decreased ability to issue additional
securities or obtain additional financing in the future.
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Risks Related to our Proposed Business
Combination with Ensysce
There is no assurance when or even
if the Merger will be completed. Failure to obtain required approvals necessary to satisfy closing conditions may delay or prevent
completion of the Merger.
Completion of the Merger
is subject to the satisfaction or waiver of a number of conditions. There can be no assurance that we and Ensysce will be able
to satisfy the closing conditions or that closing conditions beyond their control will be satisfied or waived. If the Merger is
not completed, it is most likely that we will not be able to complete a Business Combination before the expiration of the Combination
Period and we will be required to liquidate.
LACQ
will be unable to close the Transactions if the redemptions of public shares result in its Tangible Net Assets being less than
$5,000,001 unless it is able to obtain sufficient equity financing.
LACQ’s amended
and restated certificate of incorporation, as amended, does not provide a specified maximum redemption threshold, except that
in no event will LACQ redeem its public shares in an amount that would cause its Net Tangible Assets to be less than $5,000,001
(such that LACQ is not 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 an initial business combination. It is also a condition to closing under the
Merger Agreement that, among other things, following payment to all stockholders who have exercised their redemption rights (and
after giving effect to the payment of expenses related to the
Transactions that are to be paid at or after Closing (provided that LACQ can pay such expenses in equity securities and
not cash)) and LACQ having cash of at least $5,000,000. If redemptions by LACQ’s public stockholders cause LACQ to be unable
to meet this closing condition, then Ensysce will not be required to consummate the business combination, although they may, in
their sole discretion, waive this condition. In the event that Ensysce waives this condition, LACQ does not intend to seek additional
stockholder approval or to extend the time period in which its public stockholders can exercise their redemption rights. In no
event, however, will LACQ close the Transactions if redemptions of public shares would cause LACQ’s Net Tangible Assets
to be less than $5,000,001. If redemptions exceed this level, we will not be able to close the Transactions unless we are able
to obtain a sufficient amount of equity financing to meet the Net Tangible Asset test. There can be no assurance that we will
be able to do so.
Even if the Business
Combination closes, there can be no assurance that the combined company will be successful and we and our stockholders will realize
the benefits of the Business Combination.
The realization of the
benefits in connection with the Business Combination will depend on Ensysce’s success in operating our business after completion
of the Merger and developing and commercializing its product candidates, which will be subject to risks, which will be addressed
in more detail in the Form S-4 to be filed by us in in connection with the business combination, including the following:
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Ensysce
is a clinical-stage pharmaceutical company with a limited operating history. Ensysce
has not yet demonstrated an ability to generate revenues, obtain regulatory approvals,
engage in clinical development beyond Phase 1 trials, manufacture any product on a commercial
scale or arrange for a third party to do so on Ensysce’s behalf or enter into licensing
arrangements to commercialize a product, or conduct sales and marketing activities necessary
for successful product commercialization.
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Ensysce
has invested a significant portion of its efforts and financial resources in the research
and development of its lead product candidate, and expects to continue to do so. Ensysce’s
ability to generate revenues from the sale of abuse-deterrent opioid products, which
may not occur at a significant level for several years, if at all, will depend heavily
on the successful development, regulatory approval and eventual commercialization of
this lead product candidate, as well as other product candidates it may develop.
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Ensysce’s
operations have consumed substantial amounts of cash since inception. Ensysce expects
to continue to spend substantial amounts to continue the clinical and preclinical development
of Ensysce’s product candidates. Accordingly, Ensysce will need to raise additional
capital to complete its currently planned clinical trials and any future clinical trials
and to further develop and commercialize its products.
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Ensysce’s
business will be subject to the risks commonly associated with research and development
of pharmaceutical products, including risks related to:
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Ensysce’s
lead product candidates may not be successful in limiting or impeding abuse, overdose
or misuse or provide additional safety upon commercialization;
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Ensysce
may experience failure or delay in completing clinical development;
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Ensysce’s
product candidates may cause undesirable side effects or have other properties that could
delay or prevent their regulatory approval;
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Ensysce
might not be able to obtain regulatory approval for its product candidates;
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Ensysce’s
clinical trials may fail to replicate positive results from earlier preclinical studies
or clinical trials conducted by Ensysce or third parties; and
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Ensysce
may face issues in connection with its patent or its patents may not provide sufficient
protection for its products.
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The
Business Combination with Ensysce is outside of LACQ’s original investment strategy.
LACQ was organized as
a blank check company to identify and build a company in the leisure sector that would complement and benefit from LACQ’s
management teams experience in this sector. LACQ’s officers and directors have substantial experience in evaluation the
operating and financial merits of companies from a wide range of industries, but do not have experience with companies in the
biotechnology sector. While we believe that proposed Business Combination with Ensysce is a in the best interests of LACQ, there
can be no assurance that the review of the proposed Business Combination with Ensysce, a biotechnology
company developing a pharmaceutical product, and the ability to identify the potential benefits and risks associated with Ensysce’s
business, was not affected by this proposed target being outside of the LACQ management team’s and the LACQ board’s
primary area of expertise.
Our management will not maintain control
of Ensysce after our Business Combination, if the Business Combination is consummated.
Our stockholders prior
to the Business Combination will collectively own a minority interest in the post Business Combination company, if the Business
Combination is consummated, Accordingly, our management will not maintain our control of the target business. We cannot provide
assurance that new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
Risks Related to Searching for and
Consummating a Business Combination
Our public
stockholders may not be afforded an opportunity to vote on our proposed Business Combination, which means we may complete our
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 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 legal reasons. For instance, Nasdaq
rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder
approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in our Business
Combination. Therefore, if the structure of our Business Combination involved the issuance of more than 20% of our outstanding
shares, we would seek stockholder approval of such Business Combination. However, except as required by law, 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. Accordingly,
we may complete our Business Combination even if holders of a majority of our public shares do not approve of the Business Combination
we complete. Please refer to “Item 1. Business – Stockholders May Not Have the Ability to Approve Our Business Combination”
for additional information.
If we seek stockholder approval of
our Business Combination, after approval of our board, our initial stockholders have agreed to vote in favor of such Business
Combination, regardless of how our public stockholders vote.
Unlike many other blank check companies
in which the initial stockholders agree to vote their founder shares in accordance with the majority of the votes cast by the public
stockholders in connection with a Business Combination, after approval of our board, our initial stockholders have agreed to vote
their founder shares, as well as any public shares purchased during or after our Initial Public Offering, in favor of our Business
Combination. Our initial stockholders own shares representing approximately 96.4% (as of December 31, 2020) of our outstanding
shares of common stock. Accordingly, if we seek stockholder approval of our Business Combination, it is more likely that the necessary
stockholder approval will be received than would be the case if our initial stockholders 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 the business combination.
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, unless we seek such stockholder vote. 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 Business Combination. Even if we seek stockholder approval, our initial stockholders
and their respective affiliates, including the sponsors and the strategic investor and directors and officers, have agreed to
vote in favor of the Business Combination and have sufficient votes to approve the Business Combination without the vote of other
stockholders.
The ability of our public stockholders
to redeem their shares for cash may make our financial condition unattractive to potential Business Combination targets, which
may make it difficult for us to enter into a Business Combination with a target.
We may seek to enter into a Business Combination
transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain
amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition
and, as a result, would not be able to proceed with the Business Combination. Furthermore, 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 are not 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 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.
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 Business Combination, we will not know how many stockholders may exercise their redemption rights, and therefore will
need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption.
If our 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 are 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. The above considerations may limit our ability to complete the most desirable
Business Combination available to us or optimize our capital structure. The amount of the deferred underwriting commissions payable
to the underwriters will not be adjusted for any shares that are redeemed in connection with a Business Combination. The per-share
amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting
commission and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation
to pay the deferred underwriting commissions.
The ability of our public stockholders
to exercise redemption rights with respect to a large number of our shares could increase the probability that our Business Combination
would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our 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 (as is the case of the Merger Agreement with Ensysce), the probability that our Business Combination would
be unsuccessful is increased. If our 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
Business Combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a Business
Combination and may decrease our ability to conduct due diligence on potential Business Combination targets as we approach our
dissolution deadline, which could undermine our ability to complete our 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 Business Combination during
the Combination Period. Consequently, such target business may obtain leverage over us in negotiating a Business Combination,
knowing that if we do not complete our Business Combination with that particular target business, we may be unable to complete
our 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 Business Combination on terms that we would
have rejected upon a more comprehensive investigation.
We may not be able to complete our
Business Combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding
up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.00 per share,
or less than such amount in certain circumstances, and our warrants will expire worthless.
Our sponsors, strategic investor, officers
and directors have agreed that we must complete our Business Combination during the Combination Period. We may not be able to
find a suitable target business and complete our Business Combination within such time period. If we have not completed our Business
Combination within such time period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the
Trust Account and not previously released to us to pay our franchise and income taxes (less up to $75,000 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject in 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 only receive $10.00
per share, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00
per share on the redemption of their shares. 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 below.
If we seek stockholder approval of
our Business Combination, our sponsors, strategic investor, directors, officers, advisors and their affiliates may elect to purchase
shares from public stockholders, 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
Business Combination and we do not conduct redemptions in connection with our Business Combination pursuant to the tender offer
rules, our sponsors, strategic investor, directors, officers, advisors or their affiliates may purchase shares in privately negotiated
transactions or in the open market either prior to or following the completion of our Business Combination, although they are
under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still
the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption
rights. In the event that our sponsors, strategic investor, directors, officers, advisors or their affiliates purchase shares
in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such
selling stockholders would be required to revoke their prior elections to redeem their shares. 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 the 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 business combination, where it appears that such requirement would
otherwise not be met. This may result in the completion of our Business Combination that may not otherwise have been possible.
In addition, if such purchases are made,
the public “float” of our common stock and the number of beneficial holders of our securities may be reduced, possibly
making it difficult to obtain or maintain 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 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 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 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 documents or proxy materials
mailed to such holders, or up to two business days prior to the vote on the proposal to approve the Business Combination in the
event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder
fails to comply with these or any other procedures, its shares may not be redeemed. See “Item 1. Business – Tendering
Stock Certificates in Connection with a Tender Offer or Redemption Rights” for additional information.
If the net proceeds of the Initial
Public Offering and the Concurrent Private Placement 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 Business Combination and we may be required
to depend on the availability of loans from our sponsors, management team or strategic investor to fund our search for a Business
Combination, to pay our franchise and income taxes and to complete our Business Combination. If we are unable to obtain these
loans, we may be unable to complete our Business Combination.
If the funds available to us outside the
Trust Account are not sufficient to fund our working capital requirements, we may be required to borrow funds from our sponsors,
management team, strategic investor or other third parties to operate or may be forced to liquidate. Other than working capital
loans of $1,460,000 which have been received through March 10, 2021 ($1,000,000 of which was converted into working capital warrants),
none of our sponsors or strategic investor, members of our management team or any of their affiliates is under any obligation to
advance funds to us in such circumstances. Any such loans and advances would be repaid only from funds held outside the Trust Account
or from funds released to us upon completion of our Business Combination. We do not expect to seek loans from parties other than
our sponsors or strategic investor or an affiliate of our sponsors or strategic investor as we do not believe third parties will
be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account. If
we are unable to obtain these loans, we may be unable to complete our Business Combination. If we are unable to complete our Business
Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust
Account. Consequently, our public stockholders may only receive approximately $10.00 per share plus any pro rata interest earned
on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $75,000
of interest to pay dissolution expenses) on our redemption of our public shares, and our warrants will expire worthless. In certain
circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares. 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 below.
We may be unable to obtain additional
financing to complete our 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 Initial Public Offering and Concurrent Private Placement, as well as the private placement made by our strategic investor,
will be sufficient to allow us to complete our Business Combination, such aggregate net proceeds may not be sufficient to meet
the capital requirements for our Business Combination. If the net proceeds of the Initial Public Offering and Concurrent Private
Placement prove to be insufficient, either because of the size of our Business Combination, the depletion of the available net
proceeds in search of a target business, the obligation to repurchase for cash a significant number of shares from stockholders
who elect redemption in connection with our Business Combination or the terms of negotiated transactions to purchase shares in
connection with our Business Combination, we may be required to seek additional financing or to abandon the proposed Business Combination.
We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing
proves to be unavailable when needed to complete our Business Combination, we would be compelled to either restructure the transaction
or abandon that particular Business Combination and seek an alternative target business candidate. If we are unable to complete
our Business Combination, our public stockholders may receive only approximately $10.00 per share plus any pro rata interest earned
on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $75,000
of interest to pay dissolution expenses) on the liquidation of our Trust Account and our warrants will expire worthless. In addition,
even if we do not need additional financing to complete our 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 Business Combination. If we are unable to complete
our Business Combination, our public stockholders may only receive approximately $10.00 per share on the liquidation of our Trust
Account, and our warrants will expire worthless.
Risks Related to Our Securities
You will not have any rights or interests
in funds from the Trust Account, except under certain limited circumstances. To liquidate your investment, therefore, you may
be forced to sell your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled
to receive funds from the Trust Account only upon the earliest to occur of: (i) our completion of a Business Combination, (ii)
the redemption of any public shares properly tendered 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 redeem 100% of our public shares if we do
not complete our Business Combination during the Combination Period and (iii) the redemption of our public shares if we are unable
to complete a Business Combination during the Combination Period, subject to applicable law and as further described herein. In
addition, if we are unable to complete a Business Combination during the Combination Period 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 during the Combination
Period 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. Accordingly, to liquidate your investment, you may be forced to sell your public shares
or warrants, potentially at a loss.
You will not be entitled to protections
normally afforded to investors of many other blank check companies.
Because we have net tangible assets in
excess of $5,000,000 and timely filed a Current Report on Form 8-K after the IPO Closing Date, including an audited balance sheet
demonstrating this fact, we are exempt from rules promulgated by the SEC to protect stockholders in blank check companies, such
as Rule 419. Accordingly, stockholders are not afforded the benefits or protections of those rules. Among other things, this means
our Units were immediately tradable at the IPO Closing Date and we will have a longer period of time to complete our Business
Combination than do companies subject to Rule 419. Moreover, if we 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 a Business Combination.
If we seek stockholder approval of
our 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 20% of our common stock, you will lose the ability to redeem all such shares in
excess of 20% of our common stock.
If we seek stockholder approval of our
Business Combination and we do not conduct redemptions in connection with our 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 20%
of the public shares sold in the IPO, which we refer to as the “Excess Shares.” However, this does not restrict our
stockholders’ ability to vote all of their shares (including Excess Shares) for or against our Business Combination. The
inability to redeem the Excess Shares will reduce a stockholder’s influence over our ability to complete our Business Combination
and could result in a stockholder suffering a material loss on investment if the stockholder sells Excess Shares in open market
transactions. Additionally, redemption distributions will not be made with respect to the Excess Shares if we complete our Business
Combination. As a result, such stockholder would continue to hold the Excess Shares and, in order to dispose of such shares, would
be required to sell such stock in open market transactions, 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 Business Combination.
If we are unable to complete our Business Combination, our public stockholders may receive only approximately $10.00 per share
on our redemption of our public shares, or less than such amount in certain circumstances, and our warrants will expire worthless.
We expect to encounter intense competition
from other entities having a business objective similar to ours, including private investors (which may be individuals or investment
partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses
we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying
and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many
of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our
financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there
are numerous target businesses we could potentially acquire with the net proceeds of the Initial Public Offering and the Concurrent
Private Placement, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be
limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition
of certain target businesses. Furthermore, because we are obligated to pay cash for the shares of common stock which our public
stockholders redeem in connection with our Business Combination, target companies will be aware that this may reduce the resources
available to us for our Business Combination. This may place us at a competitive disadvantage in successfully negotiating a Business
Combination. If we are unable to complete our 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. In certain circumstances, our public
stockholders may receive less than $10.00 per share upon our liquidation. 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 below.
If the net proceeds of our Initial
Public Offering and Concurrent Private Placement not being held in the Trust Account are insufficient to allow us to operate during
the Combination Period, we may be unable to complete our Business Combination, in which case our public stockholders may only
receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
As of December 31, 2020, we have $49,202
available to us outside the Trust Account to fund our working capital requirements. The funds available to us outside of the Trust
Account may not be sufficient to allow us to operate during the Combination Period assuming that our Business Combination is not
completed during that time. 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. If we are unable to complete our 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. In certain circumstances, our public stockholders
may receive less than $10.00 per share upon our liquidation. 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 below.
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 auditors), 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.
Examples of possible instances where we
may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise
or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver
or in cases where management is unable to find a service provider willing to execute a waiver. 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 Business Combination within the prescribed timeframe, or upon the exercise of a redemption
right in connection with our 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 $10.00 per share (plus any pro rata interest earned on the funds held in the
Trust Account and not previously released to us to pay our franchise and income taxes) , due to claims of such creditors. Each
sponsor has agreed that it will be liable to us, jointly and severally, if and to the extent any claims by a vendor (other than
our independent public accountants) 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 (i) $10.00 per public
share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account
due to reductions in the value of the trust assets, in each case net, of the interest which may be withdrawn to pay our franchise
and income tax obligations. This liability will not apply with respect to any claims by a third party who executed a waiver of
any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of our
Initial Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that
an executed waiver is deemed to be unenforceable against a third party, then our sponsors will not be responsible to the extent
of any liability for such third-party claims. We have not independently verified whether each sponsor has sufficient funds to satisfy
its indemnity obligations and believe that our sponsors’ only substantive assets are securities of our company. We have not
asked our sponsors to reserve for such indemnification obligations. Therefore, we cannot assure you that our sponsors would be
able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds
available for our 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 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 directors may decide not to enforce
the indemnification obligations of our sponsors, 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 (i) $10.00 per public share or (ii) such lesser amount per share held in the Trust
Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case
net of the interest which may be withdrawn to pay our franchise and income tax obligations, and each 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 sponsors to enforce their indemnification obligations.
While we currently expect that our independent
directors would take legal action on our behalf against our sponsors to enforce their indemnification obligations to us, it is
possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost
of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent
directors 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 we and our board may be exposed 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 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, thereby exposing itself and us to claims of punitive damages,
by paying public stockholders from the Trust Account prior to addressing the claims of creditors.
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 stockholders
in connection with our liquidation may 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 business combination.
If we are deemed to be an investment company
under the Investment Company Act, our activities may be restricted, including:
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restrictions on
the nature of our investments; and
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restrictions on
the issuance of securities, each of which may make it difficult for us to complete our Business Combination.
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In addition, we may have imposed upon
us burdensome requirements, including:
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registration as
an investment company;
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adoption of a specific
form of corporate structure; and
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reporting, record
keeping, voting, proxy and disclosure requirements and other rules and regulations.
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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. To this end, the proceeds held in the Trust Account may only
be invested in United States “government securities” within the meaning of Section 2(a) (16) of the Investment Company
Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement,
the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments,
and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling
businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company”
within the meaning of the Investment Company Act. The Trust Account is intended as a holding place for funds pending the earliest
to occur of: (i) the completion of our primary business objective, which is a Business Combination; (ii) the redemption of any
public shares properly tendered 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 redeem 100% of our public shares if we do not complete our Business Combination
during the Combination Period; or (iii) absent a Business Combination, our return of the funds held in the Trust Account to our
public stockholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed above, we may
be deemed to be subject to 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 complete a Business Combination. If we are unable to complete our 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, investments and results of operations.
We are subject to laws, regulations and
rules enacted by national, regional and local governments and Nasdaq. In particular, we will be required to comply with certain
SEC and other legal requirements or regulations. Compliance with, and monitoring of, applicable laws and regulations may be difficult,
time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time
and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a
failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our
business and results of operations.
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 Business Combination during the Combination Period may be considered a liquidating distribution under Delaware
law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable
provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against
the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting
period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating
distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the
stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it
is our intention to redeem our public shares as soon as reasonably possible following during the Combination Period in the event
we do not complete our Business Combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with
Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide
for our payment of all existing and pending claims or claims that may be potentially brought against us within the 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, 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. Further, stockholders will not know at the time of dissolution the scope of potential claims 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 Business Combination during the Combination Period is not considered a liquidating distribution under Delaware
law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations
for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the
case of a liquidating distribution.
We are not registering the shares of
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 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 to use our best efforts to file a registration statement under the Securities
Act covering such shares and maintain a current prospectus relating to the common stock issuable upon exercise of the warrants,
until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we
will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth
in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current
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 is available. Notwithstanding the above, if our 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 be required to
use our 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 there is no exemption 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 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 common stock for sale under all applicable state securities laws.
The grant of registration rights to
our initial stockholders may make it more difficult to complete our Business Combination, and the future exercise of such rights
may adversely affect the market price of our common stock.
Pursuant to an agreement entered into
on the IPO Closing Date, our initial stockholders and our strategic investor and their permitted transferees can demand that we
register their founder shares, the shares issuable pursuant to the contingent forward purchase contract, the shares of common
stock issuable upon exercise of the warrants pursuant to the contingent forward purchase contract, the private placement warrants
and the shares of common stock issuable upon exercise of the private placement warrants held by them and holders of warrants that
may be issued upon conversion of working capital loans may demand that we register such warrants or the common stock issuable
upon exercise of such warrants. In addition, given that the lock-up period on the founder shares is potentially shorter than most
other blank check companies, these shares may become registered and available for sale sooner than founder shares in such other
companies. 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 common stock. In addition,
the existence of the registration rights may make our Business Combination more costly or difficult to conclude. 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 common stock that is expected when the securities owned by our initial
stockholders or holders of working capital loans or their respective permitted transferees are registered.
We do not have a specified maximum
redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a Business Combination
with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of
incorporation does not provide a specified maximum 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 are not 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 Business Combination. As a result, we may be able to complete our 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 Business Combination and do not conduct redemptions in connection with our Business Combination pursuant to the
tender offer rules, have entered into privately negotiated agreements to sell their shares to our sponsors, strategic investor,
officers, directors, advisors or their affiliates. In the event the aggregate cash consideration we would be required to pay for
all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant
to the terms of the proposed Business Combination exceed the aggregate amount of cash available to us, we will not complete the
Business Combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders
thereof, and we instead may search for an alternate Business Combination.
The exercise price for the public warrants
is higher than in many similar blank check company offerings in the past, and, accordingly, the warrants are more likely to expire
worthless.
The exercise price of the public warrants
is higher than is typical in many similar blank check companies in the past. Historically, the exercise price of a warrant was
generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our public warrants
is $11.50 per share. As a result, the warrants are less likely to ever be in the money and more likely to expire worthless.
In order to effectuate our Business
Combination, we may seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that
will make it easier for us to complete our Business Combination but that our stockholders may not support.
In order to effectuate a Business Combination,
blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments.
For example, blank check companies have amended the definition of Business Combination, increased redemption thresholds and changed
industry focus. We cannot assure you that we will not seek to amend our charter or governing instruments in order to effectuate
our Business Combination.
The 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 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 a Business Combination
that some of our stockholders may not support.
Some other blank check companies have
a provision in their charter that prohibits the amendment of certain of its provisions, including those which relate to a company’s
pre-Business Combination activity, without approval by a certain percentage of the company’s stockholders. In those companies,
amendment of these provisions requires approval by between 90% and 100% of the company’s public stockholders. Our amended
and restated certificate of incorporation provides that any of its provisions related to pre-Business Combination activity (including
the requirement to deposit proceeds of our Initial Public Offering and the Concurrent Private Placement into 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 65% of our common stock entitled to vote thereon, 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 entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended
by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL
or applicable stock exchange rules. Our initial stockholders, who collectively beneficially own founder shares representing approximately
21% of our common stock, will participate in any vote to amend our amended and restated certificate of incorporation and/or trust
agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions
of our amended and restated certificate of incorporation which govern our pre-Business Combination behavior more easily than some
other blank check companies, and this may increase our ability to complete a 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 sponsors, strategic investor, officers
and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and
restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public
shares if we do not complete our Business Combination during the Combination Period, unless we provide our public stockholders
with the opportunity to redeem their shares of 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 initial stockholders. 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 sponsors, strategic investor, 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.
Our initial stockholders may exert
a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
As of December 31, 2020, our initial stockholders
own founder shares representing approximately 80.3% of our issued and outstanding shares of common stock and our strategic investor
owns an additional 1,000,000 public shares (which were acquired as part of units purchased in our Initial Public Offering), representing
aggregate ownership of 96.4% of the outstanding shares of common stock. Accordingly, our initial stockholders may exert a substantial
influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our
amended and restated certificate of incorporation and approval of major corporate transactions. If our initial stockholders purchase
any additional shares of common stock in the open market or in privately negotiated transactions, this would increase their control.
Factors that would be considered in making such additional purchases would include consideration of the current trading price of
our common stock. In addition, because of their ownership position, our initial stockholders will continue to have considerable
influence on elections for our boards of directors and will continue to exert control at least until the completion of our Business
Combination.
We may amend the terms of the warrants
in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then outstanding public warrants.
As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of
shares of our common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants were issued in registered
form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement
provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any
defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make
any change that adversely affects the interests of the registered holders. 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, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a
warrant.
We may redeem your unexpired warrants
prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding
warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that
the last reported sales price of our common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day
period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain
other conditions are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are
unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the
outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be
disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to
hold your warrants or (iii) to accept the nominal redemption price of $0.01 per warrant which, at the time the outstanding warrants
are called for redemption, is likely to be substantially less than the market value of your warrants. None of the private placement
warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.
Our warrants and founder shares may
have an adverse effect on the market price of our common stock and make it more difficult to effectuate our Business Combination.
We issued warrants to purchase 10,000,000
shares of our common stock as part of the units offered in our Initial Public Offering and we issued warrants to purchase an aggregate
of 6,825,000 shares of common stock at $11.50 per share in the Concurrent Private Placement. Our initial stockholders currently
own an aggregate of 5,000,000 founder shares. In addition, our sponsors or strategic investor made working capital loans in the
aggregate amount of $1,460,000, as of March 10, 2021, of which $1,000,000 has been converted to warrants and an additional $460,000
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, including as to exercise price, exercisability and exercise period. In addition, we issued to
GTWY Holdings Limited warrants to purchase 566,288 shares of LACQ common stock in exchange for previously outstanding loans under
the GTWY Expense Advancement Agreement.
To the extent we issue shares of common
stock to effectuate a Business Combination, the potential for the issuance of a substantial number of additional shares of common
stock upon exercise of these warrants and conversion rights could make us a less attractive acquisition vehicle to a target business.
Any such issuance will increase the number of issued and outstanding shares of our common stock and reduce the value of the shares
of common stock issued to complete the Business Combination. Therefore, our warrants and founder shares may make it more difficult
to effectuate a Business Combination or increase the cost of acquiring the target business.
The private placement warrants are identical
to the warrants sold as part of the units in our Initial Public Offering except that, so long as they are held by their initial
purchasers or their permitted transferees, (i) they will not be redeemable by us, (ii) they (including the common stock issuable
upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by such purchasers
until 30 days after the completion of our Business Combination, (iii) they may be exercised by the holders on a cashless basis
and (iv) are subject to registration rights.
Because each unit contains one-half
of one warrant and only a whole warrant may be exercised, the units may be worth less than units of other blank check companies.
Each unit contains one-half of one warrant.
Because, pursuant to the warrant agreement, the warrants may only be exercised for a whole number of shares, only a whole warrant
may be exercised at any given time. This is different from other offerings similar to ours whose units include one share of common
stock and one warrant to purchase one whole share. We have established the components of the units in this way in order to reduce
the dilutive effect of the warrants upon completion of a Business Combination since the warrants will be exercisable in the aggregate
for one-half of the number of shares compared to units that each contain a warrant to purchase one whole share, thus making us,
we believe, a more attractive merger partner for target businesses. Nevertheless, this unit structure may cause our units to be
worth less than if they included a warrant to purchase one whole share.
Because we must furnish our stockholders
with target business financial statements, we may lose the ability to complete an otherwise advantageous Business Combination
with some prospective target businesses.
The federal proxy rules require that a
proxy statement with respect to a vote on a Business Combination meeting certain financial significance tests include target historical
and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in
connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements
may be required to be prepared in accordance with, or be reconciled to, GAAP or IFRS depending on the circumstances and the historical
financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements
may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial
statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete our Business
Combination within the prescribed time frame.
We are an emerging growth company within
the meaning of the Securities Act, as well as a smaller reporting company within the meaning of the Securities Act, and if we
take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting
companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance
with other public companies.
We are an “emerging growth company”
within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not
limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important.
We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier,
including if the market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 before that time,
in which case we would no longer be an emerging growth company as of the following December 31. 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 an election to opt out is irrevocable. We have elected not to opt out of such
extended transition period, which means that when a standard is issued or revised and it has different application dates for public
or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt
the new or revised standard. This may make comparison of our financial statements with another public company which is neither
an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Additionally, we qualify
as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may
take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial
statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value
of common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal
quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of
common stock held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.
To the extent we take advantage of such reduced disclosure obligations, we may also make comparison of its financial statements
with other public companies difficult or impossible.
Compliance obligations
under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our Business Combination, require substantial financial
and management resources, and increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley
Act requires that we evaluate and report on our system of internal controls. As long as we maintain our status as 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 company with which
we seek to complete our 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 acquisition.
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 common stock and could entrench management.
Our amended and restated certificate of
incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their
best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate
the terms of and issue new series of preferred shares, which may make the removal of management more difficult and may discourage
transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions
under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management
more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices
for our securities.
If we effect our Business Combination
with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional risks
that may negatively impact our operations.
If we effect our Business Combination
with a company with operations or opportunities outside of the United States, we would be subject to any special considerations
or risks associated with companies operating in an international setting, including any of the following:
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higher costs and
difficulties inherent in managing cross-border business operations and complying with different commercial and legal requirements
of overseas markets;
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rules and regulations
regarding currency redemption;
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complex corporate
withholding taxes on individuals;
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laws governing the
manner in which future Business Combinations may be effected;
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tariffs and trade
barriers;
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regulations related
to customs and import/export matters;
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longer payment cycles
and challenges in collecting accounts receivable;
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tax issues, such
as tax law changes and variations in tax laws as compared to the United States;
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currency fluctuations
and exchange controls;
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cultural and language
differences;
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employment regulations;
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crime, strikes,
riots, civil disturbances, terrorist attacks, natural disasters and wars;
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deterioration of
political relations with the United States; and
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government appropriations
of assets.
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We may not be able to adequately address
these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations
and financial condition.
Risks Related to The Company after a Business Combination
Subsequent to the completion of our
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 our stock price, 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 surface all material issues
that may be present inside 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 would not have an immediate impact on our liquidity, unexpected risks may arise
and previously known risks may materialize in a manner not consistent with LACQ’s risk analysis. Even though some of these
charges may be non-cash items and not have an immediate impact on LACQ’s liquidity, charges of this nature could contribute
to negative market perceptions about LACQ or its securities. Accordingly, LACQ’s stockholders following the business combination
could suffer a reduction in the value of their shares.
We may issue additional common or preferred
shares to complete our Business Combination or under an employee incentive plan after completion of our Business Combination,
any one of which 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 100,000,000 shares of common stock, par value $0.0001 per share, and 1,000,000 shares
of preferred stock, par value $0.0001 per share. As of March 10, 2021, there were 75.4 million authorized but unissued shares of
common stock available for issuance, which amount takes into account shares reserved for issuance upon exercise of outstanding
warrants, and there were no shares of preferred stock issued and outstanding.
We may issue a substantial number of additional
shares of common or preferred stock to complete our Business Combination or under an employee incentive plan after completion
of our Business Combination. However, our amended and restated certificate of incorporation provides, among other things, that
prior to our 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 vote on any Business Combination. The issuance of additional shares of common or preferred
stock:
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may significantly
dilute the equity interest of existing stockholders;
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may subordinate
the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
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could cause a change
in control if a substantial number of shares of common stock is issued, which may affect, among other things, our ability
to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers
and directors; and
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may adversely affect
prevailing market prices for our units, common stock and/or warrants.
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Resources could be wasted in researching
acquisitions 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 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 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 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 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.
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 on Form 10-K to issue any notes or other debt securities, or to otherwise incur outstanding debt,
we may choose to incur substantial debt to complete our Business Combination. We have agreed that we will not incur any indebtedness
unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in
the Trust Account. As such, no issuance of debt will affect the per-share amount available for redemption from the Trust Account.
Nevertheless, the incurrence of debt could have a variety of negative effects, including:
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default and foreclosure
on our assets if our operating revenues after a Business Combination are insufficient to repay our debt obligations;
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acceleration of
our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment
of all principal and accrued interest, if any, if the debt security is payable on demand;
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our inability to
obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing
while the debt security is outstanding;
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our inability to
pay dividends on our common stock;
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using a substantial
portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on
our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general
corporate purposes;
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limitations on our
flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability
to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
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limitations on our
ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution
of our strategy; and
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other disadvantages
compared to our competitors who have less debt.
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We may only be able to complete one
Business Combination, which will cause us to be solely dependent on a single business which may have a limited number of products
or services. This lack of diversification may negatively impact our operations and profitability.
We may effectuate our Business Combination
with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not
be able to effectuate our Business Combination with more than one target business because of various factors, including the existence
of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present
operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By
completing our Business Combination with only a single entity, our lack of diversification may subject us to numerous economic,
competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible
spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several Business Combinations
in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
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solely dependent
upon the performance of a single business, property or asset; or
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dependent upon the
development or market acceptance of a single or limited number of products, processes or services.
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This lack of diversification may subject
us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon
the particular industry in which we may operate subsequent to our business combination.
We may attempt to complete our 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 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 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.
Risks Related to Our Sponsor, Management, Directors and
Employees
We are dependent upon our executive
officers and directors and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively
small group of individuals and, in particular, our executive officers and directors. We believe that our success depends on the
continued service of our executive officers and directors, at least until we have completed our Business Combination. In addition,
our executive officers and directors are not required to commit any specified amount of time to our affairs and, accordingly,
will have conflicts of interest in allocating management time among various business activities, including identifying potential
Business Combinations and monitoring the related due diligence. We do not have an employment agreement with, or key man insurance
on the life of, any of our directors or executive officers. The unexpected loss of the services of one or more of our directors
or executive officers could have a detrimental effect on us.
Our ability to successfully effect
our Business Combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some
of whom may join us following our 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
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 Business Combination, it is likely that some or all of the management of the target business
will remain in place. While we intend to closely scrutinize any individuals we engage after our 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 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 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 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.
Past performance by our management
team may not be indicative of future performance of an investment in our company.
Information regarding performance by,
or businesses associated with, our management team, including Mr. Weil and Mr. Silvers is presented for informational purposes
only. Past performance by our management team, including with respect to Mr. Weil’s involvement with two successor entities
of blank check companies, is not a guarantee either (i) that we will be able to locate a suitable candidate for our Business Combination
or (ii) of success with respect to any Business Combination we may consummate. You should not rely on the historical record
of our management team’s performance as indicative of future performance.
We may have a limited ability to assess
the management of a prospective target business and, as a result, may affect our Business Combination with a target business whose
management may not have the skills, qualifications or abilities to manage a public company, which could, in turn, negatively impact
the value of our stockholders’ investment in us.
When evaluating the desirability of effecting
our Business Combination with a prospective target business, our ability to assess the target business’s management may
be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management,
therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should
the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations
and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain
stockholders following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely
to have a remedy for such reduction in value.
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 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 businesses. We do not intend to have any full-time employees
prior to the completion of our Business Combination. Each of our officers is engaged in several other business endeavors for which
he may be entitled to substantial compensation and our officers are not obligated to contribute any specific number of hours per
week to our affairs. Our independent directors may also serve as officers or board members for other entities. If our officers’
and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their
current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our
ability to complete our Business Combination.
Our sponsors and our strategic investor,
and their affiliates, have no obligation to provide us with potential investment opportunities or to devote any specified amount
of time or support to our company’s business.
Although we expect to benefit from our
sponsors’ and our strategic investor’s network of relationships and processes for sourcing, evaluating and allocating
investment opportunities among itself, us, and other parties, our sponsors and strategic investor have no legal or contractual
obligation to seek on our behalf or to present to us investment opportunities that might be suitable for our business. Our sponsors
and our strategic investor may allocate potential investments at their discretion to any of our sponsors, the strategic investor,
us, or other parties. We have no investment management, advisory, consulting or other agreement in place with our sponsors or
strategic investor that obligate any of them to undertake efforts on our behalf or that govern the manner in which they will allocate
investment opportunities. Even if our sponsors and our strategic investor refer an opportunity to us, no assurance can be given
that such opportunity will result in an acquisition agreement or a Business Combination.
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 allocating their time and determining to which entity
a particular business opportunity should be presented.
Until we consummate our Business Combination,
we intend to engage in the business of identifying and combining with one or more businesses. Our sponsors, strategic investor
and officers and directors are, and may in the future become, affiliated with entities that are engaged in a similar business.
In addition, our sponsors, officers and directors have agreed, pursuant to a written letter agreement, not to participate in the
formation of, or become an officer or director of, any other blank check company until we have entered into a definitive agreement
regarding our Business Combination or we have failed to complete our Business Combination during the Combination Period.
Our officers and directors also may become
aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain
fiduciary or contractual duties.
Accordingly, they may have conflicts of
interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved
in our favor and a potential target business may be presented to another entity prior to its presentation to us. In addition,
our amended and restated certificate of incorporation provides for the waiver of any requirement to present corporate opportunities
to us to the extent it would conflict with competing duties owed to other entities. Our amended and restated certificate of incorporation
provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity
is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity
is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
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 our sponsors, our directors or officers,
although we do not intend to do so. 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.
Our Executive Chairman and Chief Executive
Officer are parties to certain agreements that limit the types of companies that we can target for a Business Combination, among
other restrictions, which could limit our prospects for a Business Combination.
Each of A. Lorne Weil, our Executive Chairman,
and Daniel B. Silvers, our Chief Executive Officer, is party to an employment agreement with Inspired. These employment agreements
contain non-competition provisions that provide that neither Mr. Weil nor Mr. Silvers shall directly or indirectly engage in any
business which is directly competitive with any business conducted by Inspired and its associated companies that it controls (collectively,
the “Inspired Group”) during his employment, in any geographic area in which such business was so conducted by the
Inspired Group. These agreements are collectively referred to as the non-competition agreements. In light of the non-competition
agreements, we will not seek a Business Combination with any company with operations in the businesses described above. In addition,
if our Business Combination does not cause Mr. Weil or Mr. Silvers to violate the non-competition agreements, no assurance can
be given that the combined company would not in the future engage in competitive activities which would cause Mr. Weil or Mr.
Silvers to be in breach of the non-competition agreements. If a court were to conclude that a violation of either or both of the
non-competition agreements had occurred, it could extend the term of Mr. Weil’s or Mr. Silvers’ non-competition restrictions
and/or enjoin Mr. Weil or Mr. Silvers from participating in our company, or enjoin us from engaging in aspects of the business
which compete with Inspired Group, as applicable. The court could also impose monetary damages against Mr. Weil or Mr. Silvers
or us. This could materially harm our business and the trading prices of our securities. Even if ultimately resolved in our favor,
any litigation associated with the non-competition could be time consuming, costly and distract management’s focus from
locating suitable acquisition candidates and operating our business.
Our Executive Chairman is party to
a certain agreement that will limit his ability to solicit or hire employees of Inspired, which could make us a less attractive
buyer to certain target companies.
In the employment agreement entered into
by A. Lorne Weil, our Executive Chairman, with Inspired, there are also provisions preventing him from being able to directly
or indirectly solicit or entice away or endeavor to solicit or entice away from the Inspired Group for the purposes of employment
or engagement of any person who on the date of the termination of Mr. Weil’s employment is employed or engaged by the Inspired
Group in a senior management capacity and with whom Mr. Weil worked closely during the period of 12 months prior to the date of
termination of Mr. Weil’s employment (whether or not such person would commit a breach of his contract of employment by
doing so). To the extent a target company may be interested in hiring personnel from the Inspired Group, we might be a less attractive
buyer as a result of the non-competition agreements.
We may engage in a Business Combination
with one or more target businesses that have relationships with entities that may be affiliated with our sponsors, strategic investor,
officers, directors or existing holders which may raise potential conflicts of interest.
In light of the involvement of our sponsors,
strategic investor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with
our sponsors, strategic investor, officers or directors. Our directors also serve as officers and board members for other entities,
including, without limitation, those described in “Item 10. Directors, Executive Officers and Corporate Governance”
herein. Such entities may compete with us for Business Combination opportunities. 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 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 company from a financial point of view of a Business Combination
with one or more domestic or international businesses affiliated with our officers, directors or existing holders, 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.
Since our sponsors, strategic investor,
officers and directors will lose their entire investment in us if our Business Combination is not completed, a conflict of interest
may arise in determining whether a particular Business Combination target is appropriate for our Business Combination.
Our initial stockholders hold in the aggregate
5,000,000 founder shares, representing 80.3% of the total outstanding shares as of December 31, 2020. The founder shares will
be worthless if we do not complete our Business Combination. In addition, affiliates of our Hydra Sponsor and Matthews Lane Sponsor,
our strategic investor and certain members of management hold an aggregate of 6,825,000 private placement warrants and an aggregate
of 1,000,001 working capital warrants that will also be worthless if we do not complete a Business Combination. Holders of founder
shares have agreed (A) to vote any shares owned by them in favor of any proposed Business Combination and (B) not to redeem any
founder shares in connection with a stockholder vote to approve a proposed Business Combination. In addition, we may obtain loans
from our sponsors, strategic investor, affiliates of our sponsors or strategic investor or an officer or director, and we may
pay our sponsors, strategic investor, officers, directors and any of their respective affiliates’ fees and expenses in connection
with identifying, investigating and consummating a Business Combination.
The personal and financial interests of
our sponsors, strategic investor, their affiliates or our officers and directors may influence their motivation in identifying
and selecting a target Business Combination, completing a Business Combination and influencing the operation of the business following
the Business Combination. This risk may become more acute at the end of the Combination Period.
Since our sponsors, strategic investor,
officers and directors will not be eligible to be reimbursed for their out-of-pocket expenses from the funds held in the Trust
Account if our Business Combination is not completed, a conflict of interest may arise in determining whether a particular Business
Combination target is appropriate for our Business Combination.
At the closing of our Business Combination,
our sponsors, strategic investor, officers and directors, or any of their respective affiliates, may be reimbursed for any out-of-pocket
expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due
diligence on suitable Business Combinations from the funds held in the Trust Account. In the event our Business Combination is
completed, there is no cap or ceiling on any such reimbursement from the funds held in the Trust Account of out-of-pocket expenses
incurred in connection with activities on our behalf. However, our sponsors, strategic investor, officers and directors, or any
of their respective affiliates will not be eligible for any such reimbursement from the funds held in the Trust Account if our
Business Combination is not completed. These financial interests of our sponsors, strategic investor, officers and directors may
influence their motivation in identifying and selecting a target Business Combination and completing a Business Combination. As
of December 31, 2020, the aggregate amount of unreimbursed expenses was approximately $10,000.