PROSPECTUS
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Filed
Pursuant to Rule 424(d)(4)
Registration
No. 333-231084
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$100,000,000
Proficient
Alpha Acquisition Corp.
10,000,000 Units
Proficient Alpha Acquisition Corp. is
a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target
business.” Our efforts to identify a prospective target business will not be limited to a particular industry or geographic
region, although we intend to focus on companies which provide financial services in Asia, primarily China. We do not have any
specific business combination under consideration and we have not (nor has anyone on our behalf), directly or indirectly, contacted
any prospective target business or had any substantive discussions, formal or otherwise, with respect to such a transaction. If
we are unable to consummate an initial business combination within 12 months from the closing of this offering (or up to 18 months
from the closing of this offering if we extend the period of time to consummate a business combination by the full amount of time,
as described in more detail in this prospectus), we will, as promptly as reasonably possible but not more than ten business days
thereafter, redeem 100% of the outstanding shares of common stock that were sold as part of the units in this offering, which we
refer to collectively as our public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the trust account, including any interest earned on the funds held in the trust account (net of interest that may be used by
us to pay our taxes payable and for 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 liquidation
distributions, if any), subject to applicable law and as further described herein.
This is an initial public offering of
our securities. Each unit that we are offering has a price of $10.00 and consists of one share of common stock, one redeemable
warrant and one right, as described in more detail in this prospectus. Each warrant entitles the holder to purchase one share of
common stock at a price of $11.50. Each warrant will become exercisable on the later of 30 days after the completion of an initial
business combination or 12 months from the closing of this offering and will expire on the fifth anniversary of our completion
of an initial business combination, or earlier upon redemption or liquidation. Each right entitles the holder thereof to receive
one-tenth (1/10) of one share of common stock upon consummation of our initial business combination. We have granted the underwriters
a 30-day option to purchase up to an additional 1,500,000 units to cover over-allotments, if any.
Mr. Shih-Chung Chou, who we refer to
throughout this prospectus as our “sponsor,” has committed to purchase from us an aggregate of 5,000,000 warrants,
or “private warrants,” at $1.00 per warrant (for a total purchase price of $5,000,000) in a private placement that
will close simultaneously with the closing of this offering. Our sponsor has also agreed that if the over-allotment option is
exercised by the underwriters in full or in part, it will purchase from us additional private warrants (up to a maximum of 375,000
private warrants) at a price of $1.00 per private warrant in an amount that is necessary to maintain in the trust account at $10.00
per unit sold to the public in this offering. These additional private warrants will be purchased in a private placement that
will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The private warrants
are identical to the warrants underlying the units sold in this offering, subject to certain limited exceptions as described in
this prospectus.
In September 2018, we issued our initial
stockholders an aggregate of 2,875,000 shares of our common stock, which we refer to throughout this prospectus as the “founders’
shares.” The founders’ shares include an aggregate of up to 375,000 shares held by the sponsor that are subject to
forfeiture to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that our initial
stockholders will continue to own 20.0% of our issued and outstanding shares after this offering (assuming such stockholder does
not purchase units in this offering and not including shares issued to the underwriters of this offering).
Our units have been approved for listing
on the Nasdaq Capital Market, or Nasdaq, under the symbol “PAACU”. The common stock, warrants and rights comprising
the units will begin separate trading on the 52
nd
day following the date of this prospectus unless I-Bankers Securities,
Inc. informs us of its decision to allow earlier separate trading, subject to our filing a Current Report on Form 8-K with the
SEC containing an audited balance sheet reflecting our receipt of the gross proceeds of this offering and issuing a press release
announcing when such separate trading will begin. Once the securities comprising the units begin separate trading, the common
stock, warrants and rights will be traded on Nasdaq under the symbols “PAAC,” “PAACW” and “PAACR,”
respectively.
We are an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act and will therefore be subject to reduced public company reporting requirements.
Investing in our securities involves
a high degree of risk. See “
Risk Factors
” beginning on page 17 of this prospectus for a discussion of information
that should be considered in connection with an investment in our securities.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
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Per Unit
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Total
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Public Offering Price
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$
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10.00
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$
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100,000,000
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Underwriting Discount
(1)(2)
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$
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0.25
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$
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2,500,000
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Proceeds to Proficient Alpha Acquisition Corp. (before expenses)
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$
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9.75
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$
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97,500,000
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(1)
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This reflects the maximum amount of discounts and commissions the underwriters may receive. The underwriting discounts and commissions may be reduced to $0.01 per unit for certain funds raised in this offering. Please see the section titled “Underwriting” for further information relating to the underwriting arrangements agreed to between us and the underwriters in this offering.
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(2)
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The underwriters will receive compensation in
addition to the underwriting discount. Please see the section titled “Underwriting” for further information relating
to the underwriting arrangements agreed to between us and the underwriters in this offering.
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Upon consummation of the offering,
$10.00 per unit sold to the public in this offering (regardless of whether the over-allotment option is exercised in full or part),
subject to increase of up to an additional $0.20 per share in the event that our sponsor elects to extend the period of time to
consummate a business combination by the full six months, as described in more detail in this prospectus, will be deposited into
a trust account at Morgan Stanley, N.A. maintained by American Stock Transfer & Trust Company, acting as trustee. Except as
described in this prospectus, these funds will not be released to us until the earlier of the completion of a business combination
and our redemption of our public shares (which may not occur until June 2, 2020).
The underwriters are offering the units
on a firm commitment basis. The underwriters expect to deliver the units to purchasers on or about June 3, 2019.
Sole Book-Running Manager
I-Bankers Securities, Inc.
Co-Manager
EarlyBirdCapital, Inc.
May 29 , 2019
You should rely only on the information
contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information.
We are not, and the underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted.
Proficient Alpha Acquisition Corp.
TABLE OF CONTENTS
PROSPECTUS SUMMARY
This summary only highlights the
more detailed information appearing elsewhere in this prospectus. As this is a summary, it does not contain all of the information
that you should consider in making an investment decision. You should read this entire prospectus carefully, including the information
under “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus, before
investing. References in this prospectus to “we,” “us” or “our company” refer to Proficient
Alpha Acquisition Corp. References in this prospectus to our “public shares” are to shares of our common stock sold
as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market) and references
to “public stockholders” refer to the holders of our public shares, including our sponsor (as defined below), officers
and directors to the extent they purchase public shares, provided that their status as “public stockholders” shall
only exist with respect to such public shares. References to “initial stockholders” refer to the holders of our founders’
shares, including our sponsor, officers and directors. References in this prospectus to our “management” or our “management
team” refer to our officers and directors. References to our “sponsor” refer to Mr. Shih-Chung Chou. Unless
we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment
option.
General
We are a newly organized blank
check company formed as a Nevada corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this
prospectus as our initial business combination. We have not selected any specific business combination target and we have not,
nor has anyone one our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target.
We currently intend to concentrate
our efforts in identifying businesses which provide financial services in Asia, primarily mainland China and Hong Kong. Our emphasis
is on businesses that provide financial services, brokerage and trading, asset management, underwriting and investment advisory,
financing, payment processing, financial technology and other financial services related targets. However, we are not limited
to these industries and we may pursue a business combination opportunity in any business or industry we choose and we may pursue
a company with operations or opportunities outside of China. We intend to acquire established businesses that we believe are fundamentally
sound, with sound corporate governance, profound and stable operation history, motivated and capable management team, sustainable
growth strategy, clear and scalable business model, and systematic advantages, but need financial, operational, strategic or managerial
assistance to maximize value. We do not intend to acquire start-up companies, companies with speculative business plans or companies
that are excessively leveraged. We intend to focus on seeking and consummating a business combination with a company or companies
having an enterprise value between US$200 and US$400 million.
Our sponsor, Mr. Shih-Chung
Chou, has over 20 years of experience in the financial and investment industry. He has been serving as the Chief Executive Officer
of Shanghai Kongsheng Industrial Co., Ltd., a real estate development, investment and management company, since February 1997.
He is one of the largest stockholders of National Agricultural Holding Limited, a rural market-based company that integrates financial
services, agricultural product trading, information, industry and science research. From June 2005 to November 2013, he served
as the M&A Department Manager of Qianlong Technology International Holding Limited. From December 1993 to January 1997, he
served as the General Manager of Shanghai Gaosheng Real Estate Development Co., Ltd., a consulting service provider in financial
and real estate investment. There is no relationship between our sponsor and our management.
Business Strategy
We will seek to capitalize on the
experiences and network of our management team to identify, evaluate and acquire an operating financial services business in Asia,
primarily China. We believe the financial services industry in Asia/China represents a particularly attractive deal sourcing ground
that leverages our team’s skill sets and could potentially serve as a strong platform for future add-on acquisitions. Our
investment thesis is supported by the following trends:
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High
growth in the Financial Services Industry in China.
The total Asset Under Management (“AUM”) has increased
rapidly in China. According to a Casey Quick research report, China will soon become the world’s second largest asset
management market. The Chinese asset management industry will account for nearly half of global net asset flows by 2019 and
has experienced a sustained period of growth. By 2030, China’s asset management is expected to exceed US$17 trillion.
In the financial technology space in particular, since 2010, the average annual growth rate of China's third-party payment
market has been growing more than 50% per annum, and China has become the global leader in such sector.
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Relaxing Restrictions
on Foreign Ownership of Chinese Securities Companies
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The measures issued by
the China Securities Regulatory Commission in 2017 have opened up the securities industry
to foreigners, by allowing foreign investors to become controlling shareholders of China based
securities companies
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China has committed to increase the foreign ownership upper limit in securities companies,
whether held directly or indirectly, and on a single entity or aggregated basis, to 51% since
2017. Moreover, three years after the above measures have been implemented, any remaining
limit on foreign ownership will be removed. The proposed amendments to the existing rules
included in the measures are primarily intended to honor such commitment.
The
new measures are intended to drive greater foreign investment in China.
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Mobile and Online Asset Management Platforms.
These
platforms help companies and investors connect with each other in investment markets. Demand for customer interactions and
service delivery will gradually be realized through networks and mobile channels. Investors will have better accessibility
and more choices of investment tools and projects. Companies will be able to structure financing tools to meet their needs
and attract more investors. Middle-class and general market investors will benefit from more personalized services and advice.
Individual investors gain more control over investment decisions. Customers gain greater visibility and easier adjustments
related to their investments. Automation technology extends sophisticated allocation services to individuals and institutional
investors. Investment funds are allocated to match suitable investment opportunities with prospects. As the involvement of
the financial agents decreases, the investment cost for investors decreases.
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Mobile
Payment Tools.
China fintech giants make cashless society a reality by providing mobility
payment platforms. Integrated mobile technologies change consumer needs and behavior. More
consumers will use digital payment methods instead of cash, even for small transactions. Incentives
are given to encourage consumers to use mobile payments. Transaction amounts have been increasing.
Through analyzing payment transaction data, financial service providers are able to predict
future consumer trend and deliver tailor made services. Geotags, biometrics and tokens protect
all transaction parties by avoiding fraud. With the increase of new solutions, transaction
costs decrease.
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The Belt and Road Initiative.
The
political and economic policy first proposed by President Xi Jin Ping in 2013, provides foreign enterprises, inter alia, more
cross-border investments opportunities; promotes internationalization of RMB; provides new investment directions and structures;
and expands offshore business for financial services companies.
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Closer
Economic Partnership Arrangement
. We believe free trade agreements have caused Hong
Kong to invest further in the mainland and has promoted more of Hong Kong's financial services
industry into mainland and overseas and enhances Hong Kong as an international finance center. Various
economic incentives, similar to those mentioned above, are encouraging greater economic activity
between Hong Kong and China in institutional and retail capacity. Tax incentives also
encourage Hong Kong financial services companies to enter the China market.
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Guangdong-HK-Macau
Great Bay Area.
The national strategy supports a balanced and sustainable growth of
financial services industries by leveraging regional resources, addressing the unmet needs,
combined with regulatory facilitation and easy access to capital. It also captures opportunities
brought by the Belt & Road Initiative.
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Hong
Kong Listing Regime Reform.
An initiative from Hong Kong Stock Exchange allows alternative
listing methods and a variety of listing structures, attracting more corporations to list
in Hong Kong. The reforms are: allowing IPO of non-profit biotech companies, initial public
offering of weighted voting right structure companies and secondary listings of innovative
companies. The unique stock connect collaboration between Hong Kong, Shanghai and Shenzhen
stock exchanges allows international and Mainland Chinese investors to trade securities in
each other's markets through the trading and clearing facilities of their home exchange. The
scheme now covers over 2,000 eligible equities.
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Competitive Strengths
We believe we have the following competitive strengths:
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Established
Deal Sourcing Network
. As a result of their extensive experience in the financial services industry, our management
team members have developed a broad array of contacts in the industry. We believe that these contacts will be important in generating
acquisition opportunities for us.
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Strong Financial Position and Flexibility
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With funds in the
trust account of approximately $100,000,000
(or $115,000,000 if the over-allotment option
is exercised in full) available to use for a business combination (assuming no stockholder
seeks conversion of their shares or seeks to sell their shares to us in a tender offer in
relation to such business combination), we offer a target business a variety of options such
as providing the owners of a target business with shares in a public company and a public
means to sell such shares, providing capital for the potential growth and expansion of its
operations or strengthening its balance sheet by reducing its debt ratio. Because we are able
to consummate our initial business combination using our cash, debt or equity securities,
or a combination of the foregoing, we have the flexibility to use the most efficient combination
that will allow us to tailor the consideration to be paid to the target business to fit its
needs and desires.
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Status
as a Public Company
. We believe our structure will make us an attractive business transaction partner to prospective
target businesses. As an existing public company, we will offer a target business an alternative to the traditional initial public
offering through a merger or other business transaction with us. In this situation, the owners of the target business would exchange
their shares of stock in the target business for shares of our stock. Once public, we believe the target business would have greater
access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests
than it would as a private company. We believe that being a public company can also augment a company’s profile among potential
new customers and vendors and aid it in attracting and retaining talented employees.
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Acquisition Criteria
We will seek to capitalize on the
significant financial services industry experience from our management team and our board of directors to identify, evaluate,
or acquire operating financial services businesses in Asia, primarily China. We have identified the following criteria that we
intend to use in evaluating business transaction opportunities. We expect that no individual criterion will entirely determine
a decision to pursue a particular opportunity. Further, any particular business transaction opportunity which we ultimately determine
to pursue may not meet one or more of these criteria:
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History of free cash flow generation
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We
will seek to acquire one or more businesses or assets that have a history of, or potential
for, strong, stable free cash flow generation, with predictable and recurring revenue
streams.
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Strong
management team
. We will seek to acquire one or more businesses or assets that have strong, experienced management
teams or those that provide a platform for us to assemble an effective and experienced management team. We will focus on management
teams with a proven track record of driving revenue growth, enhancing profitability and creating value for their stockholders.
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Opportunities for expansion.
We
will seek to acquire one or more businesses or assets with a sustainable and clear scalable
business model that we can grow both organically and through acquisitions. We believe that
our ability to source proprietary opportunities and execute transactions will help the business
we acquire grow through acquisition, and thus serve as a platform for further add-on acquisitions.
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Diversified customer and supplier base
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We
will seek to acquire one or more businesses or assets that have a diversified customer and
supplier base, with systematic advantages which are generally able to employ risk management
measures to endure economic downturns, industry consolidation, changing business preferences
and other unfavorable business environments that may negatively impact their customers, suppliers
and competitors.
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Effecting a Business Combination
We will either (1) seek stockholder approval of our initial
business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of
whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit
in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to us by
means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the
aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described
herein. The decision as to whether we will seek stockholder approval of our proposed business combination or allow stockholders
to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors
such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval.
In the event that we determine to conduct a tender offer, we will file tender offer documents with the Securities and Exchange
Commission, or SEC, which will contain substantially the same financial and other information about the initial business combination
as is required under the SEC’s proxy rules. We will consummate our initial business combination only if we have net tangible
assets of at least $5,000,001 upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares
of common stock voted are voted in favor of the business combination.
We
will have until 12 months from the closing of this offering to consummate an initial business combination.
However,
if we anticipate that we may not be able to consummate our initial business combination within 12 months, we may extend the period
of time to consummate a business combination up to two times, each by an additional three months (for a total of up to 18 months
to complete a business combination). Pursuant to the terms of our amended and restated articles of incorporation and the trust
agreement to be entered into between us and American Stock Transfer & Trust Company on the date of this prospectus, in order
to extend the time available for us to consummate our initial business combination, our sponsor or its affiliates or designees,
upon ten days advance notice prior to the applicable deadline, must deposit into the trust account $1,000,000, or up to $1,150,000
if the underwriters’ over-allotment option is exercised in full ($0.10 per share in either case) on or prior to the date
of the applicable deadline, for each three month extension (or up to an aggregate of $2,000,000 (or up to $2,300,000 if the underwriters’
over-allotment option is exercised in full), or $0.20 per share, if we extend for the full six months). In the event that we receive
notice from our sponsor ten days prior to the applicable deadline of its intent to effect an extension, we intend to issue a press
release announcing such intention at least three days prior to the applicable deadline. In addition, we intend to issue a press
release the day after the applicable deadline announcing whether or not the funds had been timely deposited. Our sponsor and its
affiliates or designees are not obligated to fund the trust account to extend the time for us to complete our initial business
combination.
If we are unable to consummate an initial business combination
within such time period, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem 100%
of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust
account, including any interest earned on the funds held in the trust account (net of interest that may be used by us to pay our
taxes payable and for 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 liquidation distributions,
if any), subject to applicable law and as further described herein, and then seek to dissolve and liquidate. We expect the pro
rata redemption price to be approximately $10.00 per public share (regardless of whether or not the underwriters exercise their
over-allotment option) (subject to increase of up to an additional $0.20 per share in the event that our sponsor elects to extend
the period of time to consummate a business combination by the full six months, as described in more detail in this prospectus),
without taking into account any interest earned on such funds. However, we cannot assure you that we will in fact be able to distribute
such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders.
So long as we obtain and maintain
a listing for our securities on Nasdaq, our initial business combination must occur with one or more target businesses that together
have a fair market value of at least 80% of the assets held in the trust account (excluding taxes payable on the income earned
on the trust account) at the time of the agreement to enter into the initial 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 actual and potential sales, earnings, cash flow and/or book value). Even though our board of directors will
rely on generally accepted standards, our board of directors will have discretion to select the standards employed. In addition,
the application of the standards generally involves a substantial degree of judgment. Accordingly, investors will be relying on
the business judgment of the board of directors in evaluating the fair market value of the target or targets. The proxy solicitation
materials or tender offer documents used by us in connection with any proposed transaction will provide public stockholders with
our analysis of the fair market value of the target business, as well as the basis for our determinations. If our board is not
able to independently determine the fair market value of the target business or businesses or if we seek to consummate an initial
business combination with an entity that is affiliated with any of our sponsor, officers or directors, we will obtain an opinion
from an independent investment banking firm, or another independent entity that commonly renders valuation opinions on the type
of target business we are seeking to acquire, with respect to the satisfaction of such criteria. Our stockholders may not be provided
with a copy of such opinion and they may not be able to rely on such opinion.
We currently anticipate structuring a business combination
to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial
business combination where we merge directly with the target business or where we acquire less than 100% of such interests or assets
of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons,
but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even
if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to
the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed
to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial
number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we could acquire a 100% controlling
interest in the target; however, as a result of the issuance of a substantial number of new shares, our stockholders immediately
prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business
combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the
post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes
of the 80% fair market value test.
We are not prohibited from consummating
an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors so long as we
have obtained an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation
opinions on the type of target business we are seeking to acquire, and the approval of a majority of our disinterested independent
directors that the business combination is fair to our unaffiliated stockholders from a financial point of view. Our stockholders
may not be provided with a copy of such opinion and they may not be able to rely on such opinion.
As more fully discussed in “
Management — Conflicts
of Interest
”, if any of our officers or directors becomes aware of a business combination opportunity that falls within
the line of business of any entity to which he has fiduciary or contractual obligations, he may be required to present such business
combination opportunity to such entity prior to presenting such business combination opportunity to us. Certain of our directors
currently have, and any of our officers or directors may in the future have, certain relevant fiduciary duties or contractual obligations.
Our executive officers and directors have agreed not to participate in the formation of, or become an officer or director of, any
other special purpose acquisition company with a class of securities registered under the Exchange Act until we have entered into
a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination
within the required time period.
JOBS Act
We are an emerging growth company as defined in the Jumpstart
Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act) and will remain such for up to five years. However,
if our non-convertible debt issued within a three year period exceeds $1 billion or our total revenues exceed $1.07 billion, or
the market value of our shares of common stock that are held by non-affiliates exceeds $700 million on the last day of the second
fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an
emerging growth company, we have elected, under Section 107(b) of the JOBS Act, to take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised
accounting standards.
Private Placements to Initial Stockholders
In September 2018, we issued our
initial stockholders an aggregate of 2,875,000 shares of our common stock, which we refer to throughout this prospectus as the
“founders’ shares,” for an aggregate purchase price of $555,000, or approximately $0.20 per share. The founders’
shares include an aggregate of up to 375,000 shares held by the sponsor that are subject to forfeiture to the extent that
the underwriters’ over-allotment option is not exercised in full or in part, so that our initial stockholders will continue
to own 20.0% of our issued and outstanding shares after this offering (assuming such stockholder does not purchase units in this
offering and not including shares issued to the underwriters of this offering).
Our
sponsor has committed to purchase from us an aggregate of 5,000,000 private warrants at $1.00 per warrant (for a total
purchase price of $5,000,000) in a private placement that will close simultaneously with the closing of this offering. Our
sponsor has also agreed that if the over-allotment option is exercised by the underwriters in full or in part, it will
purchase from us additional private warrants (up to a maximum of 375,000 private warrants) at a price of $1.00 per private
warrant in an amount that is necessary to maintain in the trust account at $10.00 per unit sold to the public in this
offering. These additional private warrants will be purchased in a private placement that will occur simultaneously with the
purchase of units resulting from the exercise of the over-allotment option. The private warrants are identical to the
warrants underlying the units sold in this offering except that the private warrants: (i) will not be redeemable by us and
(ii) may be exercised for cash or on a cashless basis, as described in this prospectus, so long as they are held by our
sponsor or any of its permitted transferees. The proceeds from the private placement of the private warrants will be added to
the proceeds of this offering and placed in a trust account at Morgan Stanley, N.A., with American Stock Transfer &
Trust Company, as trustee. If we do not complete an initial business combination within 12 months from the closing of this
offering
(or up to 18 months from the closing of this
offering if we extend the period of time to consummate a business combination by the full amount of time as
described herein)
, the proceeds from the sale of the private
warrants will be included in the liquidating distribution to our public stockholders and the private warrants will expire
worthless.
Our executive offices are located at 40 Wall St., 29th floor,
New York City, NY 10005 and our telephone number is (917) 289-0932.
The Offering
Securities offered
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10,000,000 units, at $10.00 per unit, each unit consisting of one share of common
stock and one warrant and one right to receive one-tenth (1/10) of one share of common stock upon consummation of our initial business
combination.
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Listing of our securities and symbols
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The units, and the shares of common stock, warrants and rights once they begin
separate trading, will be listed on Nasdaq under the symbols “PAACU,” “PAACR” and “PAACW,”
respectively.
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Trading
commencement and separation of common stock, redeemable warrants and rights
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The units will begin trading on or promptly after the date of this prospectus. The common
stock, redeemable warrants and rights comprising the units will begin separate trading on the 52
nd
day
following the date of this prospectus unless I-Bankers Securities, Inc. informs us of its decision to allow earlier
separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press
release and filed a Current Report on Form 8-K announcing when such separate trading will begin.
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Once the shares of common stock, warrants and rights commence separate trading, holders will
have the option to continue to hold units or separate their units into the component pieces. Holders will need to have their
brokers contact our transfer agent in order to separate the units into shares of common stock, warrants and rights.
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In no event will the common stock, warrants and rights be traded separately until we have
filed a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting our receipt of the gross
proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this
offering, which is anticipated to take place three business days from the date of this prospectus. If the
underwriters’ over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a
second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the
exercise of the underwriters’ over-allotment option. We will also include the Form 8-K, or amendment thereto, or in
a subsequent Form 8-K, information indicating if I-Bankers Securities, Inc. has allowed separate trading of the common
stock, warrants and rights prior to the 52
nd
day after the date of this prospectus.
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Units:
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Number outstanding before this offering
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0 units
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Number to be outstanding after this offering
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10,000,000 units
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Shares of common stock:
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Number outstanding before this offering
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2,875,000 shares
(1)
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Number to be outstanding after this offering
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12,580,000 shares
(2)(3)(4)
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Redeemable Warrants:
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Number outstanding before this offering
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0 warrants
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Number to be outstanding after this offering and private placement
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15,800,000 warrants
(5)
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Exercisability
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Each warrant is exercisable for one share of common stock. The warrants will become exercisable on the later of 30 days after the completion of an initial business combination and 12 months from the closing of this offering. The warrants will expire at 5:00 p.m., New York City time, on the fifth anniversary of our completion of an initial business combination, or earlier upon redemption. The period of time from the date the warrants will first become exercisable until the expiration of the warrants shall hereafter be referred to as the “exercise period.”
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Exercise price
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$11.50 per share, subject to
adjustment as described herein. In addition, if (x) we issue additional shares of common stock or equity-linked securities
for capital raising purposes in connection with the closing of our initial business combination at an issue price or
effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good
faith by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into
account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity
proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation
of our initial business combination (net of redemptions), and (z) the volume weighted average trading price of our shares of
common stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our
initial business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of
the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly
Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption and Amendment”
will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
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None of the warrants may be exercised until the later of
30 days after the consummation of a business combination or 12 months from the closing of this offering and, thus, after the proceeds
of the trust account have been disbursed. Accordingly, the warrant exercise price will be paid directly to us and not placed in
the trust account.
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(1)
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This
number includes an aggregate of up to 375,000 founders’ shares held by the sponsor that are subject to forfeiture if
the over-allotment option is not exercised by the underwriters in full.
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(2)
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Assumes the
over-allotment option has not been exercised and an aggregate of 375,000 founders’ shares held by the sponsor have been
forfeited.
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(3)
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Includes 80,000
shares issuable to the representative of underwriters.
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(4)
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Excludes 300,000
shares issuable to Kin Sze, our Co-Chief Executive Officer, President and Secretary, and certain directors within 10 days
following the business combination.
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(5)
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Includes 800,000 warrants
issuable to the representative of underwriters.
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Redemption and Amendment
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We may redeem the outstanding warrants (excluding the private warrants, the
warrants issued to the underwriters and/or its designees, and any other warrants underlying units we may issue to our sponsor,
initial stockholders, officers or directors upon conversion of working capital loans as described in this prospectus) in whole
and not in part, at a price of $0.01 per warrant at any time during the exercise period, upon a minimum of 30 days’
prior written notice of redemption, if, and only if, the last sales price of our shares of common stock equals or exceeds
$18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading
days within a 30 trading day period ending three business days before we send the notice of redemption; and if, and only if,
there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.
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If the foregoing conditions are satisfied and we issue a notice of redemption, each warrant holder can exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the shares of common stock may fall below the $18.00 trigger price as well as the $11.50 warrant exercise price after the redemption notice is issued.
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If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the shares of common stock for the five trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
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Our warrants will be issued in registered form under a warrant agreement between American Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision. The warrant agreement requires the approval by the holders of at least 50% of the then outstanding warrants in order to make any change that adversely affects the interests of the registered holders.
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Terms of Rights
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Except in cases where we are not the surviving company in a business combination, each holder of a right will
automatically receive one-tenth (1/10) of one share of common stock upon consummation of our initial business combination. We will
not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest
whole share or otherwise addressed in accordance with the applicable provisions of Nevada law. As a result, you must hold rights
in multiples of 10 in order to receive shares for all of your rights upon closing of a business combination. In the event we will
not be the surviving company upon completion of our initial business combination, each holder of a right will be required to affirmatively
convert his, her or its rights in order to receive the one-tenth (1/10) of a share of common stock underlying each right upon consummation
of the business combination. If we are unable to complete an initial business combination within the required time period and we
redeem the public shares for the funds held in the trust account, holders of rights will not receive any of such funds for their
rights and the rights will expire worthless.
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Securities purchased, or being purchased, by insiders
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We issued our initial stockholders an aggregate of 2,875,000 founders’
shares for an aggregate purchase price of $555,000, or approximately $0.20 per share. The 2,875,000 founders’ shares
includes an aggregate of up to 375,000 shares of common stock held by the sponsor that are subject to forfeiture to the extent
that the over-allotment option is not exercised by the underwriters in full or in part. The initial stockholders will be required
to forfeit only a number of shares of common stock necessary to continue to maintain the 20.0% ownership interest in our shares
of common stock after giving effect to the offering and exercise, if any, of the underwriters’ over-allotment option.
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The founder shares are identical to the shares of common
stock included in the units being sold in this offering, except that:
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• the founder shares are subject to certain transfer
restrictions, as described in more detail below;
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• our initial stockholders have entered into a letter
agreement with us, pursuant to which they have agreed to (i) waive their redemption rights with respect to their founder shares
and public shares in connection with the completion of our initial business combination, (ii) waive their redemption rights with
respect to their founder shares and public shares in connection with a stockholder vote to approve an amendment to our amended
and restated articles of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares
if we do not complete our initial business combination within 12 months from the closing of this offering (or
up to 18 months from the closing of this offering if we extend the period of time to consummate a business combination by the full
amount of time) or (B) with respect to any other
provision relating to stockholders’ rights or pre-initial business combination activity and (iii) waive their rights to liquidating
distributions from the trust account with respect to their founder shares if we fail to complete our initial business combination
within 12 months from the closing of this offering (or
up to 18 months from the closing of this offering if we extend the period of time to consummate a business combination by the full
amount of time), although they will be entitled
to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial
business combination within the prescribed time frame.
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• pursuant to the letter agreement, our sponsor, initial stockholders,
officers and directors have agreed to vote any founder shares or private placement shares held by them and any public shares
purchased during or after this offering (including in open market and privately negotiated transactions) in favor of our initial
business combination. If we submit our initial business combination to our public stockholders for a vote, we will complete
our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of
the initial business combination. As a result, in addition to our initial stockholders’ founder shares, we would need
only 3,710,001, or 37.1%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business
combination (assuming (i) the over-allotment option is not exercised, (ii) all shares were present and entitled to vote at
the meeting and (iii) that the 80,000 shares to be issued to the representative of the underwriters are issued and outstanding
and voted in favor of the business combination) in order to have our initial business combination approved (assuming the over-allotment
option is not exercised); and
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• the founder shares are entitled to registration
rights.
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Our sponsor has committed to purchase from us an aggregate of 5,000,000 private warrants, at $1.00 per warrant (for a total purchase price of $5,000,000) in a private placement that will close simultaneously with the closing of this offering. Our sponsor has also agreed that if the over-allotment option is exercised by the underwriters in full or in part, it will purchase from us additional private warrants (up to a maximum of 375,000 private warrants) at a price of $1.00 per private warrant in an amount that is necessary to maintain in the trust account at $10.00 per unit sold to the public in this offering. These additional private warrants will be purchased in a private placement that will occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The private warrants are identical to the warrants underlying the units sold in this offering except that the private warrants: (i) will not be redeemable by us and (ii) may be exercised for cash or on a cashless basis, as described in this prospectus, so long as they are held by our sponsor or any of its permitted transferees. If the private warrants are held by holders other than our sponsor or any of its permitted transferees, the private warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. In the event of a liquidation prior to our initial business combination, the private warrants will expire worthless.
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Restrictions on transfer of founders’
shares and private warrants
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On the date of this prospectus, the founders’ shares will be placed into
an escrow account maintained in New York, New York by American Stock Transfer & Trust Company, acting as escrow agent.
Subject to certain limited exceptions, 50% of these shares will not be transferred, assigned, sold or released from escrow
until the earlier of (i) six months after the date of the consummation of our initial business combination or (ii) the date
on which the closing price of our common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends,
reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after our initial
business combination and the remaining 50% of the founder shares may not be transferred, assigned or sold until six months
after the date of the consummation of our initial business combination, or earlier, in either case, if, subsequent to our
initial business combination, we consummate a subsequent liquidation, merger, stock exchange or other similar transaction
which results in all of our stockholders having the right to exchange their common stock for cash, securities or other property.
The limited exceptions include transfers, assignments or sales (i) to our officers, directors, consultants, advisors or their
affiliates, (ii) to an entity’s members, (iii) to relatives and trusts for estate planning purposes, (iv) by virtue
of the laws of descent and distribution upon death, (v) pursuant to a qualified domestic relations order, (vi) to us for no
value for cancellation in connection with the consummation of our initial business combination, or (vii) by private sales
made at or prior to the consummation of a business combination at prices no greater than the price at which the shares were
originally purchased, in each case (except for clause (vi) or with our prior consent) where the transferee agrees to the terms
of the escrow agreement and to be bound by these transfer restrictions.
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Our sponsor has also agreed not to transfer, assign or sell any of the private warrants or shares of common stock issuable upon exercise of the private warrants (except in connection with the same limited exceptions that the founders’ shares may be transferred as described above), until after the completion of our initial business combination.
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Offering proceeds to be held in trust
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$100,000,000, or $115,000,000 if the over-allotment option is exercised in full, of net proceeds of this offering and the sale of the private warrants will be placed in a trust account at Morgan Stanley, N.A., maintained by American Stock Transfer & Trust Company, New York, New York, as trustee, or $10.00 per public unit (regardless of whether or not the over-allotment option is exercised in full or part) pursuant to an agreement to be signed on the date of this prospectus. Except as set forth below, the proceeds held in the trust account will not be released until the earlier of the completion of an initial business combination and our redemption of 100% of the outstanding public shares if we have not completed a business combination in the required time period. Therefore, unless and until an initial business combination is consummated, the proceeds held in the trust account will not be available for our use for any expenses related to this offering or expenses which we may incur related to the investigation and selection of a target business and the negotiation of an agreement to acquire a target business.
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Notwithstanding the foregoing, there can be released to us from the trust account any interest
earned on the funds in the trust account that we need to pay our taxes and for any liquidation expenses. With these exceptions,
expenses incurred by us may be paid prior to a business combination only from the net proceeds of this offering not held in
the trust account (initially estimated to be $2,000,000); provided, however, that in order to meet our working capital needs
following the consummation of this offering if the funds not held in the trust account are insufficient, our sponsor, initial
stockholders, officers, directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at
any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note.
The notes would either be paid upon consummation of our initial business combination, without interest, or, at the holder’s
discretion, up to $1,500,000 of the notes may be converted into warrants at a price of $1.00 per warrant. These warrants would
be identical to the private warrants. If we do not complete a business combination, the loans will be forgiven.
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Ability to extend time to complete business combination
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We will have until 12 months from
the closing of this offering to consummate an initial business combination. However, if we anticipate that we may not be able to
consummate our initial business combination within 12 months, we may extend the period of time to consummate a business combination
up to two times, each by an additional three months (for a total of up to 18 months to complete a business combination). Pursuant
to the terms of our amended and restated articles of incorporation and the trust agreement to be entered into between us and American
Stock Transfer & Trust Company on the date of this prospectus, in order to extend the time available for us to consummate our
initial business combination, our sponsor or its affiliates or designees, upon ten days advance notice prior to the applicable
deadline, must deposit into the trust account $1,000,000, or up to $1,150,000 if the underwriters over-allotment option is exercised
in full ($0.10 per share in either case) on or prior to the date of the applicable deadline, for each three month extension (or
up to an aggregate of $2,000,000 (or $2,300,000 if the underwriters over-allotment option is exercised in full), or $0.20 per
share if we extend for the full six months). Any such payments would be made in the form of a loan. Any such loans will be non-interest
bearing and payable upon the consummation of our initial business combination. If we complete our initial business combination,
we would repay such loaned amounts out of the proceeds of the trust account released to us. If we do not complete a business
combination, we will not repay such loans. Furthermore, the letter agreement with our initial stockholders contains a provision
pursuant to which our sponsor has agreed to waive its right to be repaid for such loans out of the funds held in the trust account
in the event that we do not complete a business combination. Our sponsor and its affiliates or designees are not obligated to fund
the trust account to extend the time for us to complete our initial business combination.
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Limited payments to insiders
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There will be no fees, reimbursements or other cash payments paid to our sponsor, initial
stockholders, officers, directors or their affiliates for any services they render prior to, or in order to effectuate the
consummation of, an initial business combination (regardless of the type of transaction that it is) other than the following
payments, none of which will be made from the proceeds of this offering held in the trust account prior to the completion
of our initial business combination:
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• monthly fees payable and equity awards to officers and directors for their services to us as described elsewhere in this prospectus; and
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• reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on our behalf, such as identifying and investigating possible target businesses and business combinations.
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There is no limit on the amount of out-of-pocket expenses reimbursable
by us. Our audit committee will review and approve all reimbursements and payments made to our sponsor, initial stockholders,
officers, directors or our or their respective affiliates, with any interested director abstaining from such review and approval.
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Stockholder approval of, or tender offer in connection with, initial business combination
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In connection with any proposed initial business combination, we will either (1) seek stockholder approval of such initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein. If we determine to engage in a tender offer, such tender offer will be structured so that each stockholder may tender any or all of his, her or its shares rather than some pro rata portion of his, her or its shares. If enough stockholders tender their shares so that we are unable to satisfy any applicable closing condition set forth in the definitive agreement related to our initial business combination, or we are unable to maintain net tangible assets of at least $5,000,001 upon such consummation, we will not consummate such initial business combination. 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. In the event that we determine to conduct a tender offer, we will file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination as is required under the SEC’s proxy rules. We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination.
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We chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act. However, if we seek to consummate an initial business combination with a target business that imposes any type of working capital closing condition or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination, we may need to have more than $5,000,001 in net tangible assets upon consummation and this may force us to seek third party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial business combination and we may not be able to locate another suitable target within the applicable time period, if at all.
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Our initial stockholders have agreed
(i) to vote any founders’ shares in favor of any proposed business combination, (ii) not to convert any shares of common
stock in connection with a stockholder vote to approve a proposed initial business combination and (iii) not to sell any such shares
to us in a tender offer in connection with any proposed business combination. As a result, we would need only 3,710,001, or approximately
37.1%, of the 10,000,000 public shares sold in this offering to be voted in favor of a transaction in order to have our initial
business combination approved (assuming (i) the over-allotment option is not exercised, (ii) all shares were present and entitled
to vote at the meeting and (iii) that the 80,000 shares to be issued to the representative of the underwriters
are
issued and outstanding and are voted for the business combination
). Any permitted transferees of such securities will be
subject to the same obligations as our sponsor.
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None of our sponsor, initial stockholders, officers, directors or their affiliates has
indicated any intention to purchase units in this offering or any units or shares of common stock from persons in the open
market or in private transactions. However, if we hold a meeting to approve a proposed business combination and a significant
number of stockholders vote, or indicate an intention to vote, against a proposed business combination, our sponsor, initial
stockholders, officers, directors or their affiliates could make such purchases in the open market or in private transactions,
either before or after we mail a proxy statement related to the proposed business combination, in order to influence any vote
held to approve a proposed initial business combination. It is anticipated that our sponsor, initial stockholders, officers,
directors or their affiliates would approach a limited number of large holders that have voted against the proposed business
combination and/or sought redemption of their shares, or that have indicated an intention to do so, and engage in direct negotiations
for the purchase of such holders’ positions. It is likely that our sponsor, initial stockholders, officers, directors
or their affiliates would approach only those holders that have submitted votes via proxy although it is possible that it
could be from a holder that submitted a vote at the meeting. It is anticipated that all holders approached in this manner
would be institutional or sophisticated holders. In the event such transactions take place, other than on a Current Report
on Form 8-K, we will issue a press release announcing such transactions. Notwithstanding the foregoing, our officers, directors,
sponsor and their affiliates will not make purchases of shares of common stock if the purchases would violate Section 9(a)(2)
or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s stock.
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Conversion rights
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In connection with any stockholder meeting called to approve a proposed initial business combination, each public stockholder will have the right, regardless of whether he is voting for or against such proposed business combination, to demand that we convert his shares into a pro rata share of the trust account.
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We may also require public stockholders seeking conversion, whether they are a record holder or hold their shares in “street name,” to either (i) physically tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case prior to a date set forth in the proxy materials sent in connection with the proposal to approve the business combination. The requirement for physical or electronic delivery prior to the meeting ensures that a holder’s election to convert his shares is irrevocable once the business combination is approved. There is a nominal cost associated with this 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 $45 and it would be up to the broker whether or not to pass this cost on to the converting holder.
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We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation. In connection with any proposed business combination, a target business could impose a working capital closing condition or require us to have a higher minimum amount of funds available from the trust account upon consummation of such initial business combination. As a result, the foregoing may limit the number of shares that we can have converted and still consummate such business combination.
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Liquidation if no business combination
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If we are unable to complete an initial business combination by 12 months from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate a business combination by the full amount of time), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not previously released to us (net of interest that may be used by us to pay our taxes payable and to fund our 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Nevada law to provide for claims of creditors and the requirements of other applicable law. We cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims. Although we are required to use our reasonable best efforts to have all third parties (including any vendors or other entities we engage after this offering) and any prospective target businesses enter into agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account, there is no guarantee that they will execute such agreements. There is also no guarantee that the third parties would not challenge the enforceability of these waivers and bring claims against the trust account for monies owed them.
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Our sponsor has agreed that it will be personally liable to ensure that the proceeds in the trust account are not reduced below $10.00 per public share by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but we cannot assure you that it will be able to satisfy his indemnification obligations if it is required to do so. Additionally, the agreement entered into by our sponsor specifically provides for two exceptions to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and we have not asked our sponsor to reserve for such indemnification obligations.
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The holders of the founders’ shares will not participate in any redemption distribution from our trust account with respect to such founders’ shares.
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If we are unable to conclude an initial business combination and we expend all of the net proceeds of this offering not
deposited in the trust account, we expect that the initial per-share redemption price will be approximately $10.00 (not
taking into account any interest earned on the funds held in the trust account and not released to us to pay our taxes
payable and used to pay dissolution expenses) (subject to increase of up to an additional $0.20 per share in the event that
our sponsor elects to extend the period of time to consummate a business combination by the full six months, as described in
more detail in this prospectus). The proceeds deposited in the trust account could, however, become subject to claims of our
creditors that are in preference to the claims of our stockholders. In addition, if we are forced to file a bankruptcy case
or an involuntary bankruptcy case 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. Therefore, we cannot assure you that the actual per-share redemption price
will not be less than approximately $10.00 (subject to increase of up to an additional $0.20 per share in the event that our
sponsor elects to extend the period of time to consummate a business combination by the full six months, as described in more
detail in this prospectus).
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We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account and interest earned on the funds held in the trust account that we are permitted to withdraw to pay such expenses.
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Potential amendments to charter
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Our amended and restated articles
of incorporation provide that any of the provisions related to our pre-business combination activity (which include, among other
items, the requirement to submit any proposed business combination to stockholders for approval or provide all our public stockholders
the ability to tender their shares to us, to allow our public stockholders to have their shares redeemed for cash in connection
with any proposed business combination and the time period in which we must consummate our initial business combination), may be
amended if approved by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions
of the Chapter 78 of the Nevada Revised Statutes (NRS), or applicable stock exchange rules. Our sponsor, executive officers,
and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and
restated articles of incorporation (i) to modify the substance or timing of our obligation to redeem 100% of our public shares
if we do not complete our initial business combination within 12 months from the closing of this offering (or up to 18 months from
the closing of this offering if we extend the period of time to consummate a business combination by the full amount of time) or
(ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity as discussed
above, unless in each case 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 (which interest shall be net of taxes payable) divided by the number of then outstanding public shares.
This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, any executive
officer, director or any other person.
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However, we may not redeem our public shares in an amount
that would cause our net tangible assets to be less than $5,000,001 upon the consummation of our initial business combination (so
that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with
respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above),
we would not proceed with the amendment or the related redemption of our public shares at such time.
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Risks
In making your decision on whether
to invest in our securities, you should take into account the special risks we face as a blank check company, as well as the fact
that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act, and, therefore, you
will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. For additional information
concerning how Rule 419 blank check offerings differ from this offering, please see “
Proposed Business — Comparison
to offerings of blank check companies subject to Rule 419
.” You should carefully consider these and the other risks
set forth in the section entitled “Risk Factors”.
SUMMARY FINANCIAL DATA
The following table summarizes the relevant financial data
for our business and should be read with our financial statements, which are included in this prospectus. We have not had any significant
operations to date, and accordingly only balance sheet data is presented.
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March
31, 2019
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|
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Actual
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As
Adjusted
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Balance
Sheet Data:
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|
|
|
|
|
|
|
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Working
capital
(1)
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$
|
236,672
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|
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$
|
102,301,672
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Total
assets
(2)
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$
|
269,181
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|
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$
|
102,334,181
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Total
liabilities
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$
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32,509
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|
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$
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32,509
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Value
of common stock subject to possible conversion/tender
(3)
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$
|
0
|
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$
|
(97,301,671
|
)
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Stockholders’
equity
(4)
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|
$
|
236,672
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$
|
5,
000,001
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(1)
|
The
“as adjusted” calculation includes $100,000,000 cash held in trust from the proceeds of this offering, plus
$2,000,000 in cash held outside the trust account, plus offering costs of $65,000 accrued for and paid in advance, plus $236,672
of actual stockholders’ equity at M
arch
31, 2019
.
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(2)
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The
“as adjusted” calculation equals $100,000,000 cash held in trust from the proceeds of this offering, plus $2,000,000
in cash held outside the trust account, plus offering costs of $65,000 accrued for and paid in advance, plus $269,181 of actual
total assets at March 31, 2019.
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(3)
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Excludes
9,730,167 shares of common stock which are subject to redemption in connection with our initial business combination (approximately
$10.00 per share).
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(4)
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The
“as adjusted” calculation equals the “as adjusted” total assets, less the “as adjusted”
total liabilities, less the value of shares of common stock that may be redeemed in connection with our initial business combination
(approximately $10.00 per share), which is set to approximate the minimum net tangible assets threshold of at least $5,000,001
upon consummation of our initial business combination.
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The “as adjusted” information gives effect to
the sale of the units we are offering, including the application of the related gross proceeds and the payment of the estimated
remaining costs from such sale and the repayment of the accrued and other liabilities required to be repaid.
The “as adjusted” working capital and total assets
amounts include the $100,000,000 to be held in the trust account, which, except for limited situations described in this prospectus,
will be available to us only upon the consummation of a business combination within the time period described in this prospectus.
If a business combination is not so consummated, the trust account, less amounts we are permitted to withdraw as described in this
prospectus, will be distributed solely to our public stockholders (subject to our obligations under Nevada law to provide for claims
of creditors).
We will consummate our initial business combination only
if we have net tangible assets of at least $5,000,001 upon such consummation and, if we seek stockholder approval, a majority of
the outstanding shares of common stock voted are voted in favor of the business combination.
RISK FACTORS
An investment in our securities involves a high degree
of risk. You should consider carefully the risks described below, which we believe represent the material risks related to the
offering, together with the other information contained in this prospectus, before making a decision to invest in our units. This
prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in the forward-looking statements as a result of specific factors, including the risks described below.
Risks Associated with Our Business
We are a newly formed company with no operating history
and, accordingly, you will not have any basis on which to evaluate our ability to achieve our business objective.
We are a newly formed company with no operating results to
date. Therefore, our ability to commence operations is dependent upon obtaining financing through the public offering of our securities.
Since we do not have an operating history, you will have no basis upon which to evaluate our ability to achieve our business objective,
which is to consummate an initial business combination. We have not conducted any substantive discussions and we have no plans,
arrangements or understandings with any prospective acquisition candidates. We will not generate any revenues until, at the earliest,
after the consummation of a business combination.
Our independent registered public accounting firm’s
report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
As of March 31, 2019, we had $269,181 in
cash and a working capital of $236,672. Further, we have incurred and expect to continue to incur significant costs in pursuit
of our financing and acquisition plans. Management’s plans to address this need for capital through this offering are discussed
in the section of this prospectus titled
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”
We cannot assure you that our plans to raise capital or to consummate an initial business
combination will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going
concern. The financial statements contained elsewhere in this prospectus do not include any adjustments that might result from
the outcome of this uncertainty.
If
we are unable to consummate a business combination, our public stockholders may be forced to wait more than 12 months
(or
up to 18 months if we extend the period of time to consummate a business combination by the full amount of time)
before
receiving distributions from the trust account.
We have 12 months from the closing
of this offering (or up to 18 months if we extend the period of time to consummate a business combination by the full amount
of time) in which to complete a business combination. We have no obligation to return funds to investors prior to such date
unless (i) we consummate a business combination prior thereto or (ii) we seek to amend our amended and restated articles of
incorporation prior to consummation of a business combination, and only then in cases where investors have sought to convert
or sell their shares to us. Only after the expiration of this full time period will public security holders be entitled to
distributions from the trust account if we are unable to complete a business combination. Accordingly, investors’ funds
may be unavailable to them until after such date and to liquidate your investment, public security holders may be forced to
sell their public shares, warrants or rights, potentially at a loss.
Our public stockholders may not be afforded an opportunity
to vote on our proposed business combination.
We will either (1) seek stockholder approval of our initial
business combination at a meeting called for such purpose at which public stockholders may seek to convert their shares, regardless
of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on
deposit in the trust account (net of taxes payable), or (2) provide our public stockholders with the opportunity to sell their
shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata
share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations
described elsewhere in this prospectus. Accordingly, it is possible that we will consummate our initial business combination even
if holders of a majority of our public shares do not approve of the business combination we consummate. The decision as to whether
we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a
tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the
transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. For instance, Nasdaq
rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder
approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business
combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding
shares, we would seek stockholder approval of such business combination instead of conducting a tender offer.
If we seek stockholder approval of our initial business
combination, our initial stockholders have agreed to vote in favor of such initial business combination, regardless of how our
public stockholders vote.
Our
initial stockholders have agreed (i) to vote any of the founders’ shares held by the initial stockholders in favor of any
proposed business combination, (ii) not to convert any such shares in connection with a stockholder vote to approve a proposed
initial business combination and (iii) not to sell any such shares to us in a tender offer in connection with any proposed business
combination. As a result, we would need only 3,710,001, or approximately 37.1%, of the 10,000,000 public shares sold in this offering
to be voted in favor of a transaction in order to have our initial business combination approved (assuming (i) the over-allotment
option is not exercised, (ii) all shares were present and entitled to vote at the meeting
and
(iii) that the 80,000 shares to be issued to the representative of the underwriters
are issued
and outstanding and are voted in favor of the business combination
).
Accordingly, if we seek stockholder approval of our initial business combination, it is more likely that the necessary stockholder
approval will be received than would be the case if our initial stockholders agreed to vote the founders’ shares in accordance
with the majority of the votes cast by our public stockholders.
You will not be entitled to protections normally afforded
to investors of blank check companies.
Since the net proceeds of this offering are intended to be
used to complete a business combination with a target business that has not been identified, we may be deemed to be a “blank
check” company under the United States securities laws. However, since we will have net tangible assets in excess of $5,000,000
upon the successful consummation of this offering and will file a Current Report on Form 8-K, including an audited balance sheet
demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors of blank check companies such as
Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules which would, for example, completely
restrict the transferability of our securities, require us to complete a business combination within 18 months of the effective
date of the initial registration statement and restrict the use of interest earned on the funds held in the trust account. Because
we are not subject to Rule 419, our units will be immediately tradable, we will be entitled to withdraw amounts from the funds
held in the trust account prior to the completion of a business combination and we will have a longer period of time to complete
such a business combination than we would if we were subject to such rule.
If we seek stockholder approval of our initial business
combination and we do not conduct redemptions pursuant to the tender offer rules, a stockholder or a “group” of stockholders
holding a substantial portion of our common stock may influence our ability to complete our business combination.
Unlike other blank check companies, if we seek stockholder
approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination
pursuant to the tender offer rules, our amended and restated articles of incorporation will not provide that a public stockholder,
together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13 of the Exchange Act), holding in excess of a certain percentage of shares offered in our initial public
offering will be restricted from seeking redemption rights with respect to any shares they hold in excess of such percentage. The
ability of any such stockholder to redeem all their shares will increase their influence over our ability to complete our business
combination and could make it more difficult for us to complete such business combination.
If we determine to change our acquisition criteria
or guidelines, many of the disclosures contained in this prospectus would be rendered irrelevant and you would be investing in
our company without any basis on which to evaluate the potential target business we may acquire.
We could seek to deviate from the acquisition criteria or
guidelines disclosed in this prospectus although we have no current intention to do so. For instance, we currently anticipate acquiring
a target business with a consistent historical financial performance. However, we are not obligated to do so and may determine
to merge with or acquire a company with no operating history if the terms of the transaction are determined by us to be favorable
to our public stockholders. In such event, many of the acquisition criteria and guidelines set forth in this prospectus would be
rendered irrelevant. We could also seek to amend our amended and restated articles of incorporation to provide us with more time
to complete an initial business combination. Accordingly, investors may be making an investment in our company without any basis
on which to evaluate the potential target business we may acquire.
We may issue shares of our capital stock or debt securities
to complete a business combination, which would reduce the equity interest of our stockholders and likely cause a change in control
of our ownership.
Our amended and restated articles
of incorporation authorize the issuance of up to 150,000,000 shares of common stock, par value $0.001 per share and 1,000,000
shares of preferred stock, par value $0.001 per share. Immediately after this offering and the private placement of private warrants,
there will be 120,620,000 (assuming that the underwriters have not exercised their over-allotment option) authorized but unissued
shares common stock available for issuance, which amount takes into account 80,000 shares issued to underwriters, shares reserved
for issuance upon exercise of outstanding warrants (including the private warrants and the underwriters’ warrants), 1,000,000
shares issuable upon conversion of the rights and excluding the 300,000 shares issuable to Kin Sze, our Co-Chief Executive Officer,
President and Secretary, and certain directors within 10 days following the business combination. Immediately after this offering,
there will be no shares of preferred stock issued and outstanding. Although we have no commitment as of the date of this offering,
we may issue a substantial number of additional shares of common stock or shares of preferred stock, or a combination of common
stock and preferred stock, to complete a business combination. The issuance of additional shares of common stock will not reduce
the per-share conversion amount in the trust account. The issuance of additional shares of common stock or preferred stock:
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•
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may significantly reduce the equity interest of investors in this offering;
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•
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may subordinate the rights of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of common stock;
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•
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may cause a change in control if a substantial number of shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
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•
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may adversely affect prevailing market prices for our shares of common stock.
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Similarly, if we issue debt securities, it could result in:
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•
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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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•
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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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•
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and
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•
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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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If we incur indebtedness, our lenders will not have a claim
on the cash in the trust account and such indebtedness will not decrease the per-share conversion amount in the trust account.
If
the net proceeds of this offering not being held in trust are insufficient to allow us to operate for at least the next
12
months (or up to 18 months if we extend the period of time to consummate a business combination by the full amount of time)
,
we may be unable to complete a business combination.
We believe that, upon consummation
of this offering, the funds available to us outside of the trust account will be sufficient to allow us to operate for at least
the next 12 months (or up to 18 months if we extend the period of time to consummate a business combination by the full amount
of time), assuming that a business combination is not consummated during that time. However, we cannot assure you that our estimates
will be accurate. Accordingly, if we use all of the funds held outside of the trust account, we may not have sufficient funds
available with which to structure, negotiate or close an initial business combination. In such event, we would need to borrow
funds from our sponsor, initial stockholders, officers or directors or their affiliates to operate or may be forced to liquidate.
Our sponsor, initial stockholders, officers, directors and their affiliates may, but are not obligated to, loan us funds, from
time to time or at any time, in whatever amount that they deem reasonable in their sole discretion for our working capital needs.
Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination,
without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of
$1.00 per warrant.
If third parties bring claims against us, the proceeds
held in trust could be reduced and the per-share redemption price received by stockholders may be less than $10.00.
Our placing of funds in trust may not protect those funds
from third party claims against us. Although we will seek to have all vendors and service providers we engage and prospective target
businesses we negotiate with execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies
held in the trust account for the benefit of our public stockholders, they may not execute such agreements. Furthermore, even if
such entities execute such agreements with us, they may seek recourse against the trust account. A court may not uphold the validity
of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of
our public stockholders. If we are unable to complete a business combination and distribute the proceeds held in trust to our public
stockholders, our sponsor has agreed (subject to certain exceptions described elsewhere in this prospectus) that it will be
liable to ensure that the proceeds in the trust account are not reduced below $10.00 per public share by the claims of target
businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products
sold to us. However, it may not be able to meet such obligation. Therefore, the per-share distribution from the trust account
may be less than $10.00, plus interest, due to such claims.
Additionally, if we are forced to file a bankruptcy case
or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject
to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority
over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we may not be able to return
to our public stockholders at least $10.00 (subject to increase of up to an additional $0.20 per share in the event that our sponsor
elects to extend the period of time to consummate a business combination by the full six months, as described in more detail in
this prospectus). We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations.
We have not asked our sponsor to reserve for such indemnification obligations. As a result, if any such claims were successfully
made against the trust account, the funds available for our initial business combination and redemptions could be reduced to less
than $10.00 per public share.
Our stockholders may be held liable for claims by third
parties against us to the extent of distributions received by them.
Our
amended and restated articles of incorporation provide that we will continue in existence only until
12
months from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time
to consummate a business combination by the full amount of time)
.
If we have not completed a business combination by such date, we will (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public
shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any
interest earned on the funds held in the trust account (net of interest that may be used by us to pay our taxes payable and for
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 liquidation distributions, if any), subject
to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations
under Nevada law to provide for claims of creditors and the requirements of other applicable law. We cannot assure you that we
will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable
for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well
beyond the third anniversary of the date of distribution. Accordingly, we cannot assure you that third parties will not seek to
recover from our stockholders amounts owed to them by us.
If we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders could be viewed under applicable
debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.”
As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. Furthermore, because we intend
to distribute the proceeds held in the trust account to our public stockholders promptly after expiration of the time we have to
complete an initial business combination, this may be viewed or interpreted as giving preference to our public stockholders over
any potential creditors with respect to access to or distributions from our assets. Furthermore, our board may be viewed as having
breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company
to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
We cannot assure you that claims will not be brought against us for these reasons.
Our directors may decide not to enforce our sponsor’s
indemnification obligations, resulting in a reduction in the amount of funds in the trust account available for distribution to
our public stockholders.
In the event that the proceeds in the trust account are reduced
below $10.00 per public share and our sponsor asserts that it is unable to satisfy his obligations or that he has no indemnification
obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor
to enforce such indemnification obligations. While we currently expect that our independent directors would take legal action on
our behalf against our sponsor to enforce such indemnification obligations to us, it is possible that our independent directors
in exercising their business judgment may choose not to do so in any particular instance. If our independent directors choose not
to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public
stockholders may be reduced below $10.00 per share.
If we do not file and maintain a current and effective
prospectus relating to the common stock issuable upon exercise of the warrants, holders will only be able to exercise such warrants
on a “cashless basis.”
If we do not file and maintain a current and effective prospectus
relating to the common stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they
will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available.
As a result, the number of shares of common stock that holders will receive upon exercise of the warrants will be fewer than it
would have been had such holder exercised his warrant for cash. Further, if an exemption from registration is not available, holders
would not be able to exercise on a cashless basis and would only be able to exercise their warrants for cash if a current and effective
prospectus relating to the common stock issuable upon exercise of the warrants is available. Under the terms of the warrant agreement,
we have agreed to use our best efforts to meet these conditions and to file and maintain a current and effective prospectus relating
to the common stock issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you
that we will be able to do so. If we are unable to do so, the potential “upside” of the holder’s investment in
our company may be reduced or the warrants may expire worthless.
An investor will only be able to exercise a warrant
if the issuance of shares of common stock upon such exercise has been registered or qualified or is deemed exempt under the securities
laws of the state of residence of the holder of the warrants.
No warrants will be
exercisable and we will not be obligated to issue shares of common stock unless the shares of common stock issuable upon such
exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the
holder of the warrants. If the shares of common stock issuable upon exercise of the warrants are not qualified or exempt
from qualification in the jurisdictions in which the holders of the warrants and/or rights reside, the warrants may be
deprived of any value, the market for the warrants may be limited and they may expire worthless if they cannot be sold and
may be subject to redemption.
We may amend the terms of the warrants in a manner
that may be adverse to holders with the approval by the holders of at least 50% of the then outstanding warrants.
Our warrants will be issued in registered form under a warrant
agreement between American Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the
terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision.
The warrant agreement requires the approval by the holders of at least 50% of the then outstanding warrants in order to make any
change that adversely affects the interests of the registered holders.
We may amend the terms of the
rights in a way that may be adverse to holders with the approval by the holders of a majority of the then outstanding rights.
Our rights will be issued in registered
form under a rights agreement between American Stock Transfer & Trust Company, as rights agent, and us. The rights agreement
provides that the terms of the rights may be amended without the consent of any holder to cure any ambiguity or correct any defective
provision. The rights agreement requires the approval by the holders of a majority of the then outstanding rights in order to make
any change that adversely affects the interests of the registered holders.
Because we are not limited to a particular industry
or target business with which to complete a business combination, we are unable to currently ascertain the merits or risks of the
industry or business in which we may ultimately operate.
We may consummate a business combination with a company in
any industry we choose and are not limited to any particular industry or type of business, although we intend to focus on companies
which provide financial services in Asia, primarily China. Accordingly, there is no current basis for you to evaluate the possible
merits or risks of the particular industry in which we may ultimately operate or the target business which we may ultimately acquire.
To the extent we complete a business combination with a financially unstable company or an entity in its development stage, we
may be affected by numerous risks inherent in the business operations of those entities. If we complete a business combination
with an entity in an industry characterized by a high level of risk, we may be affected by the currently unascertainable risks
of that industry. Although our management will endeavor to evaluate the risks inherent in a particular industry or target business,
we cannot assure you that we will properly ascertain or assess all of the significant risk factors. We also cannot assure you that
an investment in our units will not ultimately prove to be less favorable to investors in this offering than a direct investment,
if an opportunity were available, in a target business.
Our ability to successfully effect a business combination
and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following
a business combination. While we intend to closely scrutinize any individuals we engage after a business combination, we cannot
assure you that our assessment of these individuals will prove to be correct.
Our ability to successfully effect a business combination
is dependent upon the efforts of our key personnel. We believe that our success depends on the continued service of our key personnel,
at least until we have consummated our initial business combination. We cannot assure you that any of our key personnel will remain
with us for the immediate or foreseeable future. In addition, none of our officers are required to commit any specified amount
of time to our affairs and, accordingly, our officers 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 employment agreements with, or key-man insurance on the life of, any of our officers. The unexpected loss of the services
of our key personnel could have a detrimental effect on us.
The role of our key personnel after a business combination,
however, cannot presently be ascertained. Although some of our key personnel serve in senior management or advisory positions following
a business combination, it is likely that most, if not all, of the management of the target business will remain in place. While
we intend to closely scrutinize any individuals we engage after a business combination, we cannot assure you that our assessment
of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a public
company which could cause us to have to expend time and resources helping them become familiar with such requirements. This could
be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
Our officers and directors may not have significant
experience or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.
We may consummate a business combination with a target business
in any geographic location or industry we choose, although we intend to focus on companies which provide financial services in
Asia, primarily China. We cannot assure you that our officers and directors will have enough experience or have sufficient knowledge
relating to the jurisdiction of the target or its industry to make an informed decision regarding a business combination.
Our key personnel may negotiate employment or consulting
agreements with a target business in connection with a particular business combination. These agreements may provide for them to
receive compensation following a business combination and as a result, may cause them to have conflicts of interest in determining
whether a particular business combination is the most advantageous.
Our key personnel will be able to remain with the company
after the consummation of a business combination only if they are able to negotiate employment or consulting agreements or other
appropriate arrangements in connection with the business combination. Such negotiations would take place simultaneously with the
negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments
and/or our securities for services they would render to the company after the consummation of the business combination. The personal
and financial interests of such individuals may influence their motivation in identifying and selecting a target business.
Our officers and directors 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 consummate a business combination.
Our officers and directors are not required to commit their
full time to our affairs, which could create a conflict of interest when allocating their time between our operations and their
other commitments. We presently expect each of our employees to devote such amount of time as they reasonably believe is necessary
to our business. We do not intend to have any full time employees prior to the consummation of our initial business combination.
All of our officers and directors are engaged in other business endeavors and are not obligated to devote any specific number of
hours to our affairs. If our officers’ and directors’ other business affairs require them to devote more substantial
amounts of time to such affairs, it could limit their ability to devote time to our affairs and could have a negative impact on
our ability to consummate our initial business combination. We cannot assure you that these conflicts will be resolved in our favor.
Our officers and directors may have a conflict of interest
in determining whether a particular target business is appropriate for a business combination.
Our sponsor, initial stockholders,
officers and directors, have agreed to waive their right to convert their founders’ shares or any other shares purchased
in this offering or thereafter, or to receive distributions from the trust account with respect to their founders’ shares
upon our liquidation if we are unable to consummate a business combination. Accordingly, the shares acquired prior to this offering,
as well as the private warrants and the securities underlying the private warrants, will be worthless if we do not consummate
a business combination. The personal and financial interests of our sponsor, directors and officers may influence their motivation
in timely identifying and selecting a target business and completing a business combination. Consequently, our directors’
and officers’ discretion in identifying and selecting a suitable target business may result in a conflict of interest when
determining whether the terms, conditions and timing of a particular business combination are appropriate and in our stockholders’
best interest.
Certain of our officers have, and any of our officers
and directors or their affiliates may in the future have, fiduciary and contractual obligations and accordingly, may have conflicts
of interest in determining to which entity a particular business opportunity should be presented.
Certain of our directors have, and any of our officers and
directors or their affiliates may in the future have, fiduciary and contractual obligations to other companies. Accordingly, they
may participate in transactions and have obligations that may be in conflict or competition with our consummation of our initial
business combination. As a result, a potential target business may be presented by our management team to another entity prior
to its presentation to us and we may not be afforded the opportunity to engage in a transaction with such target business. For
a more detailed description of the pre-existing fiduciary and contractual obligations of our management team, and the potential
conflicts of interest that such obligations may present, see the section titled “
Management — Conflicts of Interest
.”
Our executive 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, executive 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 sponsor, our
directors or executive officers. Nor do we have a policy that expressly prohibits any such persons from engaging for their own
account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between
their interests and ours. We will be required to obtain a fairness opinion with respect to the target business that we seek to
acquire if it is an entity that is affiliated with any of our officers, directors or sponsor.
Nasdaq may delist our securities from quotation on
its exchange which could limit investors’ ability to make transactions in our securities and subject us to additional trading
restrictions.
Our units have been approved for
listing on Nasdaq on the date of this prospectus. Following the date the shares of our common stock, warrants and rights are
eligible to trade separately, we anticipate that the shares of our common stock, warrants and rights will be listed
separately on Nasdaq. We cannot assure you, however, that our securities will continue to be listed on Nasdaq in the future
prior to an initial business combination. Additionally, in connection with our initial business combination, it is likely
that Nasdaq will require us to file a new initial listing application and meet its initial listing requirements as opposed to
its more lenient continued listing requirements. We cannot assure you that we will be able to meet those initial listing
requirements at that time.
If Nasdaq delists our securities from trading on its exchange,
we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity with respect to our securities;
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a determination that our shares of common stock are “penny stock” which will require brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock;
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a limited amount of news and analyst coverage for our company; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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The National Securities Markets Improvement Act of 1996,
which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred
to as “covered securities.” Because our units and eventually our common stock, warrants and rights will be listed
on Nasdaq, our units, common stock, warrants and rights are covered securities. Although the states are preempted from regulating the sale
of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if
there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case.
While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check
companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to
use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed
on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer
our securities.
We are an “emerging growth company” and
we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our shares of common
stock less attractive to investors.
We are an “emerging growth company,” as defined
in the JOBS Act. We will remain an “emerging growth company” for up to five years. However, if our non-convertible
debt issued within a three year period exceeds $1 billion or revenues exceeds $1.07 billion, or the market value of our shares
of common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given
fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, we
are not required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, we have reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements and we are exempt from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or revised accounting
standards that have different effective dates for public and private companies until those standards apply to private companies.
As such, our financial statements may not be comparable to companies that comply with public company effective dates. We cannot
predict if investors will find our shares of common stock less attractive because we may rely on these provisions. If some investors
find our shares of common stock less attractive as a result, there may be a less active trading market for our shares and our share
price may be more volatile.
We may only be able to complete one business combination
with the proceeds of this offering, which will cause us to be solely dependent on a single business which may have a limited number
of products or services.
It is likely we will consummate a business combination with
a single target business, although we have the ability to simultaneously acquire several target businesses. By consummating a business
combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory
developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting
of losses, unlike other entities which may have the resources to complete several business combinations in different industries
or different areas of a single industry. Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single business, 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 a business combination.
Alternatively, if we determine to simultaneously acquire
several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our
purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more
difficult for us, and delay our ability, to complete the business combination. With multiple business combinations, we could also
face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence
investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations
and services or products of the acquired companies in a single operating business. If we are unable to adequately address these
risks, it could negatively impact our profitability and results of operations.
The ability of our stockholders to exercise their conversion
rights or sell their shares to us in a tender offer may not allow us to effectuate the most desirable business combination or optimize
our capital structure.
If our business combination requires us to use substantially
all of our cash to pay the purchase price, because we will not know how many stockholders may exercise conversion rights or seek
to sell their shares to us in a tender offer, we may either need to reserve part of the trust account for possible payment upon
such conversion, or we may need to arrange third party financing to help fund our business combination. In the event that the acquisition
involves the issuance of our stock as consideration, we may be required to issue a higher percentage of our stock to make up for
a shortfall in funds. Raising additional funds to cover any shortfall may involve dilutive equity financing or incurring indebtedness
at higher than desirable levels. This may limit our ability to effectuate the most attractive business combination available to
us.
In connection with any stockholder meeting called to
approve a proposed initial business combination, we may require stockholders who wish to convert their shares in connection with
a proposed business combination to comply with specific requirements for conversion that may make it more difficult for them to
exercise their conversion rights prior to the deadline for exercising their rights.
In connection with any stockholder
meeting called to approve a proposed initial business combination, each public stockholder will have the right, regardless of
whether he is voting for or against such proposed business combination, to demand that we convert his shares into a pro rata share
of the trust account as of two business days prior to the consummation of the initial business combination. We may require public
stockholders who wish to convert their shares in connection with a proposed business combination to either (i) tender their certificates
to our transfer agent or (ii) deliver their shares to the transfer agent electronically using the Depository Trust Company’s
DWAC (Deposit/Withdrawal At Custodian) System, at the holders’ option, in each case prior to a date set forth in the proxy
materials sent in connection with the proposal to approve the business combination. In order to obtain a physical stock certificate,
a stockholder’s broker and/or clearing broker, DTC and our transfer agent will need to act to facilitate this request. It
is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer
agent. However, because we do not have any control over this process or over the brokers or DTC, it may take significantly longer
than two weeks to obtain a physical stock certificate. While we have been advised that it takes a short time to deliver shares
through the DWAC System, we cannot assure you of this fact. Accordingly, if it takes longer than we anticipate for stockholders
to deliver their shares, stockholders who wish to convert may be unable to meet the deadline for exercising their conversion rights
and thus may be unable to convert their shares.
If, in connection with any stockholder meeting called to
approve a proposed business combination, we require public stockholders who wish to convert their shares to comply with specific
requirements for conversion, such converting stockholders may be unable to sell their securities when they wish to in the event
that the proposed business combination is not approved.
If we require public stockholders who wish to convert their
shares to either (i) tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically
using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System as described above and such proposed business
combination is not consummated, we will promptly return such certificates to the tendering public stockholders. Accordingly, investors
who attempted to convert their shares in such a circumstance will be unable to sell their securities after the failed acquisition
until we have returned their securities to them. The market price for our shares of common stock may decline during this time and
you may not be able to sell your securities when you wish to, even while other stockholders that did not seek conversion may be
able to sell their securities.
Because of our structure, other companies may have
a competitive advantage and we may not be able to consummate an attractive business combination.
We expect to encounter
intense competition from entities other than blank check companies having a business objective similar to ours, including
venture capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these entities are
well established and have extensive experience in identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater technical, human and other resources than we do and our financial
resources will be relatively limited when contrasted with those of many of these competitors. While we believe that there are
numerous potential target businesses that we could acquire with the net proceeds of this offering, our ability to compete in
acquiring certain sizable target businesses 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, seeking
stockholder approval or engaging in a tender offer in connection with any proposed business combination may delay the
consummation of such a transaction. Additionally, our outstanding warrants and rights, and the future dilution they potentially
represent, may not be viewed favorably by certain target businesses. Any of the foregoing may place us at a competitive
disadvantage in successfully negotiating a business combination.
We may be unable to obtain additional financing, if
required, to complete a business combination or to fund the operations and growth of the target business, which could compel us
to restructure or abandon a particular business combination.
Because we have not yet identified any prospective target
business, we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of this offering prove
to be insufficient, either because of the size of the business combination, the depletion of the available net proceeds in search
of a target business, or the obligation to convert into cash a significant number of shares from dissenting stockholders, we will
be required to seek additional financing. Such financing may not be available on acceptable terms, if at all. To the extent that
additional financing proves to be unavailable when needed to consummate a particular business combination, we would be compelled
to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate.
In addition, if we consummate a business combination, we may require additional financing to fund the operations or growth of the
target business. The failure to secure additional financing could have a material adverse effect on the continued development or
growth of the target business. None of our sponsor, officers, directors or stockholders is required to provide any financing to
us in connection with or after a business combination.
Our initial stockholders will control a substantial
interest in us and thus may influence certain actions requiring a stockholder vote.
Upon consummation of our offering,
our stockholders prior to the offering will own approximately 20.0% of our issued and outstanding shares of common stock (assuming
they do not purchase any units in this offering). None of our sponsor, initial stockholders, officers, directors or their affiliates
has indicated any intention to purchase units in this offering or any units or shares of common stock from persons in the open
market or in private transactions. However, our sponsor, initial stockholders, officers, directors or their affiliates could determine
in the future to make such purchases in the open market or in private transactions, to the extent permitted by law, in order to
influence the vote or magnitude of the number of stockholders seeking to tender their shares to us. In connection with any vote
for a proposed business combination, our sponsor, as well as all of our officers and directors, have agreed to vote the shares
of common stock owned by them immediately before this offering as well as any shares of common stock acquired in this offering
or in the aftermarket in favor of such proposed business combination.
Our board of directors will be divided into two classes,
each of which will generally serve for a term of two years with only one class of directors being elected in each year. There may
not be an annual meeting of stockholders to elect new directors prior to the consummation of a business combination, in which case
all of the current directors will continue in office until at least the consummation of the business combination. If there is an
annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will
be considered for election and our sponsor, because of their ownership position, will have considerable influence regarding the
outcome. Accordingly, our initial stockholders will continue to exert control at least until the consummation of a business combination.
Our initial stockholders paid an aggregate of $555,000,
or approximately $0.20 per share, for the founders’ shares and, accordingly, you will experience immediate and substantial
dilution from the purchase of our shares of common stock.
The difference between the public
offering price per share (allocating all of the unit purchase price to the common stock and none to the warrants and rights
included in the units) and the pro forma net tangible book value per share of common stock after this offering
constitutes the dilution to the investors in this offering. Our initial stockholders acquired the founders’ shares at a
nominal price, significantly contributing to this dilution. Upon consummation of this offering, you and the other new
investors will incur an immediate and substantial dilution of approximately 87.0% or $8.70 per share (the difference between
the pro forma net tangible book value per share $1.30, and the initial offering price of $10.00 per unit). This is because
investors in this offering will be contributing approximately 99.4% of the total amount paid to us for our outstanding
securities after this offering but will only own 81.0% of our outstanding securities. Accordingly, the per-share purchase
price you will be paying substantially exceeds our per share net tangible book value.
Our outstanding warrants and
rights may have an adverse effect on the market price of our common stock and make it more difficult to effect a business
combination.
We will be issuing warrants to purchase
10,000,000 shares of common stock and rights convertible into 1,000,000 shares of common stock as part of the units offered by
this prospectus (or warrants to purchase 11,500,000 shares of common stock and rights convertible into 1,150,000 shares of common
stock if the over-allotment option is exercised in full), private warrants to purchase 5,000,000 shares of common stock (or private
warrants to purchase 5,375,000 shares of common stock if the over-allotment option is exercised in full) and 800,000 warrants
(or 920,000 warrants if the over-allotment option is exercised in full) issued to the underwriters. We may also issue other warrants
to our sponsor, initial stockholders, officers or directors in payment of working capital loans made to us as described in this
prospectus. To the extent we issue shares of common stock to effect a business combination, the potential for the issuance of
a substantial number of additional shares upon exercise of these warrants and conversion of these rights could make us a less
attractive acquisition vehicle in the eyes of a target business. Such securities, when exercised and converted, will increase
the number of issued and outstanding shares of common stock and reduce the value of the shares issued to complete the business
combination. Accordingly, our warrants and rights may make it more difficult to effectuate a business combination or increase
the cost of acquiring the target business. Additionally, the sale, or even the possibility of sale, of the shares underlying the
warrants and rights could have an adverse effect on the market price for our securities or on our ability to obtain future financing.
If and to the extent these warrants are exercised or rights are converted, you may experience dilution to your holdings.
A provision of our warrant agreement
may make it more difficult for us to consummate an initial business combination.
Unlike most blank check companies, if
(i) we issue additional shares of common stock or equity-linked securities for capital raising purposes in connection with the
closing of our initial business combination at a Newly Issued Price of less than $9.20 per share; (ii) the aggregate gross proceeds
from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our
initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (iii)
the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted to be equal to 115% of the
higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the
nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. This may make it more difficult
for us to consummate an initial business combination with a target business.
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 (as adjusted for stock splits, stock dividends, reorganizations
and recapitalizations) for any 20 trading days within a 30 trading-day period ending on the third business day prior to proper
notice of such redemption provided that on the date we give notice of redemption and during the entire period thereafter until
the time we redeem the warrants, we have an effective registration statement under the Securities Act covering the shares of common
stock issuable upon exercise of the warrants and a current prospectus relating to them is available. If and when the warrants become
redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for
sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants
and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the
then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which,
at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your
warrants. None of the private warrants will be redeemable by us so long as they are held by our sponsor or its permitted transferees.
Our management’s ability to require holders of
our warrants to exercise such warrants on a cashless basis will cause holders to receive fewer shares of common stock upon their
exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If we call our public warrants for
redemption after the redemption criteria described elsewhere in this prospectus have been satisfied, our management will have
the option to require any holder that wishes to exercise his warrant (including any warrants held by our sponsor, initial stockholders,
officers or directors, other purchasers of our private warrants, or their permitted transferees) to do so on a “cashless
basis.” If our management chooses to require holders to exercise their warrants on a cashless basis, the number of shares
of common stock received by a holder upon exercise will be fewer than it would have been had such holder exercised his warrant
for cash. This will have the effect of reducing the potential “upside” of the holder’s investment in our company.
We have no obligation to net cash settle the warrants.
In no event will we have any obligation to net cash settle
the warrants. Furthermore, there are no contractual penalties for failure to deliver securities to the holders of the warrants
upon exercise of the warrants. Accordingly, the warrants may expire worthless.
If our security holders exercise their registration
rights, it may have an adverse effect on the market price of our shares of common stock and the existence of these rights may make
it more difficult to effect a business combination.
Our
initial shareholders are entitled to make a demand that we register the resale of their insider shares at any time commencing
three months prior to the date on which their shares may be released from escrow.
Additionally,
the holders of the private warrants and any warrants our sponsor, initial stockholders, officers, directors, or their affiliates
may be issued in payment of working capital loans made to us are entitled to demand that we register the resale of such warrants
(and the underlying shares of common stock) commencing at any time after we consummate an initial business combination. The presence
of these additional shares of common stock trading in the public market may have an adverse effect on the market price of our
securities. In addition, the existence of these rights may make it more difficult to effectuate a business combination or increase
the cost of acquiring the target business, as the stockholders of the target business may be discouraged from entering into a
business combination with us or will request a higher price for their securities because of the potential effect the exercise
of such rights may have on the trading market for our shares of common stock.
If we are deemed to be an investment company, we may
be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for
us to complete a business combination.
A company that, among other things, is or holds itself out
as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, owning, trading or holding
certain types of securities would be deemed an investment company under the Investment Company Act, as amended, or the Investment
Company Act. Since we will invest the proceeds held in the trust account, it is possible that we could be deemed an investment
company. Notwithstanding the foregoing, we do not believe that our anticipated principal activities will subject us to the Investment
Company Act. To this end, the proceeds held in trust may be invested by the trustee only in United States “government securities”
within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government
treasury obligations. By restricting the investment of the proceeds to these instruments, we intend to meet the requirements for
the exemption provided in Rule 3a-1 promulgated under the Investment Company Act.
If we are nevertheless deemed to be an investment company
under the Investment Company Act, we may be subject to certain restrictions that may make it more difficult for us to complete
a business combination, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities.
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In addition, we may have imposed upon us certain 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, compliance policies and procedures and disclosure requirements and other rules and regulations.
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Compliance with these additional regulatory burdens would
require additional expense for which we have not allotted.
The determination for the offering price of our units
is more arbitrary compared with the pricing of securities for an operating company in a particular industry.
Prior to this offering there
has been no public market for any of our securities. The public offering price of the units and the terms of the warrants
and rights were negotiated between us and I-Bankers Securities, Inc. Factors considered in determining the prices and terms
of the units, including the shares of common stock, warrants and rights underlying the units, include:
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the history and prospects of companies whose principal business is the acquisition of other companies;
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prior offerings of those companies;
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our prospects for acquiring an operating business at attractive values;
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an assessment of our management and their experience in identifying operating companies; and
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general conditions of the securities markets at the time of the offering.
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However, although these factors were considered, the determination
of our offering price is more arbitrary than the pricing of securities for an operating company in a particular industry since
we have no historical operations or financial results to compare them to.
If we do not conduct an adequate due diligence investigation
of a target business, we may be required to subsequently take write-downs or write-offs, restructuring, and impairment or other
charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which
could cause you to lose some or all of your investment.
We must conduct a due diligence investigation of the target
businesses we intend to acquire. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance
and legal professionals who must be involved in the due diligence process. Even if we conduct extensive due diligence on a target
business, this diligence may not reveal all material issues that may affect a particular target business, and factors outside the
control of the target business and outside of our control may later arise. If our diligence fails to identify issues specific to
a target business, industry or the environment in which the target business operates, we may be forced to later write-down or write-off
assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even though
these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this
nature could contribute to negative market perceptions about us or our common stock. In addition, charges of this nature may cause
us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target
business or by virtue of our obtaining post-combination debt financing.
The
requirement that we complete an initial business combination within
12
months from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time
to consummate a business combination by the full amount of time)
may
give potential target businesses leverage over us in negotiating a business combination.
We
have
12 months from the closing of this offering (or up to 18
months from the closing of this offering if we extend the period of time to consummate a business combination by the full amount
of time)
to complete an initial business combination. Any
potential target business with which we enter into negotiations concerning a business combination will be aware of this requirement.
Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not
complete a business combination with that particular target business, we may be unable to complete a business combination with
any other target business. This risk will increase as we get closer to the time limit referenced above.
We may not be able to complete our initial business
combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up
and we would redeem our public shares and liquidate.
We
must complete our initial business combination within
12 months
from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate
a business combination by the full amount of time)
. We may not
be able to find a suitable target business and complete our initial business combination within such time period or we may be unable
to consummate a business combination due to a downturn in industry or economic conditions or due to other factors that may occur.
If we have not completed our initial business combination within
12
months from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time
to consummate a business combination by the full amount of time)
,
we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than
ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account, including any interest earned on the funds held in the trust account (net
of interest that may be used by us to pay our taxes payable and for 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate,
subject (in the case of (ii) and (iii) above) to our obligations under Nevada law to provide for claims of creditors and the requirements
of other applicable law.
We may not obtain a fairness opinion with respect to
the target business that we seek to acquire and therefore you may be relying solely on the judgment of our board of directors in
approving a proposed business combination.
We will only be required to obtain
a fairness opinion with respect to the target business that we seek to acquire if it is an entity that is affiliated with any
of our officers, directors or sponsor. Our stockholders may not be provided with a copy of such opinion and they may not be
able to rely on such opinion. In all other instances, we will have no obligation to obtain an opinion. Accordingly, investors
will be relying solely on the judgment of our board of directors in approving a proposed business combination.
Resources could be spent researching acquisitions that
are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.
It is anticipated 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 a decision
is made not to complete a specific business combination, the costs incurred up to that point for the proposed transaction likely
would not be recoverable. Furthermore, even if an agreement is reached relating to a specific target business, we may fail to consummate
the business combination for any number of reasons including those beyond our control. Any such event will result in a loss to
us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with
another business.
Compliance with the Sarbanes-Oxley Act of 2002 will
require substantial financial and management resources and may increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley
Act of 2002 requires that we evaluate and report on our system of internal controls and may require that we have such system of
internal controls audited beginning with our Annual Report on Form 10-K for the year ending September 30, 2020. If we fail to
maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or
stockholder litigation. Any inability to provide reliable financial reports could harm our business. Section 404 of the Sarbanes-Oxley
Act also requires that our independent registered public accounting firm report on management’s evaluation of our system
of internal controls. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy
of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley
Act may increase the time and costs necessary to complete any such acquisition. Furthermore, any failure to implement required
new or improved controls, or difficulties encountered in the implementation of adequate controls over our financial processes
and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior
internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative
effect on the trading price of our stock.
Provisions in our amended and
restated articles of incorporation and bylaws and Nevada 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 articles of incorporation and bylaws
contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.
Our board of directors will be divided into two classes, each of which will generally serve for a term of two years with only one
class of directors being elected in each year. As a result, at a given annual meeting only a minority of the board of directors
may be considered for election. Since our “staggered board” may prevent our stockholders from replacing a majority
of our board of directors at any given annual meeting, it may entrench management and discourage unsolicited stockholder proposals
that may be in the best interests of stockholders. Moreover, our board of directors has the ability to designate the terms of and
issue new series of preferred stock. We may also be subject to anti-takeover provisions under Nevada law, which could delay or
prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions
that otherwise could involve payment of a premium over prevailing market prices for our securities.
Because we must furnish our stockholders with target
business financial statements prepared in accordance with U.S. generally accepted accounting principles or international financial
reporting standards, we will not be able to complete a business combination with prospective target businesses unless their financial
statements are prepared in accordance with U.S. generally accepted accounting principles.
The federal proxy rules require that a proxy statement with
respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro forma financial
statement disclosure in periodic reports. These financial statements may be required to be prepared in accordance with, or be reconciled
to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards,
or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with
the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. We will include the same financial statement
disclosure in connection with any tender offer documents we use, whether or not they are required under the tender offer rules.
Additionally, to the extent we furnish our stockholders with financial statements prepared in accordance with IFRS, such financial
statements will need to be audited in accordance with U.S. GAAP at the time of the consummation of the business combination. These
financial statement requirements may limit the pool of potential target businesses we may acquire.
There is currently no market for our securities and
a market for our securities may not develop, which would adversely affect the liquidity and price of our securities.
There is currently no market for our securities. Stockholders
therefore have no access to information about prior market history on which to base their investment decision. Following this
offering, the price of our securities may vary significantly due to one or more potential business combinations and general market
or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed, it may not
be sustained. You may be unable to sell your securities unless a market can be established and sustained.
Changes in laws or regulations, or a failure to comply
with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations enacted by national,
regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance
with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations
and their interpretation and application may also change from time to time and those changes could have a material adverse effect
on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as
interpreted and applied, could have a material adverse effect on our business and results of operations.
We may be subject to an increased rate of tax on our
income if we are treated as a personal holding company.
Depending on the date and size of our initial business combination,
it is possible that we could be treated as a “personal holding company” for U.S. federal income tax purposes. A U.S.
corporation generally will be classified as a personal holding company for U.S. federal income tax purposes in a given taxable
year if more than 50% of its ownership (by value) is concentrated, within a certain period of time, in five or fewer individuals
(without regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain
tax-exempt organizations, pension funds, and charitable trusts), and at least 60% of its income is comprised of certain passive
items. See the section titled “
Material U.S. Federal Tax Considerations — Personal Holding Company Status
”
for more detailed information.
There may be tax consequences to our business combination
that may adversely affect us.
While we expect to undertake any merger or acquisition so
as to minimize taxes both to the acquired business and/or asset and us, such business combination might not meet the statutory
requirements of a tax-free reorganization, or the parties might not obtain the intended tax-free treatment upon a transfer of shares
or assets. A non-qualifying reorganization could result in the imposition of substantial taxes.
Our amended and restated articles of incorporation
will provide, subject to limited exceptions, that the Clark County Business Court of the State of Nevada will be the sole and exclusive
forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers, employees or stockholders.
Our amended and restated articles of incorporation require,
to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees
for breach of fiduciary duty and other similar actions may be brought only in the Clark County Business Court in the State of Nevada
and, if brought outside of Nevada, the stockholder bringing the suit will be deemed to have consented to service of process on
such stockholder’s counsel. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital
stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated articles of incorporation.
This choice of forum provision may
limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of
our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although
our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.
However, there is no assurance that a court would enforce the choice of forum provision contained in our amended and restated
articles of incorporation
. If
a court were to find the choice of forum provision contained in our amended and restated articles of incorporation to be inapplicable
or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which
could harm our business, operating results and financial condition.
Our
amended and restated articles of incorporation will provide that the exclusive forum provision will be applicable to the fullest
extent permitted by applicable law. However, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits
brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the
exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any
other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act creates concurrent
jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act
or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce
any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent
jurisdiction.
Risks Associated with Acquiring and Operating a Business
Outside of the United States
If we effect our initial business combination
with a company located outside of the United States, we would be subject to a variety of additional risks that may negatively impact
our operations.
If we effect our initial business combination with
a company located outside of the United States, we would be subject to any special considerations or risks associated with companies
operating in the target business’ home jurisdiction, including any of the following:
•
rules
and regulations or currency redemption or corporate withholding taxes on individuals;
•
laws
governing the manner in which future business combinations may be effected;
•
tariffs
and trade barriers;
•
regulations
related to customs and import/export matters;
•
longer
payment cycles;
•
tax
issues, such as tax law changes and variations in tax laws as compared to the United States;
•
currency
fluctuations and exchange controls;
•
rates
of inflation;
•
challenges
in collecting accounts receivable;
•
cultural
and language differences;
•
employment
regulations;
•
crime,
strikes, riots, civil disturbances, terrorist attacks and wars; and
•
deterioration
of political relations with the United States which could result in any number of difficulties, both normal course such as above
or extraordinary such as sanctions being imposed. We may not be able to adequately address these additional risks. If we were unable
to do so, our operations might suffer.
If we effect a business combination with a company
located outside of the United States, the laws applicable to such company will likely govern all of our material agreements and
we may not be able to enforce our legal rights.
If we effect a business combination with a company
located outside of the United States, the laws of the country in which such company operates will govern almost all of the material
agreements relating to its operations. We cannot assure you that the target business will be able to enforce any of its material
agreements or that remedies will be available in this new jurisdiction. The system of laws and the enforcement of existing laws
in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The inability to enforce
or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or
capital. Additionally, if we acquire a company located outside of the United States, it is likely that substantially all of our
assets would be located outside of the United States and some of our officers and directors might reside outside of the United
States. As a result, it may not be possible for investors in the United States to enforce their legal rights, to effect service
of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and
criminal penalties of our directors and officers under Federal securities laws.
Because of the costs and difficulties inherent
in managing cross-border business operations after we acquire it, our results of operations may be negatively impacted following
a business combination.
Managing a business, operations, personnel or assets
in another country is challenging and costly. Management of the target business that we may hire (whether based abroad or in the
U.S.) may be inexperienced in cross-border business practices and unaware of significant differences in accounting rules, legal
regimes and labor practices. Even with a seasoned and experienced management team, the costs and difficulties inherent in managing
cross-border business operations, personnel and assets can be significant (and much higher than in a purely domestic business)
and may negatively impact our financial and operational performance.
Many countries, and especially those in emerging
markets, have difficult and unpredictable legal systems and underdeveloped laws and regulations that are unclear and subject to
corruption and inexperience, which may adversely impact our results of operations and financial condition.
Our ability to seek and enforce legal protections,
including with respect to intellectual property and other property rights, or to defend ourselves with regard to legal actions
taken against us in a given country, may be difficult or impossible, which could adversely impact our operations, assets or financial
condition.
Rules and regulations in many countries, including
some of the emerging markets within the regions we will initially focus, are often ambiguous or open to differing interpretation
by responsible individuals and agencies at the municipal, state, regional and federal levels. The attitudes and actions of such
individuals and agencies are often difficult to predict and inconsistent.
Delay with respect to the enforcement of particular
rules and regulations, including those relating to customs, tax, environmental and labor, could cause serious disruption to operations
abroad and negatively impact our results.
After our initial business combination, substantially
all of our assets may be located in a foreign country and substantially all of our revenue may be derived from our operations in
such country. Accordingly, our results of operations and prospects will be subject, to a significant extent, to the economic, political
and legal policies, developments and conditions in the country in which we operate.
The economic, political and social conditions, as
well as government policies, of the country in which our operations are located could affect our business. The economies in developing
markets we will initially focus on, such as China, differ from the economies of most developed countries in many respects. Such
economic growth has been uneven, both geographically and among various sectors of the economy and such growth may not be sustained
in the future. If in the future such country’s economy experiences a downturn or grows at a slower rate than expected, there
may be less demand for spending in certain industries. A decrease in demand for spending in certain industries could materially
and adversely affect our ability to find an attractive target business with which to consummate our initial business combination
and if we effect our initial business combination, the ability of that target business to become profitable.
Exchange rate fluctuations and currency policies
may cause a target business’ ability to succeed in the international markets to be diminished.
In the event we acquire a non-U.S. target, all revenues
and income would likely be received in a foreign currency, the dollar equivalent of our net assets and distributions, if any, could
be adversely affected by reductions in the value of the local currency. The value of the currencies in our target regions fluctuate
and are affected by, among other things, changes in political and economic conditions. Any change in the relative value of such
currency against our reporting currency may affect the attractiveness of any target business or, following consummation of our
initial business combination, our financial condition and results of operations. Additionally, if a currency appreciates in value
against the dollar prior to the consummation of our initial business combination, the cost of a target business as measured in
dollars will increase, which may make it less likely that we are able to consummate such transaction.
Because our business objective includes the possibility
of acquiring one or more operating businesses with primary operations in emerging markets we will focus on, changes in the exchange
rate between the U.S. dollar and the currency of any relevant jurisdiction may affect our ability to achieve such objective. For
instance, the exchange rates between Chinese Yuan and the U.S. dollar has changed substantially in the last two decades and may
fluctuate substantially in the future. If the U.S. dollar declines in value against the relevant currency, any business combination
will be more expensive and therefore more difficult to complete. Furthermore, we may incur costs in connection with conversions
between U.S. dollars and the relevant currency, which may make it more difficult to consummate a business combination.
Because foreign law could govern almost all
of our material agreements, we may not be able to enforce our rights within such jurisdiction or elsewhere, which could result
in a significant loss of business, business opportunities or capital.
Foreign law could govern almost all of our material
agreements. The target business may not be able to enforce any of its material agreements or that remedies will be available outside
of such foreign jurisdiction’s legal system. The system of laws and the enforcement of existing laws and contracts in such
jurisdiction may not be as certain in implementation and interpretation as in the United States. Judiciaries in such jurisdiction
may also be relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty
as to the outcome of any litigation. As a result, the inability to enforce or obtain a remedy under any of our future agreements
could result in a significant loss of business and business opportunities.
Corporate governance standards in foreign countries
may not be as strict or developed as in the United States and such weakness may hide issues and operational practices that are
detrimental to a target business.
General
corporate governance standards in some countries are weak in that they do not prevent business practices that cause unfavorable
related party transactions, over-leveraging, improper accounting, family company interconnectivity and poor management. Local
laws often do not go far to prevent improper business practices. Therefore, stockholders may not be treated impartially and equally
as a result of poor management practices, asset shifting, conglomerate structures that result in preferential treatment to some
parts of the overall company, and cronyism. The lack of transparency and ambiguity in the regulatory process also may result in
inadequate credit evaluation and weakness that may precipitate or encourage financial crisis. In our evaluation of a business
combination we will have to evaluate the corporate governance of a target and the business environment, and in accordance with
United States laws for reporting companies take steps to implement practices that will cause compliance with all applicable rules
and accounting practices. Notwithstanding these intended efforts, there may be endemic practices and local laws that could add
risk to an investment we ultimately make and that result in an adverse effect on our operations and financial results.
Companies in foreign countries
may be subject to accounting, auditing, regulatory and financial standards and requirements that differ, in some cases significantly,
from those applicable to public companies in the United States, which may make it more difficult or complex to consummate a business
combination. In particular, the assets and profits appearing on the financial statements of a foreign company may not reflect
its financial position or results of operations in the way they would be reflected had such financial statements been prepared
in accordance with U.S. GAAP and there may be substantially less publicly available information about companies in certain
jurisdictions than there is about comparable United States companies. Moreover, foreign companies may not be subject to the same
degree of regulation as are United States companies with respect to such matters as insider trading rules, tender offer regulation,
stockholder proxy requirements and the timely disclosure of information.
Legal principles relating
to corporate affairs and the validity of corporate procedures, directors’ fiduciary duties and liabilities and stockholders’
rights for foreign corporations may differ from those that may apply in the U.S., which may make the consummation of a business
combination with a foreign company more difficult. We therefore may have more difficulty in achieving our business objective.
Because a foreign judiciary may determine the
scope and enforcement of almost all of our target business’ material agreements under the law of such foreign jurisdiction,
we may be unable to enforce our rights inside and outside of such jurisdiction.
The law of a foreign jurisdiction, may govern almost
all of our target business’ material agreements, some of which may be with governmental agencies in such jurisdiction. We
cannot assure you that the target business or businesses will be able to enforce any of their material agreements or that remedies
will be available outside of such jurisdiction. The inability to enforce or obtain a remedy under any of our future agreements
may have a material adverse impact on our future operations.
A slowdown in economic growth in the markets
that our business target operates in may adversely affect our business, financial condition, results of operations, the value of
its equity shares and the trading price of our shares following our business combination.
Following the business combination, our results of
operations and financial condition may be dependent on, and may be adversely affected by, conditions in financial markets in the
global economy, and, particularly in the markets where the business operates. The specific economy could be adversely affected
by various factors such as political or regulatory action, including adverse changes in liberalization policies, business corruption,
social disturbances, terrorist attacks and other acts of violence or war, natural calamities, interest rates, inflation, commodity
and energy prices and various other factors which may adversely affect our business, financial condition, results of operations,
value of our equity shares and the trading price of our shares following the business combination.
Regional hostilities, terrorist attacks, communal
disturbances, civil unrest and other acts of violence or war may result in a loss of investor confidence and a decline in the value
of our equity shares and trading price of our shares following our business combination.
Terrorist attacks, civil unrest and other acts of
violence or war may negatively affect the markets in which we may operates our business following our business combination and
also adversely affect the worldwide financial markets. In addition, the countries we will focus on, have from time to time experienced
instances of civil unrest and hostilities among or between neighboring countries. Any such hostilities and tensions may result
in investor concern about stability in the region, which may adversely affect the value of our equity shares and the trading price
of our shares following our business combination. Events of this nature in the future, as well as social and civil unrest, could
influence the economy in which our business target operates, and could have an adverse effect on our business, including the value
of equity shares and the trading price of our shares following our business combination.
The occurrence of natural disasters may adversely
affect our business, financial condition and results of operations following our business combination.
The occurrence of natural disasters, including hurricanes,
floods, earthquakes, tornadoes, fires and pandemic disease may adversely affect our business, financial condition or results of
operations following our business combination. The potential impact of a natural disaster on our results of operations and financial
position is speculative, and would depend on numerous factors. The extent and severity of these natural disasters determines their
effect on a given economy. Although the long term effect of diseases such as the H5N1 “avian flu,” or H1N1, the swine
flu, cannot currently be predicted, previous occurrences of avian flu and swine flu had an adverse effect on the economies of those
countries in which they were most prevalent. An outbreak of a communicable disease in our market could adversely affect our business,
financial condition and results of operations following our business combination. We cannot assure you that natural disasters will
not occur in the future or that its business, financial condition and results of operations will not be adversely affected.
Any downgrade of credit ratings of the country
in which the company we acquire does business may adversely affect our ability to raise debt financing following our business combination.
No assurance can be given that any rating organization
will not downgrade the credit ratings of the sovereign foreign currency long-term debt of the country in which our business
target operates, which reflect an assessment of the overall financial capacity of the government of such country to pay its obligations
and its ability to meet its financial commitments as they become due. Any downgrade could cause interest rates and borrowing costs
to rise, which may negatively impact both the perception of credit risk associated with our future variable rate debt and our ability
to access the debt markets on favorable terms in the future. This could have an adverse effect on our financial condition following
our business combination.
Returns on investment in foreign companies may
be decreased by withholding and other taxes.
Our investments will incur tax risk unique to investment
in developing economies. Income that might otherwise not be subject to withholding of local income tax under normal international
conventions may be subject to withholding of income tax in a developing economy. Additionally, proof of payment of withholding
taxes may be required as part of the remittance procedure. Any withholding taxes paid by us on income from our investments in such
country may or may not be creditable on our income tax returns. We intend to seek to minimize any withholding tax or local tax
otherwise imposed. However, there is no assurance that the foreign tax authorities will recognize application of such treaties
to achieve a minimization of such tax. We may also elect to create foreign subsidiaries to effect the business combinations to
attempt to limit the potential tax consequences of a business combination.
Risks Associated with Acquiring
and Operating a Target Business with its Primary Operation in China
As set forth herein, our efforts in identifying a
prospective target business will not be limited to a particular country, although we intend to focus on companies with operations
or prospects in the financial services sector in China, including Hong Kong, Macau and mainland China. Accordingly, in addition
to the risk factors referred above, we have set forth some of the primary risks we have identified in seeking to consummate our
initial business combination with a company having its primary operations in and/or important economic relationships with the PRC.
As a result of merger and acquisition regulations
implemented on September 8, 2006 (amended on June 22, 2009) relating to acquisitions of assets and equity interests of Chinese
companies by foreign persons, we may not be able to complete a PRC transaction in a timely manner.
On September 8, 2006, the Ministry of Commerce, together
with several other government agencies, promulgated the Regulations on Merger and Acquisition of Domestic Enterprises by Foreign
Investors (the “M&A Regulations”, including its amendment on June 22, 2009), which implemented a comprehensive
set of regulations governing the approval process by which a Chinese company may participate in an acquisition of its assets or
its equity interests and by which a Chinese company may obtain public trading of its securities on a securities exchange outside
the PRC. Although there was a complex series of regulations in place prior to September 8, 2006 for approval of Chinese enterprises
that were administered by a combination of provincial and centralized agencies, the M&A Regulations have largely centralized
and expanded the approval process to the Ministry of Commerce, the State Administration of Industry and Commerce (“SAIC”),
the State Administration of Foreign Exchange (“SAFE”) or its branch offices, the State Asset Supervision and Administration
Commission (“SASAC”), and the China Securities Regulatory Commission (“CSRC”). Depending on the structure
of the transaction, these M&A Regulations will require the Chinese parties to make a series of applications and supplemental
applications to one or more of the aforementioned agencies, some of which must be made within strict time limits and depending
on approvals from one or the other of the aforementioned agencies. The application process has been supplemented to require the
presentation of economic data concerning a transaction, including appraisals of the business to be acquired and evaluations of
the acquirer which will permit the government to assess the economics of a transaction in addition to the compliance with legal
requirements. If obtained, approvals will have expiration dates by which a transaction must be completed. Also, completed transactions
must be reported to the Ministry of Commerce and some of the other agencies within a short period after closing or be subject to
an unwinding of the transaction. Therefore, acquisitions in China may not be able to be completed because the terms of the transaction
may not satisfy aspects of the approval process and may not be completed, even if approved, if they are not consummated within
the time permitted by the approvals granted.
Compliance with the PRC Antitrust law may limit
our ability to effect our initial business combination.
The PRC Antitrust Law became
effective on August 1, 2008. The government authorities in charge of antitrust matters in China are the Antitrust Commission and
other antitrust authorities under the State Council. The PRC Antitrust Law regulates (1) monopoly agreements, including decisions
or actions in concert that preclude or impede competition, entered into by business operators; (2) abuse of dominant market position
by business operators; and (3) concentration of business operators that may have the effect of precluding or impeding competition.
To implement the Antitrust Law, in 2008, the State Council formulated the regulations that require filing of concentration of
business operators, pursuant to which concentration of business operators refers to (1) merger with other business operators;
(2) gaining control over other business operators through acquisition of equity interest or assets of other business operators;
and (3) gaining control over other business operators through exerting influence on other business operators through contracts
or other means. In 2009, the Ministry of Commerce, to which the Antitrust Commission is affiliated, promulgated the Measures for
Filing of Concentration of Business Operators (amended by the Guidelines for Filing of Concentration of Business Operators in
2014), which set forth the criteria of concentration and the requirement of miscellaneous documents for the purpose of filing.
The business combination we contemplate may be considered the concentration of business operators, and to the extent required
by the Antitrust Law and the criteria established by the State Council, we must file with the antitrust authority under the PRC
State Council prior to conducting the contemplated business combination. If the antitrust authority decides not to further investigate
whether the contemplated business combination has the effect of precluding or impeding competition or fails to make a decision
within 30 days from receipt of relevant materials, we may proceed to consummate the contemplated business combination. If antitrust
authority decides to prohibit the contemplated business combination after further investigation, we must terminate such business
combination and would then be forced to either attempt to complete a new business combination if it was prior to 12 months from
the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate
a business combination by the full amount of time) or we would be required to return any amounts which were held in the trust
account to our stockholders. When we evaluate a potential business combination, we will consider the need to comply with the Antitrust
Law and other relevant regulations which may limit our ability to effect an acquisition or may result in our modifying or not
pursuing a particular transaction.
If, due to restrictions on foreign investment
in a target business, we have to acquire the business through the use of contractual arrangements and the PRC government determines
that such contractual arrangements do not comply with foreign investment regulations, or if these regulations or the interpretation
of existing regulations in the PRC change or new restrictive or prohibitive regulations come into force in the future, we could
be subject to significant penalties or be forced to relinquish our interests in those operations.
Because of the above mentioned industrial restrictions,
foreign investors often acquire control of PRC business through the use of contractual arrangements pursuant to which they effectively
control the PRC business. There are uncertainties as to whether such contractual arrangements comply with the regulations prohibiting
or restricting foreign ownership in certain industries. In addition, even if such arrangements are not in violation of current
regulations, such regulations are subject to change in the future and may be broadened to further restrict foreign investments
in new industries or new category of assets.
If we or any of our potential future target businesses
are found to be in violation of any existing or future local laws or regulations with respect to foreign investment in local entities
(for example, if we are deemed to be holding equity interests in certain of our affiliated entities in which direct foreign ownership
is prohibited), the relevant regulatory authorities might have the discretion to:
•
revoke
the business and operating licenses of the potential future target business;
•
confiscate
relevant income and impose fines and other penalties;
•
discontinue
or restrict the operations of the potential future target business;
•
require
us or potential future target business to restructure the relevant ownership structure or operations;
•
restrict
or prohibit our use of the proceeds of this offering to finance the target businesses and its operations;
•
impose
conditions or requirements with which we or potential future target business may not be able to comply; or
•
require
us to discontinue a portion or all of our business.
The imposition of any of the above penalties could
result in a material and adverse effect on our ability to conduct our business as well as our financial situation and we might
be forced to relinquish our interests in operations.
If we have to acquire a target business through
contractual arrangements with, or which results in, one or more operating businesses in China, such contracts may not be as effective
in providing operational control as direct ownership of such businesses.
The government of the PRC has restricted or limited
foreign ownership of certain kinds of assets and companies operating in certain industries. The industry groups that are restricted
are wide ranging, including certain aspects of telecommunications, advertising, food production and heavy equipment manufacturers,
for example. In addition, there can be restrictions on the foreign ownership of businesses that are determined from time to time
to be in “important industries” that may affect the national economic security or having “famous Chinese brand
names” or “well established Chinese brand names.” Subject to the review and approval requirements of the Ministry
of Commerce and other relevant agencies as discussed elsewhere for acquisitions of assets and companies in the PRC and subject
to the various percentage ownership limitations that exist from time to time, acquisitions involving foreign investors and parties
in the various restricted categories of assets and industries may nonetheless sometimes be consummated using contractual arrangements
with permitted Chinese parties. To the extent such agreements are employed, they may be for control of specific assets such as
intellectual property or control of blocks of the equity ownership interests of a company which may provide exceptions to the merger
and acquisition regulations mentioned above since these types of arrangements typically do not involve a change of equity ownership
in PRC operating company. The agreements would be designed to provide our company with the economic benefits of and control over
the subject assets or equity interests similar to the rights of full ownership, while leaving the technical ownership in the hands
of Chinese parties who would be our nominees and, therefore, may exempt the transaction from the merger and acquisition regulations,
including the application process required thereunder. However, there has been limited implementation guidance provided with respect
to the merger and acquisition regulations. There can be no assurance the relevant government agencies would not apply them to a
business combination effected through contractual arrangements. If such an agency determines such an application should have made,
consequences may include levying fines, revoking business and other licenses, requiring restructure of ownership or operations
and requiring discontinuation of any portion of all of the acquired business. These agreements likely also would provide for increased
ownership or full ownership and control by us when and if permitted under PRC law and regulation. If we choose to effect our initial
business combination that employs the use of these types of control arrangements, we may have difficulty in enforcing our rights.
Therefore, these contractual arrangements may not be as effective in providing us with the same economic benefits, accounting consolidation
or control over a target business as would direct ownership. For example, if the target business or any other entity fails to perform
its obligations under these contractual arrangements, we may have to incur substantial costs and expend substantial resources to
enforce such arrangements, and rely on legal remedies under Chinese law, including seeking specific performance or injunctive relief,
and claiming damages, which we cannot assure will be sufficient to off-set the cost of enforcement and may adversely affect the
benefits we expect to receive from the business combination.
Regulations relating to the transfer of state-owned
property rights in enterprises may increase the cost of our acquisitions and impose an additional administrative burden on us.
The legislation governing the acquisition of a China
state-owned company contains stringent governmental regulations. The transfer of state-owned property rights in enterprises must
take place through a government approved “state-owned asset exchange,” and the value of the transferred property rights
must be evaluated by those Chinese appraisal firms qualified to do “state-owned assets evaluation.” The final price
must not be less than 90% of the appraisal price. Additionally, bidding/auction procedures are essential in the event that there
is more than one potential transferee. In the case of an acquisition by foreign investors of state-owned enterprises, the acquirer
and the seller must make a resettlement plan to properly resettle the employees, and the resettlement plan must be approved by
the Employees’ Representative Congress. The seller must pay all unpaid wages and social welfare payments from the existing
assets of the target company to the employees. These regulations may adversely affect our ability to acquire a state-owned business
or assets.
Exchange controls that exist in the PRC may
restrict or prevent us from using the proceeds of this offering to acquire a target company in PRC and limit our ability to utilize
our cash flow effectively following our initial business combination.
SAFE promulgated
the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital
of Foreign-invested Enterprises, or Circular 19, effective on June 1, 2015, in replacement of the Circular on the Relevant Operating
Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested
Enterprises, or SAFE Circular 142, the Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening
the Administration of Foreign Exchange Businesses, or Circular 59, and the Circular on Further Clarification and Regulation of
the Issues Concerning the Administration of Certain Capital Account Foreign Exchange Businesses, or Circular 45. According to Circular
19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company
is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans
or the repayment of banks loans that have been transferred to a third party. Although Circular 19 allows RMB capital converted
from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within
the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested
company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether SAFE will permit
such capital to be used for equity investments in the PRC in actual practice. SAFE promulgated the Notice of the State Administration
of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or Circular
16, effective on June 9, 2016, which reiterates some of the rules set forth in Circular 19, but changes the prohibition against
using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted
loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19
and Circular 16 could result in administrative penalties.
As such, Circular 19 and Circular 16 may significantly
limit our ability to transfer the proceeds of this offering to a PRC target company and the use of such proceeds by the PRC target
company.
In addition, following our initial business combination
with a PRC target company, we will be subject to the PRC’s rules and regulations on currency conversion. In the PRC, the
SAFE regulates the conversion of the Renminbi into foreign currencies. Currently, FIEs are required to apply to the SAFE for “Foreign
Exchange Registration Certificates for FIEs.” Following our initial business combination, we will likely be an FIE as a result
of our ownership structure. With such registration certificates, which need to be renewed annually, FIEs are allowed to open foreign
currency accounts including a “basic account” and “capital account.” Currency conversion within the scope
of the “basic account,” such as remittance of foreign currencies for payment of dividends, can be effected without
requiring the approval of the SAFE. However, conversion of currency in the “capital account,” including capital items
such as direct investment, loans and securities, still require approval of the SAFE.
We cannot assure you the
PRC regulatory authorities will not impose further restrictions on the convertibility of the Renminbi. Any future restrictions
on currency exchanges may limit our ability to use the proceeds of this offering in an initial business combination with a PRC
target company and the use our cash flow for the distribution of dividends to our stockholders or to fund operations we may have
outside of the PRC.
Our initial business combination may be subject
to national security review by the PRC government and we may have to spend additional resources and incur additional time delays
to complete any such business combination or be prevented from pursuing certain investment opportunities.
On February 3, 2011, the PRC government issued a Notice
Concerning the Establishment of Security Review Procedure on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,
or Security Review Regulations, which became effective on March 5, 2011. The Security Review Regulations cover acquisitions by
foreign investors of a broad range of PRC enterprises if such acquisitions could result in de facto control by foreign investors
and the enterprises are relating to military, national defense, important agriculture products, important energy and natural resources,
important infrastructures, important transportation services, key technologies and important equipment manufacturing. The scope
of the review includes whether the acquisition will impact the national security, economic and social stability, and the research
and development capabilities on key national security related technologies. Foreign investors should submit a security review application
to the Department of Commerce for its initial review for contemplated acquisition. If the acquisition is considered to be within
the scope of the Security Review Regulations, the Department of Commerce will transfer the application to a joint security review
committee within five business days for further review. The joint security review committee, consisting of members from various
PRC government agencies, will conduct a general review and seek comments from relevant government agencies. The joint security
review committee may initiate a further special review and request the termination or restructuring of the contemplated acquisition
if it determines that the acquisition will result in significant national security issue.
The Security Review Regulations will potentially subject
a large number of mergers and acquisitions transactions by foreign investors in China to an additional layer of regulatory review.
Currently, there is significant uncertainty as to the implication of the Security Review Regulations. Neither the Department of
Commerce nor other PRC government agencies have issued any detailed rules for the implementation of the Security Review Regulations.
If, for example, our potential initial business combination is with a target company operating in the PRC in any of the sensitive
sectors identified above, the transaction will be subject to the Security Review Regulations, and we may have to spend additional
resources and incur additional time delays to complete any such acquisition. We may also be prevented from pursuing certain investment
opportunities if the PRC government considers that the potential investments will result in a significant national security issue.
If we successfully consummate a business combination
with a target business with its primary operation in the PRC, we will be subject to restrictions on dividend payments following
consummation of our initial business combination.
After we consummate our initial business combination,
we may rely on dividends and other distributions from our operating company to provide us with cash flow and to meet our other
obligations. Current regulations in China would permit our operating company in China to pay dividends to us only out of its accumulated
distributable profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our operating
company in China will be required to set aside at least 10% (up to an aggregate amount equal to half of its registered capital)
of its accumulated profits each year. Such cash reserve may not be distributed as cash dividends. In addition, if our operating
company in China incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay
dividends or make other payments to us.
If we make equity compensation grants to persons
who are PRC citizens, they may be required to register with the SAFE. We may also face regulatory uncertainties that could restrict
our ability to adopt equity compensation plans for our directors and employees and other parties under PRC laws.
On April 6, 2007, SAFE issued the “Operating
Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of
An Overseas Listed Company, also known as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity
compensation plans or only those which provide for the granting of shares options. For any plans which are so covered and are adopted
by a non-PRC listed company, such as our company, after April 6, 2007, Circular 78 requires all participants who are PRC citizens
to register with and obtain approvals from SAFE prior to their participation in the plan. In addition, Circular 78 also requires
PRC citizens to register with SAFE and make the necessary applications and filings if they participated in an overseas listed company’s
covered equity compensation plan prior to April 6, 2007. We believe that the registration and approval requirements contemplated
in Circular 78 will be burdensome and time consuming.
Upon consummation of business combination with a target
business with primary operations in PRC, we may adopt an equity incentive plan and make shares option grants under the plan to
our officers, directors and employees, whom may be PRC citizens and be required to register with SAFE. If it is determined that
any of our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject us and participants
of our equity incentive plan who are PRC citizens to fines and legal sanctions and prevent us from being able to grant equity compensation
to our PRC employees. In that case, our ability to compensate our employees and directors through equity compensation would be
hindered and our business operations may be adversely affected.
Substantial uncertainties
exist with respect to the interpretation and implementation of the framework rules of the PRC Foreign Investment Law, and its
application may require further rules to be issued by Chinese government, which may impact the viability of our corporate structure
and business operations should we directly acquire equity interests of one or more target companies that fall within a restricted
industry under the “negative list” in connection with our initial business combination.
On March 15, 2019, the National People’s
Congress of China promulgated the Foreign Investment Law of the PRC aiming to replace the major existing laws governing foreign
direct investment in China. The Foreign Investment Law will become effective from January 1, 2020. The Foreign Investment Law
applies to PRC enterprises established, acquired or otherwise invested wholly or partially by foreign investors in a manner prescribed
under applicable PRC laws and regulations. It also governs investment projects and activities in China by foreign investors.
Under the Foreign Investment Law, a “negative
list’ promulgated or approved by the State Council will set forth industries that are prohibited industries and restricted
industries. A foreign investor is prohibited to invest in any prohibited industry included therein. If a foreign investor is found
to invest in any prohibited industry set forth under the “negative list”, such foreign investor may be required to,
among other aspects, suspend its investment activities, dispose of its equity interests or assets of the “foreign invested
enterprise” (“FIE”) and forfeit its income. A foreign investor may be permitted to invest in a restricted industry
set forth in the “negative list”, provided that relevant conditions are satisfied and certain approvals are obtained
from relevant Chinese governmental authorities. With respect to industries in which foreign investment is not prohibited or restricted,
domestic and foreign investors will be equally treated. The National Development and Reform Commission and the MOFCOM issued a
“negative list” on June 28, 2018, which took effect on July 28, 2018. In addition to prohibited industries, such “negative
List” sets forth certain special conditions for foreign investors to invest in restricted industries, including, among other
aspects, requirements relating to controlling shareholder, shareholding percentage, organization model and board members.
Although
we do not currently anticipate to do so, we may directly acquire equity interests of one or more entities in China in connection
with our initial business combination that fall within a restricted industry under the “negative list.”
In such event, we will be required to obtain
entry clearance and approvals from the MOFCOM or its local counterparts and other relevant PRC government agencies. As such, there
may be substantial uncertainties as to whether we can complete these actions in a timely manner, or at all, and our business and
financial condition may be materially and adversely affected.
Enhanced scrutiny over acquisition transactions
by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
The PRC tax authorities have enhanced their scrutiny
over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise,
by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January
2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.
Under Circular 698, where a non-resident enterprise
conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise” indirectly
by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be
subject to PRC corporate income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable
commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular
698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its
related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment
to the taxable income of the transaction.
In February 2015, the SAT issued Circular 7 to replace
the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime that is significantly different
from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698
but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding
company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and
has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the
transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the
taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being
the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority
such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence
of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding
or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC corporate income tax, and the
transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at
a rate of 10% for the transfer of equity interests in a PRC resident enterprise.
We face uncertainties on the reporting and consequences
on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in our company
by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises with respect
to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the filing.
As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or
being taxed, under Circular 59 or Circular 698 and Circular 7, and may be required to expend valuable resources to comply with
Circular 59, Circular 698 and Circular 7 or to establish that we and our non-resident enterprises should not be taxed under these
circulars, which may have a material adverse effect on our financial condition and results of operations.
The PRC tax authorities have the discretion under
SAT Circular 59, Circular 698 and Circular 7 to make adjustments to the taxable capital gains based on the difference between the
fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions
in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If
we are considered a non-resident enterprise under the PRC corporate income tax law and if the PRC tax authorities make adjustments
to the taxable income of the transactions under SAT Circular 59 or Circular 698 and Circular 7, our income tax costs associated
with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of
operations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
The statements contained in this prospectus that are not
purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding
our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements
that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions,
are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intends,” “may,” “might,” “plan,”
“possible,” “potential,” “predicts,” “project,” “should,” “would”
and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement
is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about our:
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•
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ability to complete our initial business combination;
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•
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success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
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•
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officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;
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•
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potential ability to obtain additional financing to complete a business combination;
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•
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pool of prospective target businesses;
|
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•
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ability of our officers and directors to generate a number of potential investment opportunities;
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•
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potential change in control if we acquire one or more target businesses for stock;
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•
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public securities’ potential liquidity and trading;
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•
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the lack of a market for our securities;
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•
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expectations regarding the time during which we will be an “emerging growth company” under the JOBS Act;
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•
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use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or
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•
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financial performance following this offering.
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The forward-looking statements contained in this prospectus
are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be
no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve
a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include,
but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks
or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from
those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
USE OF PROCEEDS
We estimate that the net proceeds of this offering, in addition
to the funds we will receive from the sale of the private warrants (all of which will be deposited into the trust account), will
be as set forth in the following table:
|
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Without
Over-Allotment
Option
|
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Over-Allotment
Option
Exercised
|
|
Gross proceeds
|
|
|
|
|
|
|
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From offering
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|
$
|
100,000,000
|
|
|
$
|
115,000,000
|
|
From private placement
|
|
|
5,000,000
|
|
|
|
5,375,000
|
|
Total gross proceeds
|
|
|
105,000,000
|
|
|
|
120,375,000
|
|
Offering expenses
(1)
|
|
|
|
|
|
|
|
|
Underwriting discount (2.5% of the gross proceeds from the units sold to public)
|
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|
2,500,000
|
(2)
|
|
|
2,875,000
|
(2)
|
Legal fees and expenses
|
|
|
280,000
|
|
|
|
280,000
|
|
Nasdaq Listing Fees
|
|
|
50,000
|
|
|
|
50,000
|
|
Printing and engraving expenses
|
|
|
15,000
|
|
|
|
15,000
|
|
Accounting fees and expenses
|
|
|
30,000
|
|
|
|
30,000
|
|
FINRA
filing fee
|
|
|
21,269
|
|
|
|
21,269
|
|
SEC registration fee
|
|
|
16,782
|
|
|
|
16,782
|
|
Miscellaneous
expenses
|
|
|
86,949
|
|
|
|
86,949
|
|
Total expenses (excluding underwriting discount)
|
|
|
500,000
|
|
|
|
500,000
|
|
Net proceeds
|
|
|
|
|
|
|
|
|
Held in trust
|
|
|
100,000,000
|
|
|
|
115,000,000
|
|
% of public offering size
|
|
|
100
|
%
|
|
|
100
|
%
|
Not held in trust
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
Total net proceeds
|
|
$
|
102,000,000
|
|
|
$
|
117,000,000
|
|
Use of net proceeds not held in trust
(3)(4)
|
|
Amount
|
|
|
Percentage
|
|
Legal, accounting and other third party expenses attendant to the search for target businesses and to the due diligence investigation, structuring and negotiation of a business combination
|
|
$
|
700,000
|
|
|
|
35.0
|
%
|
Due diligence of prospective target businesses by officers, directors
and sponsor
|
|
|
500,000
|
|
|
|
25.0
|
%
|
Legal and accounting fees relating to SEC reporting obligations
|
|
|
100,000
|
|
|
|
5.0
|
%
|
Directors & Officers liability insurance premiums
|
|
|
100,000
|
|
|
|
5.0
|
%
|
Working capital to cover fees to officers and directors, miscellaneous expenses, general corporate purposes, liquidation obligations and reserves
|
|
|
600,000
|
|
|
|
30.0
|
%
|
Total
|
|
$
|
2,000,000
|
|
|
|
100.0
|
%
|
|
(1)
|
A portion of the offering expenses, including the SEC registration fee, the FINRA filing fee, the non-refundable portion of the Nasdaq listing fee and a portion of the legal and audit fees, have been paid from the funds we received from our sponsor for the founder shares.
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|
(2)
|
Assuming all of the gross proceeds of the offering were raised through underwriter’s effort. No discounts or commissions will be paid with respect to the purchase of the private warrants. In the event we raise up to $15,000,000 in this offering through our own effort, the underwriting discount on such proceeds shall be reduced to 0.1%.
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|
(3)
|
The amount of proceeds not held in trust will remain constant at approximately $2,000,000 even if the over-allotment is exercised. Does not include interest earned on the trust proceeds that may be available to us, as described elsewhere in this prospectus.
|
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(4)
|
These are estimates only. Our actual expenditures for some or all of these items may differ from the estimates set forth herein. For example, we may incur greater legal and accounting expenses than our current estimates in connection with negotiating and structuring our initial business combination based upon the level of complexity of that business combination. We do not anticipate any change in our intended use of proceeds, other than fluctuations among the current categories of allocated expenses, which fluctuations, to the extent they exceed current estimates for any specific category of expenses, would be deducted from our excess working capital.
|
Our sponsor has committed to purchase from us an aggregate
of 5,000,000 private warrants at $1.00 per warrant (for a total purchase price of $5,000,000) in a private placement that will
close simultaneously with the closing of this offering. Our sponsor has also agreed that if the over-allotment option is exercised
by the underwriters in full or in part, it will purchase from us additional private warrants (up to a maximum of 375,000 private
warrants) at a price of $1.00 per private warrant in an amount that is necessary to maintain in the trust account at $10.00 per
unit sold to the public in this offering. These additional private warrants will be purchased in a private placement that will
occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The founder’s units
are identical to the units sold in this offering subject to certain limited exceptions as described elsewhere in this prospectus.
All of the proceeds we receive from these purchases will be placed in the trust account described below.
$100,000,000, or $115,000,000 if the over-allotment option
is exercised in full, of net proceeds of this offering and the sale of the private warrants will be placed in a
trust account at Morgan Stanley, N.A., maintained by American Stock Transfer & Trust Company, New York, New York, as trustee. The funds
held in trust will be invested only in United States “government securities” within the meaning of Section 2(a)(16)
of the Investment Company Act having a maturity of 180 days or less, or in money market funds meeting the conditions of paragraph
(d) under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations,
so that we are not deemed to be an investment company under the Investment Company Act. Except with respect to interest earned
on the funds held in the trust account that may be released to us to pay our tax obligations and dissolution expenses, the proceeds
will not be released from the trust account until the earlier of the completion of a business combination or our redemption of
100% of the outstanding public shares if we have not completed a business combination in the required time period. The proceeds
held in the trust account may be used as consideration to pay the sellers of a target business with which we complete a business
combination. Any amounts not paid as consideration to the sellers of the target business may be used to finance operations of the
target business.
Other than the monthly fees and
equity awards payable to officers and directors for their services to us as described elsewhere in this prospectus, no compensation
of any kind will be paid to our sponsor, initial stockholders, officers, directors or any of their respective affiliates, for
services rendered to us prior to or in connection with the consummation of our initial business combination (regardless of the
type of transaction that it is). However, such entity and individuals will receive reimbursement for any out-of-pocket expenses
incurred by them in connection with activities on our behalf, such as identifying potential target businesses, performing business
due diligence on suitable target businesses and business combinations as well as traveling to and from the offices, plants or
similar locations of prospective target businesses to examine their operations. Our audit committee will review and approve all
reimbursements and payments made to our sponsor, initial stockholders, officers, directors or our or their respective affiliates,
with any interested director abstaining from such review and approval. There is no limit on the amount of such expenses reimbursable
by us; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the trust account, such
expenses would not be reimbursed by us unless we consummate an initial business combination. Since the role of present management
after a business combination is uncertain, we have no ability to determine what remuneration, if any, will be paid to those persons
after a business combination.
Regardless of whether the over-allotment
option is exercised in full, the net proceeds from this offering available to us out of trust for our working capital requirements
in searching for a business combination will be approximately $2,000,000. We intend to use the proceeds for miscellaneous expenses
such as paying fees to consultants or advisors to assist us with our search for a target business, with the balance being held
in reserve in the event due diligence, legal, accounting and other expenses of structuring and negotiating business combinations
exceed our estimates, as well as for reimbursement of any out-of-pocket expenses incurred by our sponsor, initial stockholders,
officers and directors in connection with activities on our behalf as described below.
The allocation of the net proceeds available to us outside
of the trust account represents our best estimate of the intended uses of these funds. In the event that our assumptions prove
to be inaccurate, we may reallocate some of such proceeds within the above described categories. If our estimate of the costs of
undertaking in-depth due diligence and negotiating a business combination is less than the actual amount necessary to do so, we
may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable. In this event,
we could seek such additional capital through loans or additional investments from members of our management team, but such members
of our management team are not under any obligation to advance funds to, or invest in, us.
We may use substantially all of the net proceeds of this
offering, including the funds held in the trust account, to acquire a target business and to pay our expenses relating thereto.
To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the proceeds
held in the trust account which are not used to consummate a business combination (including to pay converting stockholders as
described herein) will be disbursed to the combined company and will, along with any other net proceeds not expended, be used as
working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways
including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research
and development of existing or new products.
To the extent we are unable to consummate a business combination,
we will pay the costs of liquidation from our remaining assets outside of the trust account and any available interest earned on
the funds held in the trust account that we are permitted to withdraw.
We
believe that, upon consummation of this offering, we will have sufficient available funds to operate for the next
12
months (or up to 18 months if we extend the period of time to consummate a business combination by the full amount of time)
,
assuming that a business combination is not consummated during that time. However, if necessary, in order to meet our working
capital needs following the consummation of this offering, our sponsor, initial stockholders, officers and directors may, but
are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion.
Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination,
without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of
$1.00 per warrant. The warrants would be identical to the private warrants. If we do not complete a business combination, the
loans will be forgiven.
Our
public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion
of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder
vote to amend our amended and restated articles of incorporation (A) to modify the substance or timing of our obligation to redeem
100% of our public shares if we do not complete our initial business combination within 12 months from the closing of this offering
(or
up to 18 months from the closing of this offering if we extend the period of time to consummate a business combination by the full
amount of time)
or (B) with respect to any other provision relating
to stockholders’ rights or pre-business combination activity, and (iii) the redemption of all of our public shares if we
are unable to complete our business combination within
12 months
from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate
a business combination by the full amount of time)
, subject to
applicable law. In no other circumstances will a public stockholder have any right or interest of any kind to or in the trust account.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock to
date and do not intend to pay cash dividends prior to the completion of an initial business combination. The payment of cash dividends
in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent
to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion
of our board of directors at such time. It is the present intention of our board of directors to retain all earnings, if any, for
use in our business operations and, accordingly, our board of directors does not anticipate declaring any dividends in the foreseeable
future. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends
in the foreseeable future, Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive
covenants we may agree to in connection therewith.
DILUTION
The difference between the public offering
price per share of common stock, assuming no value is attributed to the warrants and rights included in the units we are offering
pursuant to this prospectus or the private placement warrants, and the pro forma net tangible book value per share of our common
stock after this offering constitutes the dilution to investors in this offering. Such calculation does not reflect any dilution
associated with the sale and exercise of warrants, including the private warrants, which would cause the actual dilution to the
public stockholders to be higher, particularly where a cashless exercise is utilized. Net tangible book value per share is determined
by dividing our net tangible book value, which is our total tangible assets less total liabilities (including the value of common
stock which may be redeemed for cash), by the number of outstanding shares of our common stock.
At March 31, 2019, our net tangible
book value was $236,672, or approximately $0.09 per share of common stock. For purposes of the dilution calculation, in order
to present the maximum estimated dilution as a result of this offering, we have assumed (i) the issuance of 0.10 of a share for
each right outstanding, as such issuance will occur upon a business combination without the payment of additional consideration
and (ii) the number of shares of common stock included in the units offered hereby will be deemed to be 11,000,000 (consisting
of 10,000,000 shares of common stock included in the units we are offering by this prospectus and 1,000,000 shares of common stock
for the outstanding rights), and the price per share in this offering will be deemed to be $10.00. After giving effect to the
sale of 10,000,000 shares of common stock included in the units we are offering by this prospectus, the sale of the private warrants
and the deduction of underwriting commissions and estimated expenses of this offering, our pro forma net tangible book value at
March 31, 2019 would have been $5,000,001 or $1.30 per share, representing an immediate increase in net tangible book value (as
decreased by the value of the approximately 9,730,167 shares of common stock that may be redeemed for cash in connection with
our initial business combination and assuming no exercise of the underwriters’ over-allotment option) of $1.21 per share
to our initial stockholders as of the date of this prospectus and an immediate dilution of $8.70 per share or 87.0% to our public
stockholders not exercising their redemption rights. The dilution to new investors if the underwriters exercise their over-allotment
option in full would be an immediate dilution of $8.86 per share or 88.6%.
The following table
illustrates the dilution to the new investors on a per-share basis, assuming no value is attributed to the warrants and
rights included in the units:
Public
offering price
|
|
|
|
|
|
$
|
10.00
|
|
Net
tangible book value before this offering
|
|
$
|
0.09
|
|
|
|
|
|
Increase
attributable to public stockholders and private sales
|
|
|
1.21
|
|
|
|
|
|
Pro
forma net tangible book value after this offering and private sales
|
|
|
|
|
|
|
1.30
|
|
Dilution
to public stockholders
|
|
|
|
|
|
$
|
8.70
|
|
Percentage
of dilution to public stockholders
|
|
|
|
|
|
|
87.0
|
%
|
For purpose of presentation, we
have reduced our pro forma net tangible book value after this offering (assuming no exercise of the underwriters’ option
to purchase additional units) by $97,301,671 because holders of up to approximately 88.5% of our public shares may redeem their
shares for a pro rata share of the aggregate amount then on deposit in the trust account at a per share redemption price equal
to the amount in the trust account as set forth in our tender offer or proxy materials (initially anticipated to be the aggregate
amount held in trust two business days prior to the commencement of our tender offer or stockholders meeting, divided by the number
of shares of common stock sold in this offering).
The following table sets forth information with respect to
our existing stockholders and the public stockholders:
|
|
|
|
|
Shares
Purchased
|
|
|
Total Consideration
|
|
|
Average Price
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
per Share
|
|
Existing
stockholders
(1)
|
|
|
2,500,000
|
|
|
|
18.4
|
%
|
|
$
|
555,000
|
|
|
|
0.6
|
%
|
|
$
|
0.22
|
|
Shares
issued to underwriter as compensation
|
|
|
80,000
|
|
|
|
0.6
|
%
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Public
stockholders
(2)
|
|
|
11,000,000
|
|
|
|
81.0
|
%
|
|
|
100,000,000
|
|
|
|
99.4
|
%
|
|
$
|
10.00
|
|
|
|
|
13,580,000
|
|
|
|
100
|
%
|
|
$
|
100,555,000
|
|
|
|
100
|
%
|
|
|
|
|
|
(1)
|
Assumes
the over-allotment option has not been exercised and an aggregate of 375,000 founders’ shares held by the sponsor have
been forfeited as a result thereof.
|
|
|
|
|
(2)
|
Assumes the issuance of an additional 1,000,000 shares underlying the rights issued to public shareholders.
|
The pro forma net tangible book value after the offering
is calculated as follows:
Numerator:
|
|
|
|
|
Net
tangible book value before the offering
|
|
$
|
236,672
|
|
Net
proceeds from this offering and private placement of private warrants
|
|
|
102,000,000
|
|
Plus:
Offering costs accrued for and paid in advance, excluded from tangible book value before this offering
|
|
|
65,000
|
|
Less:
Proceeds held in trust subject to redemption
|
|
|
(97,301,671
|
)
|
|
|
$
|
5,000,001
|
|
Denominator:
|
|
|
|
|
Shares
of common stock outstanding prior to this offering
(1)(2)
|
|
|
2,500,000
|
|
Shares
of common stock included in the units offered
(3)
|
|
|
11,000,000
|
|
|
|
|
|
|
Shares
issued to underwriter as compensation
|
|
|
80,000
|
|
Less:
Shares subject to redemption to maintain net tangible assets of $5,000,001
|
|
|
(9,730,167
|
)
|
|
|
|
3,849,333
|
|
|
(1)
|
Assumes
the over-allotment option has not been exercised and an aggregate of 375,000 founders’ shares held by the sponsor have
been forfeited as a result thereof.
|
|
(2)
|
Excludes
300,000 shares issuable to Kin Sze, our Co-Chief Executive Officer, President and Secretary, and certain directors within
10 days following the business combination.
|
|
|
|
|
(3)
|
Assumes
the issuance of an additional 1,000,000 shares underlying the rights issued to public shareholders.
|
CAPITALIZATION
The following table sets forth our
capitalization at March 30, 2018 and as adjusted to give effect to the sale of our units and the private warrants and the application
of the estimated net proceeds derived from the sale of such securities:
|
|
March 31, 2019
|
|
|
Actual
|
|
As
Adjusted
(1)
|
Common
stock, $.001 par value, -0- and 9,730,167 shares which are subject to possible redemption
(2)
|
|
|
—
|
|
|
|
97,301,671
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value, 1,000,000 shares authorized (actual
and as adjusted); no shares issued and outstanding (actual and as adjusted)
|
|
|
—
|
|
|
|
—
|
|
Common
stock, $.001 par value, 150,000,000 shares authorized (actual and as adjusted); 2,875,000 shares issued and outstanding (actual);
2,849,833 shares
(3)
issued and outstanding (excluding 9,730,167 shares subject to possible conversion/tender)
(as adjusted)
|
|
|
2,875
|
|
|
|
2,850
|
|
Additional paid-in capital
|
|
|
544,764
|
|
|
|
5,308,118
|
|
Accumulated deficit
|
|
|
(310,967
|
)
|
|
|
(310,967
|
)
|
Total stockholders’ equity:
|
|
|
236,672
|
|
|
|
5,000,001
|
|
Total capitalization
|
|
$
|
236,672
|
|
|
$
|
102,301,672
|
|
|
(1)
|
Includes
the $5 million we will receive from the sale of the private warrants, minus underwriting discount and total expenses.
|
|
(2)
|
Upon the consummation of our initial business combination, we will provide our stockholders with the opportunity to convert or sell their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination, less taxes payable, subject to the limitations described herein whereby our net tangible assets will be maintained at a minimum of $5,000,001 upon consummation of our initial business combination.
|
|
(3)
|
Assumes
the over-allotment option has not been exercised and an aggregate of 375,000 founders’ shares held by the sponsor have
been forfeited by our sponsor as a result thereof.
Includes 80,000
shares issuable to
I-Bankers
Securities, Inc.
, the representative of the underwriters in this offering, upon consummation
of this offering.
|
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
We are a newly organized blank check company formed as a
Nevada corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses. We have not selected any specific business combination target and
we have not, nor has anyone one our behalf, initiated any substantive discussions, directly or indirectly, with any business combination
target. Our initial business combination and value creation strategy will be to identify, acquire and, after our initial business
combination, assist in the growth of a business which provide financial services in Asia, primarily China.
We intend to utilize cash derived from the proceeds of this
offering, our securities, debt or a combination of cash, securities and debt, in effecting a business combination. The issuance
of additional shares of common stock or preferred stock:
|
•
|
may significantly reduce the equity interest of our stockholders;
|
|
•
|
may subordinate the rights of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of common stock;
|
|
•
|
will likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and
|
|
•
|
may adversely affect prevailing market prices for our securities.
|
Similarly, if we issue debt securities, it could result in:
|
•
|
default and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations;
|
|
•
|
acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant;
|
|
•
|
our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and
|
|
•
|
our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding.
|
We have neither engaged in any operations nor generated any
revenues to date. Our entire activity since inception has been to prepare for our proposed fundraising through an offering of our
equity securities.
We are an emerging growth company as defined in the JOBS
Act. As an emerging growth company, we have elected to delay the adoption of new or revised accounting standards that have different
effective dates for public and private companies until those standards apply to private companies. As such, our financial statements
may not be comparable to companies that comply with public company effective dates.
Operating Expenses
We had operating expenses of
$92,851 and $197,951 for the three and six months ended March 31, 2019, respectively, and $113,016 during the period from
July 27, 2018 (inception) through September 30, 2018. During the three and six months ended March 31, 2019, operating
expenses were primarily due to audit fees of $2,000 and $10,000, respectively, legal fees of $0 and $25,000, respectively,
general and administrative expenses of $24,999 and $25,423, respectively, and officers’ compensation of $65,852 and
$137,519, respectively, of which $3,333 and $6,667, respectively, were in connection with stock issuances to our Co-Chief
Executive Officer and Chief Financial Officer. During the period from July 27, 2018 (inception) through September 30, 2018,
we had upfront offering costs of $40,000 to the underwriter of this offering, legal fees of $25,000 and officers’
compensation of $47,778, of which $2,222 were in connection with stock issuances to our Chief Executive Officer and Chief
Financial Officer. Pursuant to the executed Offer Letters, the Company agreed to pay the Company’s Co-Chief Executive
Officer $2,000 in cash per month and 50,000 founder shares, and pay the Company’s Chief Financial Officer $5,000 in
cash per month and 50,000 founder shares. The total 100,000 founder shares were issued in September of 2018. Accordingly, we
recognized stock-based compensation of $3,333 and $6,667, respectively, during the three and six months ended March 31, 2019,
and recognized stock-based compensation of $2,222 during the period from July 27, 2018 (inception) through September 30,
2018, to the statement of operations. The unrecognized stock-based compensation was $11,111 as of March 31, 2019.
We expect our operating
expenses will significantly increase in 2019 as we attempt to complete the business combination as discussed hereto. However,
our operating expenses are difficult to predict due to the uncertainty of the business combination, and it may be necessary to
continuously raise additional capital to sustain operations.
Liquidity and Capital Resources
As indicated in the accompanying financial
statements, at March 31, 2019 and September 30, 2018, we had $269,181 and $302,362 in cash, respectively, and a working capital
of $236,672and $261,706, respectively. Further, we have incurred and expect to continue to incur significant costs in pursuit
of our financing and acquisition plans. Management’s plans to address this uncertainty through this offering are discussed
above. We cannot assure you that our plans to raise capital or to consummate an initial business combination will be successful.
These factors, among others, raise substantial doubt about our ability to continue as a going concern.
Our liquidity needs have been satisfied to date through receipt
of $555,000 from the sale of the founders’ shares that is more fully described below. We estimate that the net proceeds from
(i) the sale of the units in this offering, after deducting offering expenses of approximately $500,000 and underwriting discounts
and commissions of $2,500,000 (or $2,875,000 if the over-allotment option is exercised in full) and (ii) the sale of the private
warrants for a purchase price of $5,000,000, or $5,375,000 if the over-allotment option is exercised in full, will be $102,000,000
(or $117,000,000 if the over-allotment option is exercised in full). Of this amount, $100,000,000 (or $115,000,000 if the over-allotment
option is exercised in full) will be held in the trust account. The remaining $2,000,000 will not be held in trust.
We may use substantially all of the net proceeds of this
offering, including the funds held in the trust account, to acquire a target business and to pay our expenses relating thereto.
To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the remaining
proceeds held in the trust account as well as any other net proceeds not expended will be used as working capital to finance the
operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding
the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new
products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the
completion of our business combination if the funds available to us outside of the trust account were insufficient to cover such
expenses.
We believe that, upon consummation of this offering, the
approximate $2,000,000 of net proceeds not held in the trust account, will be sufficient to allow us to operate for at least the
next 12 months (or up to 18 months if we extend the period of time to consummate a business combination by the full amount of time),
assuming that a business combination is not consummated during that time. Over this time period, we will be using these funds for
identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents
and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating
and consummating the business combination. We anticipate that we will incur approximately:
|
•
|
$700,000 of expenses for the search for target businesses and for the legal, accounting and other third-party expenses attendant to the due diligence investigations, structuring and negotiating of a business combination;
|
|
•
|
$500,000 of expenses for the due diligence and investigation of a target business by our officers, directors and sponsor;
|
|
•
|
$100,000 of expenses in legal and accounting fees relating to our SEC reporting obligations;
|
|
•
|
$100,000 of expenses in Directors & Officers liability insurance premiums; and
|
|
|
|
|
•
|
$600,000 for general working capital that will be used for fees to officers and directors, miscellaneous expenses, liquidation obligations and reserves.
|
If our estimates of the costs of undertaking in-depth due
diligence and negotiating an initial business combination is less than the actual amount necessary to do so, we may have insufficient
funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing
either to consummate our initial business combination or because we become obligated to redeem a significant number of our public
shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in
connection with such business combination. We do not have a maximum debt leverage ratio or a policy with respect to how much debt
we may incur. The amount of debt we will be willing to incur will depend on the facts and circumstances of the proposed business
combination and market conditions at the time of the potential business combination. At this time, we are not party to any arrangement
or understanding with any third party with respect to raising additional funds through the sale of our securities or the incurrence
of debt. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the
consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient,
we may need to obtain additional financing in order to meet our obligations.
Related Party Transactions
We paid Wei Fan, our Co-Chief
Executive Officer monthly fees of $2,000 commencing on February 1, 2019 and Weixuan Luo, our Chief Financial Officer monthly fees
of $5,000 commencing on August 1, 2018. We also issued each of Wei Fan and Weixuan Luo 50,000 founder shares. We will also
pay each member of our board of directors $2,000 per month for his or her services commencing on August 1, 2018 and issue a total
of 300,000 shares of common stock to Kin Sze, our Co-Chief Executive Officer, President and Secretary, and certain members of
our board of directors within 10 days following the business combination.
Our sponsor has committed to purchase from us an aggregate
of 5,000,000 private warrants at $1.00 per warrant (for a total purchase price of $5,000,000) in a private placement that will
close simultaneously with the closing of this offering. Our sponsor has also agreed that if the over-allotment option is exercised
by the underwriters in full or in part, it will purchase from us additional private warrants (up to a maximum of 375,000 private
warrants) at a price of $1.00 per private warrant in an amount that is necessary to maintain in the trust account at $10.00 per
unit sold to the public in this offering. These additional private warrants will be purchased in a private placement that will
occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. We believe the purchase
price of the private warrants is greater than the fair value of such warrants and therefore will not result in any share-based
compensation expense.
We do not believe we will need to
raise additional funds following this offering in order to meet the expenditures required for operating our business. However,
in order to finance transaction costs in connection with an intended initial business combination, our sponsor, initial stockholders,
officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we consummate an initial
business combination, we would repay such loaned amounts. In the event that the initial business combination does not close, we
may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our
trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post business
combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private
warrants.
Controls and Procedures
We are not currently required to
maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act. We will be required to
comply with the internal control requirements of the Sarbanes-Oxley Act for the fiscal year ending September 30, 2020. As of the
date of this prospectus, we have not completed an assessment, nor have our auditors tested our systems, of internal controls.
We expect to assess the internal controls of our target business or businesses prior to the completion of our initial business
combination and, if necessary, to implement and test additional controls as we may determine are necessary in order to state that
we maintain an effective system of internal controls. A target business may not be in compliance with the provisions of the Sarbanes-Oxley
Act regarding the adequacy of internal controls. Target businesses we may consider for a business combination may have internal
controls that need improvement in areas such as:
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staffing for financial, accounting and external reporting areas, including segregation of duties;
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reconciliation of accounts;
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proper recording of expenses and liabilities in the period to which they relate;
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evidence of internal review and approval of accounting transactions;
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documentation of processes, assumptions and conclusions underlying significant estimates; and
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documentation of accounting policies and procedures.
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Because it will take time, management involvement and perhaps
outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and market
expectations for our operation of a target business, we may incur significant expense in meeting our public reporting responsibilities,
particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also
take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing reporting.
Once our management’s report on internal controls
is complete, we will retain our independent auditors to audit and render an opinion on such report when required by Section 404.
The independent auditors may identify additional issues concerning a target business’s internal controls while performing
their audit of internal control over financial reporting.
Quantitative and Qualitative Disclosures about Market
Risk
The net proceeds of this offering, including amounts in the
trust account, will 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. Due to the
short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Off-Balance Sheet Arrangements; Commitments and Contractual
Obligations; Quarterly Results
As of the date of this prospectus, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
No unaudited quarterly operating data is included in this prospectus as we have conducted no operations to date.
PROPOSED BUSINESS
General
We are a newly organized blank
check company formed as a Nevada corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this
prospectus as our initial business combination. We have not selected any specific business combination target and we have not,
nor has anyone one our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target.
We currently intend to concentrate
our efforts in identifying businesses which provide financial services in Asia, primarily mainland China and Hong Kong. Our emphasis
is on businesses that provide financial services, brokerage and trading, asset management, underwriting and investment advisory,
financing, payment processing, financial technology and other financial services related targets. However, we are not limited
to these industries and we may pursue a business combination opportunity in any business or industry we choose and we may pursue
a company with operations or opportunities outside of China. We intend to acquire established businesses that we believe are fundamentally
sound, with sound corporate governance, profound and stable operation history, motivated and capable management team, sustainable
growth strategy, clear and scalable business model, and systematic advantages, but need financial, operational, strategic or managerial
assistance to maximize value. We do not intend to acquire start-up companies, companies with speculative business plans or companies
that are excessively leveraged. We intend to focus on seeking and consummating a business combination with a company or companies
having an enterprise value between US$200 and US$400 million.
Our sponsor, Mr. Shih-Chung
Chou, has over 20 years of experience in the financial and investment industry. He has been serving as the Chief Executive Officer
of Shanghai Kongsheng Industrial Co., Ltd., a real estate development, investment and management company, since February 1997.
He is one of the largest stockholders of National Agricultural Holding Limited, a rural market-based company that integrates financial
services, agricultural product trading, information, industry and science research. From June 2005 to November 2013, he served
as the M&A Department Manager of Qianlong Technology International Holding Limited. From December 1993 to January 1997, he
served as the General Manager of Shanghai Gaosheng Real Estate Development Co., Ltd., a consulting service provider in financial
and real estate investment. There is no relationship between our sponsor and our management.
Business Strategy
We will seek to capitalize on the experiences and network
of our management team to identify, evaluate and acquire an operating financial services business in Asia, primarily China. We
believe the financial services industry in Asia/China represents a particularly attractive deal sourcing environment that allows
us to leverage our team’s skill sets and experience to identify a business combination which can potentially serve as a strong
platform for future add-on acquisitions. Our investment thesis is supported by the following trends:
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High
growth in the Financial Services Industry in China.
The total Asset Under Management (“AUM”)
has increased rapidly in China. According to a Casey Quick research report, China will soon become the world’s second
largest asset management market. The Chinese asset management industry will account for nearly half of global net asset
flows by 2019 and has experienced a sustained period of growth. By 2030, China’s asset management is expected to
exceed US$17 trillion. In the financial technology space in particular, since 2010, the average annual growth
rate of China's third-party payment market has been growing more than 50% per annum, and China has become the
global leader in such sector.
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Relaxing Restrictions on Foreign Ownership of Chinese
Securities Companies
.
The measures issued by the China Securities Regulatory Commission in 2017 have opened up
the securities industry to foreigners, by allowing foreign investors to become controlling shareholders of China based
securities companies
.
China
has committed to increase the foreign ownership upper limit in securities companies, whether held directly or indirectly, and
on a single entity or aggregated basis, to 51% since 2017. Moreover, three years after the above measures have been
implemented, any remaining limit on foreign ownership will be removed. The proposed amendments to the existing rules included
in the measures are primarily intended to honor such commitment.
The new measures are
intended to drive greater foreign investment in China.
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Mobile and Online Asset Management Platforms.
These
platforms help companies and investors connect with each other in investment markets. Demand for customer interactions and
service delivery will gradually be realized through networks and mobile channels. Investors will have better accessibility
and more choices of investment tools and projects. Companies will be able to structure financing tools to meet their needs
and attract more investors. Middle-class and general market investors will benefit from more personalized services and advice.
Individual investors gain more control over investment decisions. Customers gain greater visibility and easier adjustments
related to their investments. Automation technology extends sophisticated allocation services to individuals and institutional
investors. Investment funds are allocated to match suitable investment opportunities with prospects. As the involvement of
the financial agents decreases, the investment cost for investors decreases.
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Mobile Payment Tools.
China
fintech giants make cashless society a reality by providing mobility payment platforms. Integrated mobile technologies change consumer
needs and behavior. More consumers will use digital payment methods instead of cash, even for small transactions. Incentives are
given to encourage consumers to use mobile payments. Transaction amounts have been increasing. Through analyzing payment transaction
data, financial service providers are able to predict future consumer trend and deliver tailor made services. Geotags, biometrics
and tokens protect all transaction parties by avoiding fraud. With the increase of new solutions, transaction costs decrease.
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The Belt and Road Initiative.
The
political and economic policy first proposed by President Xi Jin Ping in 2013, provides foreign enterprises, inter alia, more
cross-border investments opportunities; promotes internationalization of RMB; provides new investment directions and structures;
and expands offshore business for financial services companies.
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Closer
Economic Partnership Arrangement
. We believe free trade agreements have caused Hong Kong to invest further in the mainland
and has promoted more of Hong Kong's financial services industry into mainland and overseas and enhances Hong Kong as an international
finance center. Various economic incentives, similar to those mentioned above, are encouraging greater economic activity between Hong
Kong and China in institutional and retail capacity. Tax incentives also encourage Hong Kong financial services companies to enter
the China market.
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Guangdong-HK-Macau Great Bay
Area.
The national strategy supports a balanced and sustainable growth of financial services industries by leveraging regional
resources, addressing the unmet needs, combined with regulatory facilitation and easy access to capital. It also captures opportunities
brought by the Belt & Road Initiative.
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Hong Kong Listing Regime Reform.
An initiative from Hong Kong Stock Exchange allows alternative listing methods and a variety of listing structures, attracting
more corporations to list in Hong Kong. The reforms are: allowing IPO of non-profit biotech companies, initial public offering
of weighted voting right structure companies and secondary listings of innovative companies. The unique stock connect collaboration
between Hong Kong, Shanghai and Shenzhen stock exchanges allows international and Mainland Chinese investors to trade securities
in each other's markets through the trading and clearing facilities of their home exchange. The scheme now covers over 2,000 eligible
equities.
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Competitive Strengths
We believe we have the following competitive strengths:
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Established
Deal Sourcing Network
. As a result of their extensive experience in the financial services industry, our management
team members have developed a broad array of contacts in the industry. We believe that these contacts will be important in generating
acquisition opportunities for us.
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Strong Financial Position and Flexibility
.
With funds in the
trust account of approximately $100,000,000
(or $115,000,000 if the over-allotment option
is exercised in full) available to use for a business combination (assuming no stockholder
seeks conversion of their shares or seeks to sell their shares to us in a tender offer in
relation to such business combination), we offer a target business a variety of options such
as providing the owners of a target business with shares in a public company and a public
means to sell such shares, providing capital for the potential growth and expansion of its
operations or strengthening its balance sheet by reducing its debt ratio. Because we are able
to consummate our initial business combination using our cash, debt or equity securities,
or a combination of the foregoing, we have the flexibility to use the most efficient combination
that will allow us to tailor the consideration to be paid to the target business to fit its
needs and desires.
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Status
as a Public Company
. We believe our structure will make us an attractive business transaction partner to prospective
target businesses. As an existing public company, we will offer a target business an alternative to the traditional initial public
offering through a merger or other business transaction with us. In this situation, the owners of the target business would exchange
their shares of stock in the target business for shares of our stock. Once public, we believe the target business would have greater
access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests
than it would as a private company. We believe that being a public company can also augment a company’s profile among potential
new customers and vendors and aid it in attracting and retaining talented employees.
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Acquisition Criteria
We will seek to capitalize on the significant financial
services from our management team and our board of directors to identify, evaluate, acquire operating financial services business
in Asia, primarily China. We have identified the following criteria that we intend to use in evaluating business transaction opportunities.
We expect that no individual criterion will entirely determine a decision to pursue a particular opportunity. Further, any particular
business transaction opportunity which we ultimately determine to pursue may not meet one or more of these criteria:
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History of free cash flow generation
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We
will seek to acquire one or more businesses or assets that have a history of, or potential
for, strong, stable free cash flow generation, with predictable and recurring revenue
streams.
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Strong
management team
. We will seek to acquire one or more businesses or assets that have strong, experienced management
teams or those that provide a platform for us to assemble an effective and experienced management team. We will focus on management
teams with a proven track record of driving revenue growth, enhancing profitability and creating value for their stockholders.
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Opportunities for expansion.
We
will seek to acquire one or more businesses or assets with a sustainable and clear scalable business model that we can grow
both organically and through acquisitions. We believe that our ability to source
proprietary opportunities and execute transactions will help the business we acquire
grow through acquisition, and thus serve as a platform for further add-on
acquisitions.
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Diversified customer and supplier base
.
We
will seek to acquire one or more businesses or assets that have a diversified customer and
supplier base, with systematic advantages which are generally able to employ risk management measures to endure economic
downturns, industry consolidation, changing business preferences and other unfavorable business environments that
may negatively impact their customers, suppliers and competitors.
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Effecting a Business Combination
General
We are not presently engaged in, and we will not engage in,
any substantive commercial business for an indefinite period of time following this offering. We intend to utilize cash derived
from the proceeds of this offering and the private placement of private warrants, our capital stock, debt or a combination of these
in effecting a business combination which has not yet been identified. Accordingly, investors in this offering are investing without
first having an opportunity to evaluate the specific merits or risks of any one or more business combinations. A business combination
may involve the acquisition of, or merger with, a company which does not need substantial additional capital but which desires
to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking
a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various federal
and state securities laws. In the alternative, we may seek to consummate a business combination with a company that may be financially
unstable or in its early stages of development or growth. While we may seek to effect simultaneous business combinations with more
than one target business, we will probably have the ability, as a result of our limited resources, to effect only a single business
combination.
We
will have until 12 months from the closing of this offering to consummate an initial business combination.
However,
if we anticipate that we may not be able to consummate our initial business combination within 12 months, we may extend the period
of time to consummate a business combination up to two times, each by an additional three months (for a total of up to 18 months
to complete a business combination). Pursuant to the terms of our amended and restated articles of incorporation and the trust
agreement to be entered into between us and American Stock Transfer & Trust Company on the date of this prospectus, in order
to extend the time available for us to consummate our initial business combination, our sponsor or its affiliates or designees,
upon ten
days
advance
notice prior to the applicable deadline, must deposit into the trust account $1,000,000, or up to $1,150,000 if the underwriters’
over-allotment option is exercised in full ($0.10 per share in either case) on or prior to the date of the applicable deadline,
for each three month extension (or up to an aggregate of $2,000,000 (or up to $2,300,000 if the underwriters’ over-allotment
option is exercised in full), or $0.20 per share, if we extend for the full six months). In the event that we receive notice from
our sponsor ten
days
prior
to the applicable deadline of their intent to effect an extension, we intend to issue a press release announcing such intention
at least three days prior to the applicable deadline. In addition, we intend to issue a press release the day after the applicable
deadline announcing whether or not the funds had been timely deposited. Our sponsor and its affiliates or designees are not obligated
to fund the trust account to extend the time for us to complete our initial business combination.
If we are unable to consummate our initial business combination
within the applicable time period, we will, as promptly as reasonably possible but not more than ten business days thereafter,
redeem the public shares for a pro rata portion of the funds held in the trust account and as promptly as reasonably possible following
such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject
in each case to our obligations under Nevada law to provide for claims of creditors and the requirements of other applicable law.
We Have Not Identified a Target Business
To date, we have not selected any target business on which
to concentrate our search for a business combination. We do not have any specific business combination under consideration and
we have not (nor has anyone on our behalf), directly or indirectly, contacted any prospective target business with respect to such
a transaction. Additionally, we have not engaged or retained any agent or other representative to identify or locate such companies.
As a result, we cannot assure you that we will be able to locate a target business or that we will be able to engage in a business
combination with a target business on favorable terms or at all.
Subject to our officers’ and directors’ pre-existing
fiduciary duties and the limitation that a target business have a fair market value of at least 80% of the balance in the trust
account (excluding taxes payable on the income earned on the trust account) at the time of the execution of a definitive agreement
for our initial business combination, as described below in more detail, we will have virtually unrestricted flexibility in identifying
and selecting a prospective acquisition candidate. Except for the general criteria and guidelines set forth above under the caption
“
Business Strategy
,” we have not established any other specific attributes or criteria (financial or otherwise)
for prospective target businesses. Accordingly, there is no basis for investors in this offering to evaluate the possible merits
or risks of the target business with which we may ultimately complete a business combination. To the extent we effect a business
combination with a financially unstable company or an entity in its early stage of development or growth, including entities without
established records of sales or earnings, we may be affected by numerous risks inherent in the business and operations of financially
unstable and early stage or potential emerging growth companies. Although our management will endeavor to evaluate the risks inherent
in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
Sources of Target Businesses
We expect to evaluate opportunities that are sourced through
the relationship networks of our management team, which includes numerous entrepreneurs, management teams, intermediaries and venture
capital funds.
Our management team has considerable expertise in the evaluation
of financial services investments.
While we have not yet identified
any acquisition candidates, we believe based on our management team’s business knowledge and experience that there are numerous
acquisition candidates. We expect that our principal means of identifying potential target businesses will be through the extensive
contacts and relationships of our management team. While our officers and directors are not required to commit any specific amount
of time in identifying or performing due diligence on potential target businesses, our officers and directors believe that the
relationships they have developed over their careers and their access to their contacts and resources will generate a number of
potential business combination opportunities that will warrant further investigation. We also anticipate that target business
candidates will be brought to our attention from various unaffiliated sources, including investment bankers, venture capital funds,
private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses
may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These
sources may also introduce us to target businesses they think we may be interested in on an unsolicited basis, since many of these
sources will have read this prospectus and know what types of businesses we are targeting. Our officers and directors, as well
as their affiliates, may also bring to our attention target business candidates that they become aware of through their business
contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions.
They must present to us all target business opportunities that have a fair market value equal to at least 80% of the assets held
in the trust account (excluding taxes payable on the income accrued in the trust account) at the time of the agreement to enter
into the initial business combination, subject to any pre-existing fiduciary or contractual obligations. While we do not presently
anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal
basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting
fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. In no event,
however, will our sponsor, initial stockholders, officers, directors or their respective affiliates be paid any finder’s
fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the consummation of
an initial business combination (regardless of the type of transaction that it is) other than the monthly fees payable and equity
awards to officers and directors for their services to us as described elsewhere in this prospectus, and reimbursement of any
out-of-pocket expenses. Our audit committee will review and approve all reimbursements and payments made to our sponsor, initial
stockholders, officers, directors or our or their respective affiliates, with any interested director abstaining from such review
and approval. We have no present intention to enter into a business combination with a target business that is affiliated with
any of our officers, directors or sponsor. However, we are not restricted from entering into any such transactions and may do
so if (i) such transaction is approved by a majority of our disinterested independent directors and (ii) we obtain an opinion
from an independent investment banking firm, or another independent entity that commonly renders valuation opinions on the type
of target business we are seeking to acquire, that the business combination is fair to our unaffiliated stockholders from a financial
point of view. Our stockholders may not be provided with a copy of such opinion and they may not be able to rely on such opinion.
Selection of a Target Business and Structuring of a
Business Combination
Subject to our officers’ and directors’ pre-existing
fiduciary duties and the limitations that a target business have a fair market value equal to at least 80% of the balance in the
trust account (excluding taxes payable on the income earned on the trust account) at the time of the execution of a definitive
agreement for our initial business combination, as described below in more detail, and that we must acquire a controlling interest
in the target business, our management will have virtually unrestricted flexibility in identifying and selecting a prospective
target business. Except for the general criteria and guidelines set forth above under the caption “
Acquisition Criteria
,”
we have not established any specific attributes or criteria (financial or otherwise) for prospective target businesses, except
that we will not invest in an entity or assets which violate, or aid and abet the violation, of federal law.
The time and costs required to select and evaluate a target
business and to structure and complete the business combination cannot presently be ascertained with any degree of certainty. Any
costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination
is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business
combination.
Alternative structures to comply with regulations in
certain Chinese industries
We may need to adopt alternative structures in the event
that we elect to acquire a target company in certain Chinese industries. The Chinese government has restricted or limited direct
foreign ownership of certain kinds of assets and companies operating in a wide variety of industries, including certain aspects
of telecommunications, advertising, food production, and heavy equipment manufacturers. The Chinese government may apply these
restrictions in other industries in the future. In addition, there can be restrictions on the foreign ownership of businesses that
are determined from time to time to be in “important industries” that may affect the national economic security or
having “famous Chinese brand names” or “well established Chinese brand names.” Subject to the review requirements
of the Ministry of Commerce and other relevant agencies as discussed elsewhere for acquisitions of assets and companies in China
and subject to the various percentage ownership limitations that exist from time to time, acquisitions involving foreign investors
and parties in the various restricted categories of assets and industries may nonetheless sometimes be consummated using contractual
arrangements with permitted Chinese parties which could, for example, result in a structure where, in exchange for our payment
of the acquisition consideration, the target business would be majority or wholly owned by Chinese residents whom we designate,
and the target business would continue to hold the requisite licenses necessary to operate its business. To the extent such agreements
are employed, they may be for control of specific assets such as intellectual property or control of blocks of the equity ownership
interests of a company. The agreements would be designed to secure for us economic benefits and to assume risk of losses and control
over the subject assets or equity interests similar to the rights of full ownership, while leaving the technical ownership in the
hands of Chinese parties.
For example, these contracts could result in a structure
where, in exchange for our payment of the acquisition consideration: (i) the target company would be majority owned by Chinese
residents whom would be likely designated by us and the target company would continue to hold the requisite licenses for the target
business and (ii) we would establish a new subsidiary in China which would provide technology, technical support, consulting and
related services to the target company in exchange for fees, which would transfer to us substantially all of the economic benefits
of ownership of the target company.
These contractual arrangements would be designed to provide
the following:
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Our exercise of effective control over the target company;
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We will assume economic benefits and risk of losses of the target company that are substantially similar to full ownership;
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The
stockholders of the target company would grant us a pledged interest in all of the issued and outstanding interests of the
target company, including the right to vote such shares, as security for the performance of the target company’s obligations
under the contractual arrangements;
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The
stockholders of the target company would grant us an irrevocable proxy for the maximum period permitted by law, to vote the
stockholders’ shares in the target company in such manner and for or against such proposals as we may determine; and
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We, or our designee, would have an exclusive option to purchase all or part of the equity interests in the target company owned by the Chinese residents whom we designate, or all or part of the assets of the target company, in each case when and to the extent permitted by Chinese regulations.
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While we cannot predict the terms of any such contract that
we will be able to negotiate, at a minimum, any contractual arrangement would need to provide us with effective control over the
target’s operations and management either directly through board control or through affirmative and/or negative covenants
and veto rights with respect to matters such as entry into material agreements, management changes and issuance of debt or equity
securities, among other potential control provisions. We have not, however, established specific provisions which must be in an
agreement in order to meet the definition of business combination.
These agreements likely also would provide for increased
ownership or full ownership and control by us when and if permitted under Chinese law and regulation. If we choose to effect our
initial business combination that employs the use of these types of control arrangements, we may have difficulty in enforcing our
rights. Therefore, these contractual arrangements may not be as effective in providing us with the same economic benefits, accounting
consolidation or control over a target business as would direct ownership through a merger or shares exchange. For example, if
the target business or any other entity fails to perform its obligations under these contractual arrangements, we may have to incur
substantial costs and expend substantial resources to enforce such arrangements, and rely on legal remedies under Chinese law,
including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be sufficient
to off-set the cost of enforcement and may adversely affect the benefits we expect to receive from the business combination.
While we believe under such contractual arrangement, we will
be considered the primary beneficiary and be able to consolidate financial results of the target company in our consolidated financial
statements. In the event that in the future generally accepted accounting policies in the United States and the SEC accounting
regulations change and we are deemed not to be the primary beneficiary by controlling the target company through such contractual
arrangement, we would not be able to consolidate line by line the target company’s financial results in our consolidated
financial statements.
Moreover, we expect that the contractual arrangements upon
which we would be relying would be governed by Chinese law and would be the only basis of providing resolution of disputes which
may arise through either arbitration or litigation in China. Accordingly, these contracts would be interpreted in accordance with
Chinese law and any disputes would be resolved in accordance with Chinese legal procedures. Uncertainties in the Chinese legal
system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual
arrangements, we may not be able to exert the effective level of control over the target business.
We have not selected any target business or target industry
on which to concentrate our search for our initial business combination and we are, therefore, unable to determine at this time
what form an acquisition of a target business will take.
Fair Market Value of Target Business
So long as we obtain and maintain a listing for our securities
on Nasdaq, the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of
the balance of the funds in the trust account (excluding taxes payable on the income earned on the trust account) at the time of
the execution of a definitive agreement for our initial business combination, although we may acquire a target business whose fair
market value significantly exceeds 80% of the trust account balance.
We currently anticipate structuring
a business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however,
structure our initial business combination where we merge directly with the target business or where we acquire less than 100%
of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders
or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50%
or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient
for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction
company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination
may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us
in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of
new shares in exchange for all of the outstanding capital stock of a target. In this case, we could acquire a 100% controlling
interest in the target; however, as a result of the issuance of a substantial number of new shares, our stockholders immediately
prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business
combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the
post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes
of the 80% fair market value test. In order to consummate such an acquisition, we may issue a significant amount of our debt or
equity securities to the sellers of such businesses and/or seek to raise additional funds through a private offering of debt or
equity securities. Since we have no specific business combination under consideration, we have not entered into any such fund
raising arrangement and have no current intention of doing so. The fair market value of the target will be determined by our board
of directors based upon one or more standards generally accepted by the financial community (such as actual and potential sales,
earnings, cash flow and/or book value). The proxy solicitation materials or tender offer documents used by us in connection with
any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business, as
well as the basis for our determinations. If our board is not able to independently determine the fair market value of the target
business or businesses or if we seek to consummate an initial business combination with an entity that is affiliated with any
of our sponsor, initial stockholders, officers or directors, we will obtain an opinion from an independent investment banking
firm, or another independent entity that commonly renders valuation opinions on the type of target business we are seeking to
acquire, with respect to the satisfaction of such criteria. Our stockholders may not be provided with a copy of such opinion and
they may not be able to rely on such opinion.
We will not be required to obtain an opinion from an investment
banking firm as to the fair market value if our board of directors independently determines that the target business complies with
the 80% threshold.
Lack of Business Diversification
We may seek to effect a business combination with more than
one target business, and there is no required minimum valuation standard for any target at the time of such acquisition. We expect
to complete only a single business combination, although this process may entail the simultaneous acquisitions of several operating
businesses. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance
of a single business operation. Unlike other entities which may have the resources to complete several business combinations of
entities operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources
to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. By consummating a business
combination with only a single entity, our lack of diversification may:
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subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to a business combination, and
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result in our dependency upon the performance of a single operating business or the development or market acceptance of a single or limited number of products, processes or services.
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If we determine to simultaneously acquire several businesses
and such businesses are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business
is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us, and delay our ability,
to complete the business combination. With multiple acquisitions, we could also face additional risks, including additional burdens
and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the
additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies
in a single operating business.
Limited Ability to Evaluate the Target Business’
Management
Although we intend to scrutinize the management of a prospective
target business when evaluating the desirability of effecting a business combination, we cannot assure you that our assessment
of the target business’ management will prove to be correct. In addition, we cannot assure you that the future management
will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of our officers
and directors, if any, in the target business following a business combination cannot presently be stated with any certainty. While
it is possible that some of our key personnel will remain associated in senior management or advisory positions with us following
a business combination, it is unlikely that they will devote their full time efforts to our affairs subsequent to a business combination.
Moreover, they would only be able to remain with the company after the consummation of a business combination if they are able
to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place
simultaneously with the negotiation of the business combination and could provide for them to receive compensation in the form
of cash payments and/or our securities for services they would render to the company after the consummation of the business combination.
While the personal and financial interests of our key personnel may influence their motivation in identifying and selecting a target
business, their ability to remain with the company after the consummation of a business combination will not be the determining
factor in our decision as to whether or not we will proceed with any potential business combination. Additionally, we cannot assure
you that our officers and directors will have significant experience or knowledge relating to the operations of the particular
target business.
Following a business combination, we may seek to recruit
additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability
to recruit additional managers, or that any such additional managers we do recruit will have the requisite skills, knowledge or
experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve an
Initial Business Combination
In connection with any proposed business combination, we
will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders
may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, into their
pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders
with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote)
for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable),
in each case subject to the limitations described herein. If we determine to engage in a tender offer, such tender offer will be
structured so that each stockholder may tender any or all of his, her or its shares rather than some pro rata portion of his, her
or its shares. The decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders
to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors
such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval.
In the event that we determine to conduct a tender offer, we will file tender offer documents with the SEC which will contain substantially
the same financial and other information about the initial business combination as is required under the SEC’s proxy rules.
We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation
and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business
combination.
We
chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under
the Securities Act of 1933, as amended. However, if we seek to consummate an initial business combination with a target business
that imposes any type of working capital closing condition or requires us to have a minimum amount of funds available from the
trust account upon consummation of such initial business combination, we may need to have more than $5,000,001 in net tangible
assets upon consummation and this may force us to seek third party financing which may not be available on terms acceptable to
us or at all. As a result, we may not be able to consummate such initial business combination and we may not be able to locate
another suitable target within the applicable time period, if at all. Public stockholders may therefore have to wait 12 months
from the closing of this offering
(or up to 18 months from the
closing of this offering if we extend the period of time to consummate a business combination by the full amount of time)
in
order to be able to receive a pro rata share of the trust account.
Our
sponsor and our officers and directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed
business combination, including the founders’ shares, (2) not to convert any shares of common stock in connection with a
stockholder vote to approve a proposed initial business combination and (3) not sell any shares of common stock in any tender
in connection with a proposed initial business combination. As a result, we would need only 3,710,001, or approximately 37.1%,
of the 10,000,000 public shares sold in this offering to be voted in favor of a transaction in order to have our initial business
combination approved (assuming (i) the over-allotment option is not exercised, (ii) all shares were present and entitled to vote
at the meeting
and (iii) that the 80,000 shares to be issued
to the representative of the underwriters
are issued and outstanding and voted in favor of
the business combination
).
None of our officers, directors,
sponsor or their affiliates has indicated any intention to purchase units or shares of common stock in this offering or from persons
in the open market or in private transactions. However, if we hold a meeting to approve a proposed business combination and a
significant number of stockholders vote, or indicate an intention to vote, against such proposed business combination, our officers,
directors, sponsor or their affiliates could make such purchases in the open market or in private transactions in order to influence
the vote. It is anticipated that our officers, directors, sponsor or their affiliates would approach a limited number of
large holders that have voted against the proposed business combination and/or sought redemption of their shares, or that have
indicated an intention to do so, and engage in direct negotiations for the purchase of such holders’ positions. It is likely
that our officers, directors, sponsor or their affiliates would approach only those holders that have submitted votes via proxy
although it is possible that it could be from a holder that submitted a vote at the meeting. It is anticipated that all holders
approached in this manner would be institutional or sophisticated holders. In the event such transactions take place, other than
on a Current Report on Form 8-K, we will issue a press release announcing such transactions. Notwithstanding the foregoing, our
officers, directors, sponsor and their affiliates will not make purchases of shares of common stock if the purchases would violate
Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s
stock.
Conversion Rights
At any meeting called to approve an initial business combination,
public stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination,
into their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation
of the initial business combination, less any taxes then due but not yet paid (which taxes may be paid only from the interest earned
on the funds in the trust account). Alternatively, we may provide our public stockholders with the opportunity to sell their shares
of our common stock to us through a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their
pro rata share of the aggregate amount then on deposit in the trust account, less any taxes then due but not yet paid.
We may also require public stockholders seeking conversion,
whether they are a record holder or hold their shares in “street name,” to either (i) tender their certificates to
our transfer agent or (ii) deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case prior to a date set forth in the proxy materials
sent in connection with the proposal to approve the business combination.
There is a nominal cost associated with the above-referenced
delivery process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically
charge the tendering broker $45.00 and it would be up to the broker whether or not to pass this cost on to the holder. However,
this fee would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to deliver
shares is a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However,
in the event we require stockholders seeking to exercise conversion rights to deliver their shares prior to the consummation of
the proposed business combination and the proposed business combination is not consummated, this may result in an increased cost
to stockholders.
Any proxy solicitation materials we furnish to stockholders
in connection with a vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy
such certification and delivery requirements. Accordingly, a stockholder would have from the time the stockholder received our
proxy statement up until the vote on the proposal to approve the business combination to deliver his shares if he wishes to seek
to exercise his conversion rights. This time period varies depending on the specific facts of each transaction. However, as the
delivery process can be accomplished by the stockholder, whether or not he is a record holder or his shares are held in “street
name,” in a matter of hours by simply contacting the transfer agent or his broker and requesting delivery of his shares through
the DWAC System, we believe this time period is sufficient for an average investor. However, we cannot assure you of this fact.
Please see the risk factor titled “
We may require stockholders who wish to convert their shares in connection with a proposed
business combination to comply with specific requirements for conversion that may make it more difficult for them to exercise their
conversion rights prior to the deadline for exercising their rights
” for further information on the risks of failing
to comply with these requirements.
Any request to convert such shares once made, may be withdrawn
at any time up to the vote on the proposed business combination. Furthermore, if a holder of a public share of common stock delivered
his certificate in connection with an election of their conversion and subsequently decides prior to the vote on the proposed business
combination not to elect to exercise such rights, he may simply request that the transfer agent return the certificate (physically
or electronically).
If the initial business combination is not approved or completed
for any reason, then our public stockholders who elected to exercise their conversion rights would not be entitled to convert their
shares for the applicable pro rata share of the trust account as of two business days prior to the consummation of the initial
business combination. In such case, we will promptly return any shares delivered by public holders.
Ability to Extend Time to Complete Business
Combination
We
will have until 12 months from the closing of this offering to consummate an initial business combination. However, if we anticipate
that we may not be able to consummate our initial business combination within 12 months, we may extend the period of time to consummate
a business combination up to two times, each by an additional three months (for a total of up to 18 months to complete a business
combination). Pursuant to the terms of our amended and restated articles of incorporation and the trust agreement to be entered
into between us and American Stock Transfer & Trust Company on the date of this prospectus, in order to extend the time available
for us to consummate our initial business combination, our sponsor or its affiliates or designees, upon ten
days
advance
notice prior to the applicable deadline, must deposit into the trust account $1,000,000, or up to $1,150,000 if the underwriters’
over-allotment option is exercised in full ($0.10 per share in either case) on or prior to the date of the applicable deadline,
for each three month extension (or up to an aggregate of $2,000,000 (or up to $2,300,000 if the underwriters’ over-allotment
option is exercised in full), or $0.20 per share, if we extend for the full six months). In the event that we receive notice from
our sponsor ten
days
prior to the applicable deadline of its
intent to effect an extension, we intend to issue a press release announcing such intention at least three days prior to the applicable
deadline. In addition, we intend to issue a press release the day after the applicable deadline announcing whether or not the funds
had been timely deposited. Our sponsor and its affiliates or designees are not obligated to fund the trust account to extend the
time for us to complete our initial business combination.
Liquidation if No Business Combination
Our amended and restated articles of incorporation provides
that we will have only 12 months from the closing of this offering (or up to 18 months from the closing of this offering if we
extend the period of time to consummate a business combination by the full amount of time) to complete an initial business combination.
If we have not completed an initial business combination by such date, we will (i) cease all operations except for the purpose
of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding
public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including
any interest earned on the funds held in the trust account (net of interest that may be used by us to pay our taxes payable and
for 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 liquidation distributions, if any), subject
to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations
under Nevada law to provide for claims of creditors and the requirements of other applicable law.
Our
sponsor, executive officers, and directors have agreed, pursuant to a written agreement with us, that they will not propose any
amendment to our amended and restated articles of incorporation (i) to modify the substance or timing of our obligation to redeem
100% of our public shares if we do not complete our initial business combination within
12
months from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time
to consummate a business combination by the full amount of time)
from
the closing of this offering or (ii) with respect to any other provision relating to stockholders’ rights or pre-business
combination activity, 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 (which interest shall be net of taxes payable) divided by the number of then outstanding public shares.
This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, any executive
officer or director, or any other person. 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 upon the consummation of our initial business combination (so that we are not subject to the
SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number
of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the
amendment or the related redemption of our public shares at such time.
Under Section 78.597 of the Nevada Revised Statutes, stockholders
may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.
There is a statute of limitations of 2 years after the date of the dissolution with respect to any remedy or cause of action in
which the plaintiff learns, or in the exercise of reasonable diligence should have learned of, the underlying facts on or before
the date of dissolution, or within 3 years after the date of dissolution with respect to any other remedy or cause of action. (NRS
78.585). The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding
public shares in the event we do not complete our initial business combination within the required time period may be considered
a liquidation distribution under Nevada law.
If
we are unable to complete a business combination within the prescribed time frame, we will (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100%
of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust
account, including any interest earned on the funds held in the trust account (net of interest that may be used by us to pay our
taxes payable and for 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 liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above)
to our obligations under Nevada 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
12-month
(or up to 18-month if we extend the period of time to consummate a business combination by the full amount of time)
anniversary
of the closing of this offering, and, therefore, prior to the running of the applicable statute of limitations. 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 until the third anniversary of such date.
However, because we are a blank check company, rather than
an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely
claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We are required to use our reasonable best efforts to have
all third parties (including any vendors or other entities we engage after this offering) and any prospective target businesses
enter into agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in
the trust account. As a result, the claims that could be made against us will be limited, thereby lessening the likelihood that
any claim would result in any liability extending to the trust. We therefore believe that any necessary provision for creditors
will be reduced and should not have a significant impact on our ability to distribute the funds in the trust account to our public
stockholders. Nevertheless, we cannot assure you of this fact as there is no guarantee that vendors, service providers and prospective
target businesses will execute such agreements. If any third party refuses to execute an agreement waiving such claims to the monies
held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into
an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement
would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party
that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed
by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where
management is unable to find a service provider willing to execute a waiver. Our underwriters and auditor are the only third parties
we are currently aware of that may not execute a waiver. Nor is there any guarantee that, even if they execute such agreements
with us, they will not seek recourse against the trust account. Our sponsor has agreed that it will be personally liable to ensure
that the proceeds in the trust account are not reduced below $10.00 per public share by the claims of target businesses or claims
of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but we cannot
assure you that it will be able to satisfy his indemnification obligations if it is required to do so. Additionally, the agreement
entered into by our sponsor specifically provides for two exceptions to the indemnity it has given: it will have no liability (1)
as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement with us waiving any
right, title, interest or claim of any kind they may have in or to any monies held in the trust account, or (2) as to any claims
for indemnification by the underwriters of this offering against certain liabilities, including liabilities under the Securities
Act. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and we have
not asked our sponsor to reserve for such indemnification obligations. As a result, if we liquidate, the per-share distribution
from the trust account could be less than $10.00 due to claims or potential claims of creditors. We will distribute to all of our
public stockholders, in proportion to their respective equity interests, an aggregate amount then on deposit in the trust account,
including any interest earned on the funds held in the trust account (net of interest that may be used by us to pay our taxes payable
and for dissolution expenses).
We anticipate notifying the
trustee of the trust account to begin liquidating such assets promptly after such date and anticipate it will take no more
than 10 business days to effectuate such distribution. The holders of the founders’ shares and the shares of common
stock underlying the private warrants have waived their rights to participate in any liquidation distribution with respect to
such founders’ shares. There will be no distribution from the trust account with respect to our warrants or rights,
which will expire worthless. We will pay the costs of any subsequent liquidation from our remaining assets outside of
the trust account and the interest earned on the funds held in the trust account that we are permitted to withdraw to pay
such expenses.
If we are unable to complete an initial business combination
and expend all of the net proceeds of this offering, other than the proceeds deposited in the trust account, and without taking
into account interest, if any, earned on the trust account, the initial per-share redemption price would be $10.00. The proceeds
deposited in the trust account could, however, become subject to claims of our creditors that are in preference to the claims of
public stockholders.
Our public stockholders will be entitled to receive funds
from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption
of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated articles of incorporation
(A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business
combination within the required time period or (B) with respect to any other provision relating to stockholders’ rights or
pre-business combination activity, and (iii) the redemption of all of our public shares if we are unable to complete our business
combination within the required time period, subject to applicable law. In no other circumstances will a public stockholder have
any right or interest of any kind to or in the trust account.
The holders of the founders’ shares or shares of common
stock underlying the private warrants will not participate in any redemption distribution from our trust account with respect to
such founders’ shares. Additionally, any loans made by our officers, directors, sponsors or their affiliates for working
capital needs will be forgiven and not repaid if we are unable to complete an initial business combination.
If we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable
bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the
claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able
to return to our public stockholders at least $10.00 per share.
If we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders could be viewed under applicable
debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.”
As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. Furthermore, because we intend
to distribute the proceeds held in the trust account to our public stockholders promptly after twenty-four months from the date
of this prospectus, this may be viewed or interpreted as giving preference to our public stockholders over any potential creditors
with respect to access to or distributions from our assets. Furthermore, our board may be viewed as having breached their fiduciary
duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages,
by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims
will not be brought against us for these reasons.
Amended and Restated Articles of Incorporation
Our
amended and restated articles of incorporation contain certain requirements and restrictions relating to this offering that will
apply to us until the consummation of our initial business combination. These provisions cannot be amended without the approval
of a majority of our stockholders. If we seek to amend any provisions of our amended and restated articles of incorporation that
would stop our public stockholders from converting or selling their shares to us in connection with a business combination or
affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete a business combination
within
12 months from the closing
of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate a business
combination by the full amount of time)
, we will provide dissenting
public stockholders with the opportunity to convert their public shares in connection with any such vote. This redemption right
shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, any executive officer, or director,
or any other person. Our sponsor, initial stockholders, officers and directors, and other holders of our private warrants have
agreed to waive any conversion rights with respect to any founders’ shares, shares of common stock underlying the private
warrants and any public shares they may hold in connection with any vote to amend our amended and restated articles of incorporation.
Specifically, our amended and restated articles of incorporation provide, among other things, that:
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we shall either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein;
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we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination;
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if our initial business combination is not consummated within
12 months from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate a business combination by the full amount of time)
, then we will redeem all of the outstanding public shares and thereafter liquidate and dissolve our company;
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upon the consummation of this offering, $100.0 million, or $115.0 million if the over-allotment option is exercised in full, shall be placed into the trust account;
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we may not consummate any other business combination, merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction prior to our initial business combination; and
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prior to our initial business combination, we may not issue additional stock that participates in any manner in the proceeds of the trust account, or that votes as a class with the common stock sold in this offering on any matter.
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Competition
In identifying, evaluating and selecting a target business,
we may encounter intense competition from other entities having a business objective similar to ours. Many of these entities are
well established and have extensive experience identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively
limited when contrasted with those of many of these competitors. While we believe there may be numerous potential target businesses
that we could acquire with the net proceeds of this offering, our ability to compete in acquiring certain sizable target businesses
may be limited by our available financial resources.
The following also may not be viewed favorably by certain
target businesses:
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our obligation to seek stockholder approval of a business combination or engage in a tender offer may delay the completion of a transaction;
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our obligation to convert or repurchase shares of common stock held by our public stockholders may reduce the resources available to us for a business combination; and
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our
outstanding warrants and rights and the potential future dilution they represent.
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Any of these factors may place us at a competitive disadvantage
in successfully negotiating a business combination. Our management believes, however, that our status as a public entity and potential
access to the United States public equity markets may give us a competitive advantage over privately-held entities having a similar
business objective as ours in acquiring a target business with significant growth potential on favorable terms.
If we succeed in effecting a business combination, there
will be, in all likelihood, intense competition from competitors of the target business. We cannot assure you that, subsequent
to a business combination, we will have the resources or ability to compete effectively.
Facilities
We currently maintain our
principal executive offices at 40 Wall St., 29th floor, New York City, NY 10005 for which we pay a base fee of
approximately $100 per month plus other expenses on an as needed basis for additional office use or administrative services.
We consider our current office space, combined with the other office space otherwise available to our executive
officers, adequate for our current operations.
Employees
We have three executive officers.
These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time
as they deem necessary to our affairs. The amount of time they will devote in any time period will vary based on whether a target
business has been selected for the business combination and the stage of the business combination process the company is in. Accordingly,
once a suitable target business to acquire has been located, management will spend more time investigating such target business
and negotiating and processing the business combination (and consequently spend more time on our affairs) than had been spent
prior to locating a suitable target business. We presently expect our executive officers to devote such amount of time as they
reasonably believe is necessary to our business. We do not intend to have any full time employees prior to the consummation of
a business combination.
Periodic Reporting and Audited Financial Statements
We have registered our
units, common stock, warrants and rights under the Exchange Act and have reporting obligations, including the requirement
that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our
annual report will contain financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements
of the prospective target business as part of any proxy solicitation materials or tender offer documents sent to stockholders to
assist them in assessing the target business. These financial statements will need to be prepared in accordance with or reconciled
to United States generally accepted accounting principles or international financial reporting standards. We cannot assure you
that any particular target business identified by us as a potential acquisition candidate will have the necessary financial statements.
To the extent that this requirement cannot be met, we may not be able to acquire the proposed target business.
We may be required to have our internal
control procedures audited for the fiscal year ending September 30, 2019 as required by the Sarbanes-Oxley Act. A target company
may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development
of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs
necessary to complete any such acquisition.
Comparison to Offerings of Blank Check Companies Subject
to Rule 419
The following table compares and contrasts the terms of our
offering and the terms of an offering of blank check companies under Rule 419 promulgated by the SEC assuming that the gross proceeds,
underwriting discounts and underwriting expenses for the Rule 419 offering are the same as this offering and that the underwriters
will not exercise their over-allotment option. None of the terms of a Rule 419 offering will apply to this offering because we
will have net tangible assets in excess of $5,000,000 upon the successful consummation of this offering and will file a Current
Report on Form 8-K, including an audited balance sheet demonstrating this fact
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Terms of the Offering
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Terms Under a Rule 419 Offering
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Escrow of offering proceeds
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$100,000,000 of the net offering proceeds including the $5,000,000 we will receive from the sale of the private warrants will be deposited into a trust account at Morgan Stanley, N.A. and maintained by American Stock Transfer & Trust Company, acting as trustee.
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$87,750,000 of the offering proceeds would be required to be deposited into either an escrow account with an insured depositary institution or in a separate bank account established by a broker-dealer in which the broker-dealer acts as trustee for persons having the beneficial interests in the account.
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Investment of net proceeds
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The $100,000,000 of net offering proceeds including the $5,000,000 we will receive from the sale of the private warrants held in trust will only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act with 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.
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Proceeds could be invested only in specified securities such as a money market fund meeting conditions of the Investment Company Act or in securities that are direct obligations of, or obligations guaranteed as to principal or interest by, the United States.
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Terms of the Offering
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Terms Under a Rule 419 Offering
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Limitation on fair value or net assets of target business
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So long as we obtain and maintain a listing for our securities on Nasdaq, our initial business combination must occur with one or more target businesses that together have a fair market value of at least 80% of the assets held in the trust account (excluding taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination.
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We would be restricted from acquiring a target business unless the fair value of such business or net assets to be acquired represent at least 80% of the maximum offering proceeds.
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Trading of securities issued
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The
units may commence trading on or promptly after the date of this prospectus. The shares of common stock, warrants and
rights comprising the units will begin to trade separately on the 52
nd
day after the date of this prospectus
unless I-Bankers Securities, Inc. informs us of its decision to allow earlier separate trading, provided we have filed
with the SEC a Current Report on Form 8-K, which includes an audited balance sheet reflecting our receipt of the proceeds
of this offering, including any proceeds we receive from the exercise of the over-allotment option, if such option is
exercised prior to the initial filing of such Current Report on Form 8-K. If the over-allotment option is exercised
after the initial filing of such Current Report on Form 8-K, we will file an amendment to the Form 8-K to provide
updated financial information to reflect the exercise and consummation of the over-allotment option. We will also
include in this Form 8-K, an amendment thereto, or in a subsequent Form 8-K, information indicating if I-Bankers
Securities, Inc. has allowed separate trading of the shares of common stock, warrants and rights prior to the
52
nd
day after the date of this prospectus.
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No trading of the units or the underlying securities would be permitted until the completion of a business combination. During this period, the securities would be held in the escrow or trust account.
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Exercise of the warrants
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The warrants cannot be exercised until the later of 30 days after the completion of a business combination or 12 months from the closing of this offering and, accordingly, will be exercised only after the trust account has been terminated and distributed
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The warrants could be exercised prior to the completion of a business combination, but securities received and cash paid in connection with the exercise would be deposited in the escrow or trust account.
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Terms of the Offering
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Terms Under a Rule 419 Offering
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Election to remain an investor
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We will either (1) give our stockholders the opportunity to vote on the business combination or (2) provide our public stockholders with the opportunity to sell their shares of our common stock to us in a tender offer for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account, less taxes. If we hold a meeting to approve a proposed business combination, we will send each stockholder a proxy statement containing information required by the SEC. Under Nevada law and our bylaws, we must provide at least 10 days and no more than 60 days advance notice of any meeting of stockholders. Accordingly, this is the minimum amount of time we would need to provide holders to determine whether to exercise their rights to convert their shares into cash or to remain an investor in our company. Alternatively, if we do not hold a meeting and instead conduct a tender offer, we will conduct such tender offer in accordance with the tender offer rules of the SEC and file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination as we would have included in a proxy statement. Under the tender offer rules, a tender offer must remain open for 20 business days. Accordingly, this is the minimum amount of time we would need to provide holders to determine whether to sell their shares to us in such a tender offer or to remain an investor in our company.
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A prospectus containing information required by the SEC would be sent to each investor. Each investor would be given the opportunity to notify the company, in writing, within a period of no less than 20 business days and no more than 45 business days from the effective date of the post-effective amendment, to decide whether he or she elects to remain a stockholder of the company or require the return of his or her investment. If the company has not received the notification by the end of the 45
th
business day, funds and interest or dividends, if any, held in the trust or escrow account would automatically be returned to the stockholder. Unless a sufficient number of investors elect to remain investors, all of the deposited funds in the escrow account must be returned to all investors and none of the securities will be issued.
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Terms of the Offering
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Terms Under a Rule 419 Offering
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Business combination deadline
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Pursuant to our amended and restated articles of incorporation, if we are unable to complete our initial business combination within
12 months from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate a business combination by the full amount of time)
, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest earned on the funds held in the trust account (net of interest that may be used by us to pay our taxes payable and for 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Nevada law to provide for claims of creditors and the requirements of other applicable law.
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If an acquisition has not been consummated within 18 months after the effective date of the initial registration statement, funds held in the trust or escrow account would be returned to investors.
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Interest earned on the funds in the trust account
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There can be released to us, from time to time, any interest earned on the funds in the trust account that we may need to pay our tax obligations and for any dissolution expenses. The remaining interest earned on the funds in the trust account will not be released until the earlier of the completion of a business combination and our liquidation upon failure to effect a business combination within the allotted time.
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All interest earned on the funds in the trust account will be held in trust for the benefit of public stockholders until the earlier of the completion of a business combination and our liquidation upon failure to effect a business combination within the allotted time.
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Release of funds
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Except for any amounts that we may need to pay our tax obligations and for dissolution expenses, the proceeds held in the trust account will not be released until the earlier of the completion of a business combination and our liquidation upon failure to effect a business combination within the allotted time.
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The proceeds held in the escrow account would not be released until the earlier of the completion of a business combination or the failure to effect a business combination within the allotted time.
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MANAGEMENT
Directors and Executive Officers
Our current directors and executive officers are as follows:
Name
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Age
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Position
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Kin
Sze
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48
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Co-Chief
Executive Officer, President and Secretary
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Wei
Fan
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32
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Co-Chief
Executive Officer and Director (Class II)
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Weixuan
Luo
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45
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Chief
Financial Officer
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Jing
Chen
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39
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Director
(Class I)
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Man HungWong
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62
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Independent
Director (Class I)
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John
Bode
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44
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Independent
Director (Class I)
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Walter
Cook
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64
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Independent
Director (Class II)
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Di
Chen
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42
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Independent
Director (Class II)
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Kin (Stephen) Sze
,
our Co-Chief Executive Officer, President and Secretary since March 2019, has been serving as a Managing Director at
Zhuhai Zhonghe Sifang Asset Management Limited, a private equity asset management company, since March 2019. Prior to that he
served as an Executive Director at Agricultural Bank of China International, Hong Kong, an investment banking business
flagship of Agricultural Bank of China, one of the largest banks in the world by total assests, from December 2017 to December 2018.
He played an instrumental role in managing the company’s direct investment portfolio. Prior to that, he was a Senior
Manager at China Everbright, (Hong Kong), a China based finance conglomerate with business in banking, securities, insurance,
asset management and direct investment, from April 2006 to November 2017. He was involved in a number of acquisitions in
fintech, TMT, advanced manufacturing, real estate, etc. Mr. Sze received an MBA degree from the University of South Australia
and a bachelor’s degree in Chemical Engineering from the University of Toronto. Mr. Sze is a Chartered Financial
Analyst (“CFA”) Charterholder, Fellow of Institute of Public Accountants and Institute of
Financial Accountants.
Wei (Will) Fan
, our Co-Chief
Executive Officer and director since February 2019, has been a portfolio manager at Alpha Square Group, a private equity firm,
since November 2017. Mr. Fan served as a vice president of portfolio management at Citi Group from September 2016 to October 2017.
He was a senior financial analyst at Cybernaut Investment Group, a private equity firm, in Beijing from July 2014 to August 2016
and an associate at Alliance Bernstein, an investment management and research firm, from June 2012 to June 2014. Mr. Fan received
a Master of Science degree in applied mathematics from Stevens Institute of Technology and a Bachelor of Science degree in applied
mathematics from East China University of Science and Technology. Mr. Fan has been awarded the Chartered Financial Analyst (“CFA”) designation.
Weixuan (Tracy) Luo
,
our Chief Financial Officer since inception, is a founding partner of L&L CPAS, PA, a PCAOB registered public accounting
firm since October 2013. She has also been serving as the President of American Aeolian Travel Inc., a travel agency, since
May 2012. She has been a Senior Manager at Greentree Financial Group Inc. providing financial advisory services to public
companies since May 2003. Ms. Luo has worked with publicly traded companies for over a decade in a broad array of services,
including audits, tax preparation, risk assessment, financial analysis and financial statements preparation. Ms. Luo has also
been engaged as an advisor on over 50 merger and acquisitions transactions for both private and public companies during her
career. Ms. Luo is Certified Public Accountant in North Carolina and Florida and a member of American Institute of CPAs. Ms.
Luo received her Master’s degree in Economics and Finance from the University of North Carolina.
Jing (Vicky) Chen
, our
director since inception, has been serving as a Managing Director and Partner at Guangzhou Boxun Investment Management Co.,
Ltd. since January 2010, primarily working on merger and acquisitions, asset management and financial advisory business in
capital markets in Asia. She was involved in a number of sizable fund raising projects. She has also been serving as a director of Co-op Infinity Asset Management Co., Ltd., a PE fund
management company, since December 2017 and a director of Broad-wise Healthy Industry Investment (Guangzhou) Co., Ltd. since
February 2018. Ms. Chen started her career at Citibank in 2002. She received an MBA degree in finance from University of
Illinois at Chicago and a Bachelor’s degree in economics from Guangdong University of Foreign Studies. We believe Ms.
Chen is well-qualified to serve as a member of the board due to her experience in the financial industry and her
operational and corporate development experience
Man Hung (Patrick) Wong
,
our director since inception, is an expert on foreign-exchange, commodity, stock, bond and global financial market. He has more
than 30 years of investment experience and is one of the most popular financial market commentators in Hong Kong. Prof. Wong has
taught MBA courses in Mainland China, Hong Kong and Macau since 1997, and has written columns in Hong Kong newspapers for more
than 20 years. Mr. Wong is a financial columnist at King Wealth Group Limited since August 2008. He served as Vice Chairman and
Executive Director at Agritrade Resource Limited (HKSE:1131), a company listed on the main board of the Hong Kong Stock Exchange,
from September 2014 to May 2016. He served as the Chief Strategist of Crown One Asset Management Company Limited since April 2010
to December 2015. He also served as the Chairman of Code Agriculture Holdings Limited from April 2008 to August 2014. He is currently
a member of the Chartered Management Institute, the Associate of Cost and Executive Accountants and the Association of Taxation
and Management Accountants. We believe Mr. Wong is well-qualified to serve as a member of the board due to his extensive knowledge
of the financial and investment industry.
John Bode
, our director
since inception, has been serving as the Chief Operating Officer of Readerlink Distribution Services, LLC, since October 1, 2018.
He has also been serving a director of Postmedia Network Canada Corp. since October 2018 and Fision Corporation since March 2018.
Prior to joining us, Mr. Bode owned and operated Aeire Investments, LLC, a strategic consultancy practice focused on working with
companies, ranging from legacy media enterprises to digital start-ups, undertaking major transformation initiatives and transactions
from February 2015 to September 2018. From September 2013 to January 2015, he was the Chief Financial Officer of Tribune Publishing
Company (now Tronc, Inc, (NASDAQ: TRNC)). He started his career as an accountant at BDO Seidman from 1996 to 2002. Mr. Bode received
his Bachelor’s degree in accounting from University of Notre Dame. We believe Mr. Bode is well-qualified to serve as a member
of the board because of his strategic, operations, financial and leadership experience.
Walter R. Cook
, our director
since inception, is a proven executive and expert in the banking and financial Sector with a strong leadership history of commercial
banks and securities firms. He has extensive experience in turnarounds, acquisitions, and start-up financial institutions. Since
August 2016, Mr. Cook has been a Managing Director at Tangent Capital Partners, LLC, an investment bank serving investment advisors
and asset managers, and provided critical expertise in roll out of The Community Development Fund (CDCDX), a CRA-qualified mutual
fund for commercial banks to Dr. Kenneth H. Thomas, CDCDX’s adviser. He was an independent consultant from January 2015 to
July 2016, and an expert witness providing expert opinions and trial testimony on lending and banking practices in Florida State
Court and Federal bankruptcy Court in Boston, Massachusetts from January 2014 to December 2015. Mr. Cook served as the CEO and
the chairman of the board of the Republic Federal Bancorp, Inc. from 2003 to 2010. Mr. Cook received a Master’s degree in
business administration specializing in finance and marketing from Harvard University in 1982, a Master’s degree in law and
diplomacy from Tufts University in 1978 and a Bachelor’s degree in political science & psychology from Duke University.
We believe Mr. Cook is well-qualified to serve as a member of the board due to his extensive knowledge and understanding of financial
and investment industries.
Di (Andy) Chen
, our director
since inception, has over 20 years of extensive experience in the financial industry, 12 years of which has been with the senior
management team. He joined Harvest Global Capital Investments Limited (“HGCI”) in May 2005 and took the current roles
as Managing Director and CEO in May 2016. HGCI is an affiliate of Harvest Global Investments, one of the largest asset management
firms in China with over $121 billion asset under management. Mr. Chen received both his Bachelor’s and Master’s degrees
in finance from Jinan University. We believe Mr. Chen is well-qualified to serve as a member of the board due to his financial
and investment experience and leadership qualities.
Our sponsor, Mr. Shih-Chung
Chou, has over 20 years of experience in the financial and investment industry. He has been serving as the Chief Executive Officer
of Shanghai Kongsheng Industrial Co., Ltd., a real estate development, investment and management company, since February 1997.
He is one of the largest stockholders of National Agricultural Holding Limited, a rural market-based company that integrates financial
services, agricultural product trading, information, industry and science research. From June 2005 to November 2013, he served
as the M&A Department Manager of Qianlong Technology International Holding Limited. From December 1993 to January 1997, he
served as the General Manager of Shanghai Gaosheng Real Estate Development Co., Ltd., a consulting service provider in financial
and real estate investment. There is no relationship between our sponsor and our management.
Involvement in Certain Legal Proceedings
Except as described below, to the best
of our knowledge, none of our directors or executive officers has, during the past ten years:
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been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
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had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
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been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, by any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
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been found by a court of competent jurisdiction in a civil action or by the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
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been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
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been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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Mr. Walter Cook was the CEO and chairman of the board
of Republic Federal Bancorp, Inc. from 2003 to 2010. In 2009, Republic Federal Bancorp, Inc. was placed in receivership by the
Federal Deposit Insurance Corporation.
In August 2017, Ms.
Weixuan Luo was disciplined and fined by the PCAOB due to a violation of Auditing Standard #7 under PCAOB Release No.
105-2017-034, for not observing the two year cooling off period and serving as the engagement review partner before the
period had run on two audit engagements. As a result, she agreed to implement several remedial measures. The disciplinary
action did not require any amendment to the completed audits or question the quality of the audit work completed. She was
fined by the North Carolina Board of Accountancy in connection with the PCAOB order. Also in connection with the PCAOB order,
she was found in violation of section 5100(1) of the California Accountancy Act by the California Board of Accountancy and
referred to the California Attorney General’s Office for review and the Florida Department of Business and Professional
Regulation filed an administrative complaint against her before the Florida Board of Accountancy.
Number and Terms of Office of Officers and Directors
Our board of directors is
divided into two classes with only one class of directors being elected in each year and each class (except for those
directors appointed prior to our first annual meeting of stockholders) serving a two-year term. The term of office of the
first class of directors, consisting of Jing Chen, Man Hung Wong, John Bode, will expire at our first annual meeting of
stockholders. The term of office of the second class of directors, consisting of Wei Fan, Walter R. Cook and Di Chen, will
expire at the second annual meeting of stockholders. We do not currently intend to hold an annual meeting of stockholders
until after we consummate our initial business combination.
Our officers are elected by the
board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board
of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide
that our officers may consist of one or more Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary,
Assistant Secretaries, Treasurer and such other offices as may be determined by the board of directors.
Executive and Director Compensation
We paid Wei Fan, our Co-Chief
Executive Officer monthly fees of $2,000 commencing on February 1, 2019 and Weixuan Luo, our Chief Financial Officer monthly
fees of $5,000 commencing on August 1, 2018. We issued each of Wei Fan and Weixuan Luo 50,000 founder shares. In addition, we
paid each member of our board of directors $2,000 per month for his or her services commencing on August 1, 2018 and will
issue an aggregate of 300,000 shares of common stock to Kin Sze, our Co-Chief Executive Officer, President and Secretary, and
certain members of our board of directors within 10 days following the business combination. They will receive repayment of
any loans from our sponsor, initial stockholders, officers and directors for working capital purposes and reimbursement for
any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying potential target
businesses, performing business due diligence on suitable target businesses and business combinations as well as traveling to
and from the offices, plants or similar locations of prospective target businesses to examine their operations. There is no
limit on the amount of out-of-pocket expenses reimbursable by us.
After our initial business combination, members of our management
team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being
fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials furnished to our stockholders. It
is unlikely the amount of such compensation will be known at the time of a stockholder meeting held to consider an initial business
combination, as it will be up to the directors of the post-combination business to determine executive and director compensation.
In this event, such compensation will be publicly disclosed at the time of its determination in a Current Report on Form 8-K, as
required by the SEC.
Director Independence
Currently Mr. Wong, Mr. Bode, Mr. Cook and Mr. Di Chen would
each be considered an “independent director” under the Nasdaq listing rules, which is defined generally as a person
other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the
opinion of the company’s board of directors would interfere with the director’s exercise of independent judgment in
carrying out the responsibilities of a director.
Our independent directors will have regularly scheduled meetings
at which only independent directors are present.
Any affiliated transactions will be on terms no less favorable
to us than could be obtained from independent parties. Our board of directors will review and approve all affiliated transactions
with any interested director abstaining from such review and approval.
Audit Committee
Effective upon the date of this
prospectus, we will establish an audit committee of the board of directors, which will consist of Walter Cook (Chairman), Man
Hung Wong and John Bode, each of whom is an independent director under Nasdaq’s listing standards. The audit
committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:
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reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;
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discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
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discussing with management major risk assessment and risk management policies;
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monitoring the independence of the independent auditor;
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verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
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reviewing and approving all related-party transactions;
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inquiring and discussing with management our compliance with applicable laws and regulations;
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pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;
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appointing or replacing the independent auditor;
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determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;
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establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and
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approving reimbursement of expenses incurred by our management team in identifying potential target businesses.
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Financial Experts on Audit Committee
The audit committee will at all times be composed exclusively
of “independent directors” who are “financially literate” as defined under Nasdaq’s listing standards.
Nasdaq’s standards define “financially literate” as being able to read and understand fundamental financial statements,
including a company’s balance sheet, income statement and cash flow statement.
In addition, we must certify to Nasdaq that the committee
has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication.
The board of directors has determined that John Bode qualifies as an “audit committee financial expert,” as defined
under rules and regulations of the SEC.
Nominating Committee
Effective upon the date of this prospectus, we will establish
a nominating committee of the board of directors, which will consist of Walter Cook (Chairman) and Di Chen, each of whom is an
independent director under Nasdaq’s listing standards. The nominating committee is responsible for overseeing the selection
of persons to be nominated to serve on our board of directors. The nominating committee considers persons identified by its members,
management, stockholders, investment bankers and others.
Guidelines for Selecting Director Nominees
The guidelines for selecting nominees, which are specified
in the Nominating Committee Charter, generally provide that persons to be nominated:
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should have demonstrated notable or significant achievements in business, education or public service;
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should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and
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should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders.
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The Nominating Committee will consider a number of qualifications
relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy
for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial
or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience
and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among
nominees recommended by stockholders and other persons.
Compensation Committee
Effective upon the date of this
prospectus, we will establish a compensation committee of the board of directors, which will consist of Man Hung Wong and
Walter Cook (Chairman), each of whom is an independent director under Nasdaq’s listing standards. The compensation
committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
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•
|
reviewing
and approving on an annual basis the corporate goals and objectives relevant to our Co-Chief Executive Officers’ compensation,
evaluating our Co-Chief Executive Officers’ performance in light of such goals and objectives and determining and approving
the remuneration (if any) of our Co-Chief Executive Officers based on such evaluation;
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|
•
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reviewing and approving the compensation of all of our other executive officers;
|
|
•
|
reviewing our executive compensation policies and plans;
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|
•
|
implementing and administering our incentive compensation equity-based remuneration plans;
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|
•
|
assisting management in complying with our proxy statement and annual report disclosure requirements;
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|
•
|
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
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|
•
|
if required, producing a report on executive compensation to be included in our annual proxy statement; and
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|
•
|
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
|
Code of Ethics
Effective upon consummation of this offering, we will adopt
a code of ethics that applies to all of our executive officers, directors and employees. The code of ethics codifies the business
and ethical principles that govern all aspects of our business.
Conflicts of Interest
Investors should be aware of the following potential conflicts
of interest:
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•
|
None of our officers and directors is required to commit their full time to our affairs and, accordingly, they may have conflicts of interest in allocating their time among various business activities.
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|
•
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In the course of their other business activities, our sponsor, officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to our company as well as the other entities with which they are affiliated. However, our officers and directors have agreed to present to us all suitable target business opportunities, subject to any fiduciary or contractual obligations.
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|
•
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Unless we consummate our initial business combination, our officers, directors and sponsor will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account.
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|
•
|
The founders’ shares beneficially owned by our officers and directors will be released from escrow only if a business combination is successfully completed, and the private warrants, including the underlying shares of common stock and private warrants, purchased by our sponsor will expire worthless if a business combination is not consummated. Additionally, our officers and directors will not receive liquidation distributions with respect to any of their founders’ shares or the shares of common stock underlying the private warrants. Furthermore, our sponsor has agreed that the private warrants, and all of their underlying securities, will not be sold or transferred by it until after we have completed a business combination. For the foregoing reasons, our board may have a conflict of interest in determining whether a particular target business is appropriate to effect a business combination with.
|
In general, officers and directors of a corporation incorporated
under the laws of the State of Nevada are not required to present business opportunities to a corporation. (NRS 78.138(7). However,
the law in many other states is that directors and officers are required to present a corporate opportunity if:
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•
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the corporation could financially undertake the opportunity;
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|
•
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the opportunity is within the corporation’s line of business; and
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|
•
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it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation.
|
Accordingly, as a result of multiple business affiliations,
our officers and directors may have legal obligations relating to presenting business opportunities meeting the above-listed criteria
to multiple entities. In addition, conflicts of interest may arise when our board evaluates a particular business opportunity with
respect to the above-listed criteria. We cannot assure you that any of the above mentioned conflicts will be resolved in our favor.
In order to minimize potential conflicts of interest which
may arise from multiple corporate affiliations, each of our officers and directors has contractually agreed, pursuant to a written
agreement with us, until the earliest of our execution of a definitive agreement for a business combination, our liquidation or
such time as he ceases to be an officer or director, to present to our company for our consideration, prior to presentation to
any other entity, any suitable business opportunity which may reasonably be required to be presented to us, subject to any fiduciary
or contractual obligations he might have. Accordingly, our amended and restated articles of incorporation will provide that the
doctrine of corporate opportunity will not apply with respect to any of our executive officers or directors in circumstances where
the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have.
Below is a table summarizing the entities to which our executive
officers and directors currently have fiduciary duties or contractual obligations:
Individual
|
|
Entity
|
|
Entity’s
Business
|
|
Affiliation
|
Kin Sze
|
|
Zhuhai Zhonghe Sifang Asset Management Limited
|
|
Private equity asset management company
|
|
Managing Director
|
|
|
|
|
|
|
|
Wei
Fan
|
|
Alpha
Square Group
|
|
Private
Equity Firm
|
|
Portfolio
Manager
|
|
|
|
|
|
|
|
Weixuan
Luo
|
|
L&L
CPAs PA
|
|
Auditing
|
|
President
|
|
|
Conceptual
Consulting Inc.
|
|
Accounting
|
|
President
|
|
|
American
Aeolian Travel Inc.
|
|
Travel
Agency
|
|
President
|
|
|
Greentree
Financial Group Inc.
|
|
Financing
and financial advisory services
|
|
Senior
Manager
|
|
|
|
|
|
|
|
Jing
Chen
|
|
Guangzhou
Boxun Investment Management Co., Ltd
|
|
M&A,
asset management and financial advisory business
|
|
Managing
Director and Partner
|
|
|
Co-op
Infinity Asset Management Co., Ltd.
|
|
Private
equity fund management
|
|
Director
|
|
|
Broad-wise
Healthy Industry Investment (Guangzhou) Co. Ltd
|
|
Investment
Management
|
|
Director
|
|
|
|
|
|
|
|
Man
Hung Wong
|
|
King
Wealth Group Limited
|
|
Web-based
portal for financial news/comment
|
|
Financial
Commentator, Principal & Director
|
John
Bode
|
|
Readerlink
Distribution Services
|
|
book
distributor
|
|
Chief
Operating Officer
|
|
|
|
|
|
|
|
Walter
Cook
|
|
Tangent
Capital Partners, LLC
|
|
Investment
bank serving investment advisors and asset managers
|
|
Managing
Director
|
|
|
|
|
|
|
|
Di
Chen
|
|
Harvest
Global Capital Investments Limited
|
|
Institutional
asset manager
|
|
Chief
Executive Officer
|
If we submit our initial business combination to our public
stockholders for a vote, our sponsor, as well as all of our officers and directors, have agreed to vote any shares held by them
in favor of our initial business combination. In addition, they have agreed to waive their respective rights to participate in
any liquidation distribution with respect to their founders’ shares or shares underlying the private warrants. If they purchase
shares of common stock as part of this offering or in the open market, however, they would be entitled to participate in any liquidation
distribution in respect of such shares but have agreed not to convert or sell such shares to us in connection with the consummation
of an initial business combination.
All ongoing and future transactions between us and any of
our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are
available from unaffiliated third parties. Such transactions will require prior approval by a majority of our uninterested “independent”
directors or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense,
to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested “independent”
directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with
respect to such a transaction from unaffiliated third parties.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the
beneficial ownership of our shares of common stock as of the date of this prospectus and as adjusted to reflect the sale of our
shares of common stock included in the units offered by this prospectus (assuming none of the individuals listed purchase units
in this offering), by:
|
•
|
each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
|
|
•
|
each of our officers and directors; and
|
|
•
|
all of our officers and directors as a group.
|
Unless otherwise indicated, we believe
that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially
owned by them. The following table does not reflect beneficial ownership of the warrants or rights included in the units offered
by this prospectus or the private warrants included in the private placement as these warrants are not exercisable and these rights
are not convertible within 60 days of the date of this prospectus.
|
|
Prior to Offering
|
|
|
After Offering
(3)
|
|
Name and Address of Beneficial
Owner
(1)
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
|
Approximate
Percentage of
Outstanding
Shares of
Common Stock
(2)
|
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
|
Approximate
Percentage of
Outstanding
Shares of Common Stock
(3)
|
|
Wei
Fan
|
|
|
50,000
|
|
|
|
1.7
|
%
|
|
|
50,000
|
|
|
|
|
*
|
Kin
Sze
|
|
|
—
|
|
|
|
—
|
|
|
|
—
(4)
|
|
|
|
—
|
|
Weixuan
Luo
|
|
|
237,500
|
|
|
|
8.3
|
%
|
|
|
237,500
|
|
|
|
1.9
|
%
|
Jing
Chen
|
|
|
—
|
|
|
|
—
|
|
|
|
—
(5)
|
|
|
|
—
|
|
Man
Hung Wong
|
|
|
—
|
|
|
|
—
|
|
|
|
—
(6)
|
|
|
|
—
|
|
John
Bode
|
|
|
—
|
|
|
|
—
|
|
|
|
—
(6)
|
|
|
|
—
|
|
Walter
Cook
|
|
|
—
|
|
|
|
—
|
|
|
|
—
(4)
|
|
|
|
—
|
|
Di
Chen
|
|
|
—
|
|
|
|
—
|
|
|
|
—
(4)
|
|
|
|
—
|
|
All
directors and executive officers as a group (8 individuals)
|
|
|
287,500
|
|
|
|
10.0
|
%
|
|
|
287,500
|
|
|
|
2.3
|
%
|
Shih-Chung
Chou
|
|
431,250
|
|
|
|
|
15.0
|
%
|
|
56,250
|
|
|
|
*
|
Jia
Li
|
|
316,250
|
|
|
|
|
11.0
|
%
|
|
316,250
|
|
|
2.5
|
%
|
Yuanjing
Fan
|
|
927,500
|
|
|
|
|
32.3
|
%
|
|
927,500
|
|
|
7.4
|
%
|
Mike
Bongiovanni
|
|
375,000
|
|
|
|
|
13.0
|
%
|
|
375,000
|
|
|
3.0
|
%
|
Robert
C. Cottone
|
|
375,000
|
|
|
|
|
13.0
|
%
|
|
375,000
|
|
|
3.0
|
%
|
MGA
Holdings, LLC
|
|
81,250
|
|
|
|
|
2.83
|
%
|
|
81,250
|
|
|
|
*
|
Celtic
Asset & Equity Partners Ltd.
|
|
81,250
|
|
|
|
|
2.83
|
%
|
|
81,250
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Less than 1%
|
|
|
(1)
|
Unless otherwise indicated,
the business address of each of the individuals is 40 Wall St., 29th floor, New York City, NY 10005.
|
|
|
(2)
|
Based on 2,875,000
shares of common stock issued and outstanding.
|
|
|
|
|
(3)
|
Assumes
no exercise of the over-allotment option and, therefore, the forfeiture of an aggregate of 375,000 shares of common stock
held by our sponsor.
|
|
|
(4)
|
Excludes
50,000 shares of common stock to be issued within 10 days of the consummation of our business combination.
|
|
|
(5)
|
Excludes 100,000
shares of common stock to be issued within 10 days of the consummation of our business combination.
|
|
|
(6)
|
Excludes 25,000
shares of common stock to be issued within 10 days of the consummation of our business combination.
|
Immediately after this offering,
our founders will beneficially own 20% of the then issued and outstanding shares of common stock (assuming they do not purchase
any units offered by this prospectus but including the shares of common stock underlying the private warrants). None of our sponsor,
initial stockholders, officers and directors has indicated to us that it or they intend to purchase our securities in the offering.
Because of the ownership block held by our sponsor (and our officers and directors through their ownership of membership interests
of the sponsor), our sponsor and such individuals may be able to effectively exercise influence over all matters requiring approval
by our stockholders, including the election of directors and approval of significant corporate transactions other than approval
of our initial business combination.
If the underwriters do not exercise
all or a portion of the over-allotment option, an aggregate of 375,000 founders’ shares held by the sponsor will be forfeited.
Only a number of shares necessary to maintain the collective 20% ownership interest in our shares of common stock after giving
effect to the offering (not including the shares of common stock underlying the private warrants) and the exercise, if any, of
the underwriters’ over-allotment option will be necessary.
All of the founders’ shares outstanding prior to the
date of this prospectus will be placed in escrow with American Stock Transfer & Trust Company, as escrow agent.
50% of these shares will not be
transferred, assigned, sold or released from escrow until the earlier of (i) six months after the date of the consummation of
our initial business combination or (ii) the date on which the closing price of our common stock equals or exceeds $12.50 per
share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any
30-trading day period commencing after our initial business combination and the remaining 50% of the founder shares may not be
transferred, assigned or sold until six months after the date of the consummation of our initial business combination, or earlier,
in either case, if, subsequent to our initial business combination, we consummate a subsequent liquidation, merger, stock exchange
or other similar transaction which results in all of our stockholders having the right to exchange their common stock for cash,
securities or other property. Up to 375,000 of the founders’ shares held by the sponsor may also be released from
escrow earlier than this date for cancellation if the over-allotment option is not exercised in full as described above. All of
the founders’ shares may be released from escrow earlier than as described above if within that time period, we consummate
a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having
the right to exchange their shares of common stock for cash, securities or other property.
During the escrow period, the holders of these shares will
not be able to sell or transfer their securities except for transfers, assignments or sales (i) to our officers, directors, employees,
consultants, advisors or their affiliates, (ii) to an entity’s officers, directors, employees or members, (iii) to relatives
and trusts for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified
domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial business
combination, or (vii) by private sales made at or prior to the consummation of a business combination at prices no greater than
the price at which the shares were originally purchased, in each case (except for clause (vi) or with our prior consent) where
the transferee agrees to the terms of the escrow agreement and to be bound by these transfer restrictions and other agreements
of our initial stockholders as set forth herein, but will retain all other rights as our stockholders, including, without limitation,
the right to vote their shares of common stock and the right to receive cash dividends, if declared. If dividends are declared
and payable in shares of common stock, such dividends will also be placed in escrow. If we are unable to effect a business combination
and liquidate, there will be no liquidation distribution with respect to the founders’ shares.
Our sponsor has committed to purchase from us an aggregate
of 5,000,000 private warrants at $1.00 per warrant (for a total purchase price of $5,000,000) in a private placement that will
close simultaneously with the closing of this offering. Our sponsor has also agreed that if the over-allotment option is exercised
by the underwriters in full or in part, it will purchase from us additional private warrants (up to a maximum of 375,000 private
warrants) at a price of $1.00 per private warrant in an amount that is necessary to maintain in the trust account at $10.00 per
unit sold to the public in this offering. These additional private warrants will be purchased in a private placement that will
occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The private warrants
are identical to the warrants underlying the units sold in this offering except that the private warrants: (i) will not be redeemable
by us and (ii) may be exercised for cash or on a cashless basis, as described in this prospectus, so long as they are held by our
sponsor or any of its permitted transferees. If the private warrants are held by holders other than our sponsor or any of its permitted
transferees, the private warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included
in the units being sold in this offering. Our sponsor has agreed not to transfer, assign or sell any of the private warrants or
the common stock issuable upon exercise of the private warrants (except in connection with the same limited exceptions that the
founders’ shares may be transferred as described above), until after the completion of our initial business combination.
In order to meet our working capital
needs following the consummation of this offering, our sponsor, initial stockholders, officers and directors may, but are not
obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion.
Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination,
without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of
$1.00 per warrant. The warrants would be identical to the private warrants. If we do not complete a business combination, the
loans will be forgiven.
Our executive officers and initial stockholders may
be deemed to be our “promoters,” “founders” or “organizers”.
CERTAIN TRANSACTIONS
In September 2018, we issued 2,875,000
shares of common stock to our initial stockholders for an aggregate of $555,000 in cash, at a purchase price of approximately
$0.20 per share, in connection with our organization. If the underwriters do not exercise all or a portion of their over-allotment
option, our sponsor will forfeit up to an aggregate of 375,000 shares of common stock in proportion to the portion of the over-allotment
option that was not exercised.
If the underwriters determine the size of the offering should
be increased (including pursuant to Rule 462(b) under the Securities Act) or decreased, a share dividend or a contribution back
to capital, as applicable, would be effectuated in order to maintain our initial stockholders’ ownership at a percentage
of the number of shares to be sold in this offering.
Our sponsor has committed to purchase from us an aggregate
of 5,000,000 private warrants at $1.00 per warrant (for a total purchase price of $5,000,000) in a private placement that will
close simultaneously with the closing of this offering. Our sponsor has also agreed that if the over-allotment option is exercised
by the underwriters in full or in part, it will purchase from us additional private warrants (up to a maximum of 375,000 private
warrants) at a price of $1.00 per private warrant in an amount that is necessary to maintain in the trust account at $10.00 per
unit sold to the public in this offering. These additional private warrants will be purchased in a private placement that will
occur simultaneously with the purchase of units resulting from the exercise of the over-allotment option. We believe the purchase
price of the private warrants is greater than the fair value of such units and therefore will not result in any share-based compensation
expense. The private warrants are identical to the warrants underlying the units sold in this offering except that the underlying
private warrants: (i) will not be redeemable by us and (ii) may be exercised for cash or on a cashless basis, as described in this
prospectus, so long as they are held our sponsor or any of its permitted transferees, the private warrants will be redeemable by
us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. Our sponsor
has agreed not to transfer, assign or sell any of the private warrants or the common stock issuable upon exercise of the private
warrants (except to certain permitted transferees), until after the completion of our initial business combination.
In order to meet our working capital
needs following the consummation of this offering, our sponsor, initial stockholders, officers and directors may, but are not
obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion.
Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination,
without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into units at a price of $1.00
per warrant. The warrants would be identical to the private warrants. If we do not complete a business combination, the loans
will be forgiven.
The holders of our founders’
shares issued and outstanding on the date of this prospectus, as well as the holders of the private warrants and any warrants
our sponsor, initial stockholders, officers, directors or their affiliates may be issued in payment of working capital loans made
to us (and all underlying securities), will be entitled to registration rights pursuant to an agreement to be signed prior to
or on the effective date of this offering. The holders of a majority of these securities are entitled to make up to three demands
that we register such securities. The holders of the majority of the founders’ shares can elect to exercise these registration
rights at any time following the consummation of our initial business transaction. The holders of a majority of the private warrants
or warrants issued in payment of working capital loans made to us (or underlying securities) can elect to exercise these registration
rights at any time after we consummate a business combination. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We
will bear the expenses incurred in connection with the filing of any such registration statements.
Other
than the monthly fees payable and equity awards to our officers and directors for their services to us as described
elsewhere in this prospectus, no compensation or fees of any kind, including finder’s, consulting fees and other
similar fees, will be paid to our sponsor, members of our management team or their respective affiliates, for services
rendered prior to or in connection with the consummation of our initial business combination (regardless of the type of
transaction that it is).
We paid Wei Fan, our Co-Chief
Executive Officer monthly fees of $2,000 commencing on February 1, 2019 and Weixuan Luo, our Chief Financial Officer monthly
fees of $5,000 commencing on August 1, 2018. We issued each of Wei Fan and Weixuan Luo 50,000 founder shares. In addition, we
paid each member of our board of directors $2,000 per month for his or her services commencing on August 1, 2018 and will
issue a total of 300,000 shares of common stock to Kin Sze, our Co-Chief Executive Officer, President and Secretary, and
certain members of our board of directors within 10 days following the business combination.
Our
sponsor, executive officers and directors, or any of their respective affiliates,
will
receive the repayment of any loans from our sponsor, initial stockholders, officers and directors for working capital purposes
and reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying
potential target businesses, performing business due diligence on suitable target businesses and business combinations as well
as traveling to and from the offices, plants or similar locations of prospective target businesses to examine their operations.
There is no limit on the amount of out-of-pocket expenses reimbursable by us.
After our initial business combination, members of our management
team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being
fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials furnished to our stockholders. It
is unlikely the amount of such compensation will be known at the time of a stockholder meeting held to consider an initial business
combination, as it will be up to the directors of the post-combination business to determine executive and director compensation.
In this event, such compensation will be publicly disclosed at the time of its determination in a Current Report on Form 8-K, as
required by the SEC.
All ongoing and future transactions between us and any of
our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are
available from unaffiliated third parties. Such transactions will require prior approval by a majority of our uninterested “independent”
directors or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense,
to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested “independent”
directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with
respect to such a transaction from unaffiliated third parties.
Related Party Policy
Our Code of Ethics requires us to avoid, wherever possible,
all related party transactions that could result in actual or potential conflicts of interests, except under guidelines approved
by the board of directors (or the audit committee). Related-party transactions are defined as transactions in which (1) the aggregate
amount involved will or may be expected to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant,
and (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our
shares of common stock, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct
or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another
entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to
perform his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her
family, receives improper personal benefits as a result of his or her position.
Our audit committee, pursuant to its written charter, will
be responsible for reviewing and approving related-party transactions to the extent we enter into such transactions. The audit
committee will consider all relevant factors when determining whether to approve a related party transaction, including whether
the related party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third-party
under the same or similar circumstances and the extent of the related party’s interest in the transaction. No director may
participate in the approval of any transaction in which he is a related party, but that director is required to provide the audit
committee with all material information concerning the transaction. We also require each of our directors and executive officers
to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such
related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director,
employee or officer.
To further minimize conflicts of interest,
we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers
or directors unless we have obtained an opinion from an independent investment banking firm, or another independent entity that
commonly renders valuation opinions on the type of target business we are seeking to acquire, and the approval of a majority of
our disinterested independent directors that the business combination is fair to our unaffiliated stockholders from a financial
point of view. Our stockholders may not be provided with a copy of such opinion and they may not be able to rely on such opinion.
DESCRIPTION OF SECURITIES
General
As of the date of this prospectus, we
are authorized to issue 150,000,000 shares of common stock, par value $0.001, and 1,000,000 shares of preferred stock, par value
$0.001. As of the date of this prospectus, 2,875,000 shares of common stock are outstanding. No shares of preferred stock are outstanding.
The following description summarizes the material terms of our securities. Because it is only a summary, it may not contain all
the information that is important to you. For a complete description you should refer to our amended and restated articles of incorporation,
bylaws and the forms of warrant agreement and rights agreement, which are filed as exhibits to the registration statement of which
this prospectus is a part, and to the applicable provisions of Nevada law.
Units
Each unit consists of one share of common
stock, one warrant and one right. Each warrant entitles the holder to purchase one share of common stock. Each right entitles the
holder thereof to receive one-tenth (1/10) of one share of common stock upon consummation of our initial business combination.
We will not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to
the nearest whole share or otherwise addressed in accordance with the applicable provisions of Nevada law. As a result, you must
hold rights in multiples of 10 in order to receive shares for all of your rights upon closing of a business combination.
The shares of common stock, warrants
and rights will begin to trade separately on the 52
nd
day after the date of this prospectus unless I-Bankers Securities,
Inc. informs us of its decision to allow earlier separate trading, provided that in no event may the shares of common stock, warrants
and rights be traded separately until we have filed with the SEC a Current Report on Form 8-K which includes an audited balance
sheet reflecting our receipt of the gross proceeds of this offering. Once the shares of common stock, warrants and rights commence
separate trading, holders will have the option to continue to hold units or separate their units into the component pieces.
We will file a Current Report on Form
8-K which includes an audited balance sheet promptly upon the consummation of this offering. The audited balance sheet will reflect
proceeds we receive from the exercise of the over-allotment option, if the over-allotment option is exercised on the date of this
prospectus. If the over-allotment option is exercised after the date of this prospectus, we will file an amendment to the Form
8-K to provide updated financial information to reflect the exercise of the over-allotment option. We will also include in this
Form 8-K, an amendment thereto, or in a subsequent Form 8-K information indicating if I-Bankers Securities, Inc. has allowed separate
trading of the shares of common stock, warrants and rights prior to the 52
nd
day after the date of this prospectus.
Common Stock
Our stockholders of record are entitled to one vote for each
share held on all matters to be voted on by stockholders. In connection with any vote held to approve our initial business combination,
our sponsor, as well as all of our officers and directors and initial stockholders, have agreed to vote their respective shares
of common stock owned by them immediately prior to this offering, and any shares purchased in this offering or following this offering
in the open market in favor of the proposed business combination.
We will consummate our initial business combination only
if we have net tangible assets of at least $5,000,001 upon such consummation and, solely if a vote is held to approve a business
combination, a majority of the outstanding shares of common stock voted are voted in favor of the business combination.
Our board of directors will be divided into two classes,
each of which will generally serve for a term of two years with only one class of directors being elected in each year. There is
no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares
eligible to vote for the election of directors can elect all of the directors.
Pursuant to our amended and restated articles of incorporation,
if we do not consummate an initial business combination by
12 months
from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate
a business combination by the full amount of time)
, our corporate existence will cease except for the purposes of winding
up our affairs and liquidating. If we are forced to liquidate prior to an initial business combination, our public stockholders
are entitled to share ratably in the trust account, based on the amount then held in the trust account, which redemption will completely
extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions,
if any). Our initial stockholders have agreed to waive their rights to participate in any liquidation distribution occurring upon
our failure to consummate an initial business combination with respect to the founder’s common stock. Our initial stockholders
will therefore not participate in any liquidation distribution with respect to such shares. They will, however, participate in
any liquidation distribution with respect to any shares of common stock acquired in connection with or following this offering
but not with respect to any shares of common stock underlying the private warrants.
Our stockholders have no conversion,
preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the shares of common
stock, except that public stockholders have the right to sell their shares to us in a tender offer or have their shares of common
stock converted to cash equal to their pro rata share of the trust account if they vote on the proposed business combination in
connection with such business combination and the business combination is completed. Public stockholders who sell or convert their
stock into their share of the trust account still have the right to exercise the warrants and the right to receive common stock
upon conversion of the rights that they received as part of the units.
Founders’ Shares
The
holders of the founders’ shares have agreed (i) that the founders’ shares are subject to certain transfer restrictions,
as described in more detail below, (ii) (A) to waive their redemption rights with respect to the founders’ shares and public
shares in connection with the completion of our business combination and (B) to waive their rights to liquidating distributions
from the trust account with respect to the founders’ shares and the shares of common stock underlying the private warrants
if we fail to complete our business combination within
12 months
from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate
a business combination by the full amount of time)
, although our
initial stockholders (or any of our executive officers, directors or affiliates) will be entitled to liquidating distributions
from the trust account with respect to any public shares acquired if we fail to complete our initial business combination within
the allotted 18-month time period and (iii) to vote any founder shares or private placement shares held by them and any public
shares purchased during or after this offering (including in open market and privately negotiated transactions) in favor of our
initial business combination. If we submit our initial business combination to our public stockholders for a vote, we will complete
our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the
initial business combination. As a result, we would need only 3,710,001, or approximately 37.1%, of the 10,000,000 public shares
sold in this offering to be voted in favor of a transaction in order to have our initial business combination approved (assuming
(i) the over-allotment option is not exercised, (ii) all shares were present and entitled to vote at the meeting
and
(iii) that the 80,000 shares to be issued to the representative of the underwriters
are issued
and outstanding and are voted in favor of the business combination
).
Permitted transferees of our sponsor will be subject to the same obligations of such purchasers.
Subject to certain limited exceptions,
50% of their founders’ shares will not be transferred, assigned or sold until the earlier of (i) six months after the date
of the consummation of our initial business combination or (ii) the date on which the closing price of our common stock equals
or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20
trading days within any 30-trading day period commencing after our initial business combination and the remaining 50% of the founder
shares may not be transferred, assigned or sold until six months after the date of the consummation of our initial business combination,
or earlier, in either case, if, subsequent to our initial business combination, we consummate a subsequent liquidation, merger,
stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their common
stock for cash, securities or other property.
Preferred Stock
There are no shares of preferred stock outstanding. Our amended
and restated articles of incorporation authorizes the issuance of 1,000,000 shares of preferred stock with such designation, rights
and preferences as may be determined from time to time by our board of directors. No shares of preferred stock are being issued
or registered in this offering. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights
of the holders of common stock. However, the underwriting agreement prohibits us, prior to a business combination, from issuing
preferred stock which participates in any manner in the proceeds of the trust account, or which votes as a class with the common
stock on a business combination. We may issue some or all of the preferred stock to effect a business combination. In addition,
the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we
do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
Redeemable Warrants
No warrants are currently outstanding. Each warrant entitles
the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as discussed
below, at any time commencing on the later of 30 days after the completion of an initial business combination or 12 months from
the closing of this offering. No warrants will be exercisable for cash unless we have an effective and current registration statement
covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of
common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise
of the public warrants is not effective within a specified period following the consummation of our initial business combination,
warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed
to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section
3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available,
holders will not be able to exercise their warrants on a cashless basis. In such event, each holder would pay the exercise price
by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product
of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the
warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value”
for this purpose will mean the average reported last sale price of the shares of common stock for the 5 trading days ending on
the trading day prior to the date of exercise. The warrants will expire on the fifth anniversary of our completion of an initial
business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The private warrants, the warrants
issued to the representative of the underwriters, as well as any warrants we issue to our sponsor, initial stockholders, officers,
directors or their affiliates in payment of working capital loans made to us, will be identical to the warrants underlying the
units being offered by this prospectus except that such warrants will be exercisable for cash or on a cashless basis, at the holder’s
option, and will not be redeemable by us, in each case so long as they are still held by our sponsor, other purchasers of our
private warrants, or their affiliates. Such warrants may not be sold or transferred until after we have completed a business combination.
We may call the warrants for redemption
(excluding the private warrants, the warrants issued to the representative of the underwriters and any warrants underlying units
issued to our sponsor, initial stockholders, officers or directors in payment of working capital loans made to us), in whole and
not in part, at a price of $0.01 per warrant,
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at any time during the exercise period,
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upon not less than 30 days’ prior written notice of redemption to each warrant holder,
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if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period ending on the third business day prior to the notice of redemption to warrant holders; and
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if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.
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The right to exercise will be forfeited unless the warrants
are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant
will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.
The redemption criteria for our warrants have been established
at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient
differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result
of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
If we call the warrants for redemption
as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of
common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the
warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined
below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the
shares of common stock for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption
is sent to the holders of warrants.
In addition, if (x) we issue additional shares of common stock or equity-linked securities
for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less
than $9.20 per share (with such issue price or effective issue price to be determined in good faith by our board of directors
and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any founder shares held by
our sponsor or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent
more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination
on the date of the consummation of our initial business combination (net of redemptions), and (z) the Market Value is below $9.20
per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the
Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to
the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The warrants will be issued in registered form under a warrant
agreement between American 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 written consent or vote, of the holders of at least 50% of the then outstanding warrants in order
to make any change that adversely affects the interests of the registered holders.
The exercise price and number of shares of common stock issuable
on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
dividend or our recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances
of shares of common stock at a price below their respective exercise prices.
The warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side
of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified
or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or
privileges of holders of shares of common stock and any voting rights until they exercise their warrants and receive shares of
common stock. After the issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote
for each share held of record on all matters to be voted on by stockholders.
Under the terms of the warrant agreement, we have agreed
to use our best efforts to have declared effective a prospectus relating to the shares of common stock issuable upon exercise of
the warrants as promptly as practicable and keep such prospectus current until the expiration of the warrants. However, we cannot
assure you that we will be able to do so and, if we do not maintain a current prospectus relating to the shares of common stock
issuable upon exercise of the warrants, holders will be unable to exercise their warrants for cash and we will not be required
to net cash settle or cash settle the warrant exercise.
Warrant holders may elect to be subject to a restriction
on the exercise of their warrants such that an electing warrant holder would not be able to exercise their warrants to the extent
that, after giving effect to such exercise, such holder would beneficially own in excess of 9.8% of the shares of common stock
outstanding.
No fractional shares will be issued upon exercise of the
warrants. If, by reason of any adjustment made pursuant to the warrant agreement, upon exercise of the warrants, a holder would
be entitled to receive a fractional interest in a share, we will, upon exercise, round up to the nearest whole number the number
of shares of common stock to be issued to the warrant holder.
Rights
Except in cases where we are not
the surviving company in a business combination, each holder of a right will automatically receive one-tenth (1/10) of one share
of common stock upon consummation of our initial business combination, even if the holder of a public right converted all common
stock held by him, her or it in connection with the initial business combination or an amendment to our Articles of Incorporation
with respect to our pre-business combination activities. In the event we will not be the surviving company upon completion of our
initial business combination, each holder of a right will be required to affirmatively convert his, her or its rights in order
to receive the one-tenth (1/10) of a share underlying each right upon consummation of the business combination. No additional consideration
will be required to be paid by a holder of rights in order to receive his, her or its additional common stock upon consummation
of an initial business combination. The shares issuable upon exchange of the rights will be freely tradable (except to the extent
held by affiliates of ours). If we enter into a definitive agreement for a business combination in which we will not be the surviving
entity, the definitive agreement will provide for the holders of rights to receive the same per share consideration the holders
of common stock will receive in the transaction on an as-converted into common stock basis. We will not issue fractional shares
in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise
addressed in accordance with the applicable provisions of Nevada law. As a result, you must hold rights in multiples of 10 in order
to receive shares for all of your rights upon closing of a business combination. If we are unable to complete an initial business
combination within the required time period and we liquidate the funds held in the trust account, holders of rights will not receive
any of such funds with respect to their rights, nor will they receive any distribution from our assets held outside of the trust
account with respect to such rights, and the rights will expire worthless. Further, there are no contractual penalties for failure
to deliver securities to the holders of the rights upon consummation of an initial business combination. Accordingly, the rights
may expire worthless.
Warrants
We have agreed to issue to I-Bankers Securities, Inc. (and/or
its designees) a warrant to purchase up to 800,000 common stock (or 920,000 common stock if the underwriters’ over-allotment
option is exercised in full) at $12.00 per share. Except as described above, the warrants are identical to those underlying the
units offered by this prospectus. See “Underwriting.”
Dividends
We have not paid any cash dividends on our shares of common
stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends
in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent
to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion
of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in
our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.
Our Transfer Agent, Warrant
Agent and Rights Agent
The transfer agent for our securities,
warrant agent for our warrants and rights agent for our rights is American Stock Transfer & Trust Company, 6201 15th Ave, Brooklyn,
NY 11219.
Listing of our Securities
Our units, common stock,
warrants and rights have been approved for listing on Nasdaq under the symbols “PAACU,” “PAAC,”
“PAACW” and “PAACR,” respectively. Following the date the shares of our common stock, warrants and
rights are eligible to trade separately, we anticipate that the shares of our common stock, warrants and rights will be
listed separately on Nasdaq. Once the shares of common stock, warrants and rights commence separate trading, holders
will have the option to continue to hold units or separate their units into the component pieces.
Certain Anti-Takeover Provisions of Nevada Law and our
Amended and Restated Articles of Incorporation and By-Laws
Staggered board of directors
Our amended and restated articles of incorporation provide
that our board of directors will be classified into two classes of directors of approximately equal size. As a result, in most
circumstances, a person can gain control of our board only by successfully engaging in a proxy contest at two or more annual meetings.
Furthermore, because our board is classified, directors may be removed only with cause by a majority of our outstanding shares.
Special meeting of stockholders
Our bylaws provide that special
meetings of our stockholders may be called only by a majority vote of our board of directors, by either of our Co-Chief Executive
Officers or by our Chairman.
Advance notice requirements for stockholder proposals
and director nominations
Our bylaws provide that stockholders seeking to bring business
before our annual meeting of stockholders, or to nominate candidates for election as directors at our annual meeting of stockholders,
must provide timely notice of their intent in writing. To be timely, a stockholder’s notice will need to be received by the
company secretary at our principal executive offices not later than the close of business on the 90
th
day nor earlier
than the open of business on the 120
th
day prior to the anniversary date of the immediately preceding annual meeting
of stockholders. Pursuant to Rule 14a-8 of the Exchange Act, proposals seeking inclusion in our annual proxy statement must comply
with the notice periods contained therein. Our bylaws also specify certain requirements as to the form and content of a stockholders’
meeting. These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from
making nominations for directors at our annual meeting of stockholders.
Authorized but unissued shares
Our authorized but unissued common stock and preferred stock
are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including
future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued
and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by
means of a proxy contest, tender offer, merger or otherwise.
Exclusive Forum Selection
Our amended and restated articles
of incorporation require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against
directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Clark County
Business Court in the State of Nevada and, if brought outside of Nevada, the stockholder bringing the suit will be deemed to have
consented to service of process on such stockholder’s counsel. Although we believe this provision benefits our company by
providing increased consistency in the application of Nevada law in the types of lawsuits to which it applies, the provision may
have the effect of discouraging lawsuits against our directors and officers, although our stockholders will not be deemed to have
waived our compliance with federal securities laws and the rules and regulations thereunder
.
Our amended and restated articles
of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable
law. However, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty
or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will
not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal
courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act creates concurrent jurisdiction for federal
and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations
thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created
by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction.
Section 78.439 of the Nevada Revised Statutes
We will be subject to the provisions of Section 78.439 of
the Nevada Revised Statutes regulating corporate takeovers. This statute prevents certain resident Nevada corporations, under certain
circumstances, from engaging in a “business combination” for a two (2) year period with:
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a stockholder who owns 10% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);
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an affiliate or an associate of an interested stockholder within two (2) years before the stockholder became a 10% stockholder.
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A “business combination” includes a merger or
sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:
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our board of directors approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction;
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after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or
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on or subsequent to the date of the transaction, the business combination is approved by our board of directors and authorized at a meeting of our stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.
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Limitation on Liability and Indemnification of Directors
and Officers
Our amended and restated articles of incorporation provide
that our directors and officers will be indemnified by us to the fullest extent authorized by Nevada law as it now exists or may
in the future be amended. In addition, our amended and restated articles of incorporation provide that our directors will not be
personally liable for monetary damages to us for breaches of their fiduciary duty as directors, unless they violated their duty
of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments
of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
Our bylaws also will permit us to secure insurance on behalf
of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Nevada law would
permit indemnification. We will purchase a policy of directors’ and officers’ liability insurance that insures our
directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against
our obligations to indemnify the directors and officers.
These provisions may discourage stockholders from bringing
a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood
of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us
and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these
provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced directors and
officers.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after this offering, we will have 12,580,000
shares of common stock outstanding, or 14,467,000 shares if the over-allotment option is exercised in full. Of these shares, the
10,000,000 shares of common stock sold in this offering, or 11,500,000 shares of common stock if the over-allotment option is exercised
in full, will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased
by one of our affiliates within the meaning of Rule 144 under the Securities Act. All of the remaining shares are restricted securities
under Rule 144, in that they were issued in private transactions not involving a public offering. All of those shares have been
placed in escrow and will not be transferable until they are released except in limited circumstances described elsewhere in this
prospectus.
Rule 144
A person who has beneficially owned restricted shares of
common stock or warrants for at least six months would be entitled to sell their securities provided that (i) such person is not
deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we
are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Persons who have beneficially
owned restricted shares of common stock for at least six months but who are our affiliates at the time of, or any time during the
three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of either of the following:
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1% of the number of shares of common stock then outstanding, which will equal 125,800 shares immediately after this offering (or 144,670 if the over-allotment option is exercised in full); and
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the average weekly trading volume of the shares of common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
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Sales under Rule 144 are also limited by manner of sale provisions
and notice requirements and to the availability of current public information about us.
Restrictions on the Use of Rule 144 by Shell Companies
or Former Shell Companies
Historically, the SEC staff had taken the position that Rule
144 is not available for the resale of securities initially issued by companies that are, or previously were, blank check companies,
like us. The SEC has codified and expanded this position in the amendments discussed above by prohibiting the use of Rule 144 for
resale of securities issued by any shell companies (other than business combination related shell companies) or any issuer that
has been at any time previously a shell company. The SEC has provided an important exception to this prohibition, however, if the
following conditions are met:
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the issuer of the securities that was formerly a shell company has ceased to be a shell company;
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the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
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the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and
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at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
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As a result, it is likely that pursuant to Rule 144, our
sponsor will be able to sell its founders’ shares and the shares of common stock underlying the private warrants freely without
registration one year after we have completed our initial business combination assuming it is not an affiliate of ours at that
time.
Registration Rights
The holders of our founders’
shares issued and outstanding on the date of this prospectus, as well as the holders of the private warrants (and their underlying
securities) and any warrants our sponsor, initial stockholders, officers, directors or their affiliates may be issued in payment
of working capital loans made to us (and all underlying securities) will be entitled to registration rights pursuant to an agreement
to be signed prior to or on the effective date of this offering. The holders of a majority of these securities are entitled to
make up to three demands that we register such securities. The holders of the majority of the founders’ shares can elect
to exercise these registration rights at any time following the consummation of our initial business transaction. The holders
of a majority of the private warrants or warrants issued to our sponsor, initial stockholders, officers, directors or their affiliates
in payment of working capital loans made to us (in each case, including the underlying securities) can elect to exercise these
registration rights at any time after we consummate a business combination. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We
will bear the expenses incurred in connection with the filing of any such registration statements.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary
of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of our units, shares of
common stock, warrants and rights, which we refer to collectively as our securities. Because the components of a unit are separable
at the option of the holder, the
holder of a unit generally should
be treated, for U.S. federal income tax purposes, as the owner of the underlying common stock, warrant and right components of
the unit, as the case may be. As a result, the discussion below with respect to actual holders of common stock, warrants and rights
should also apply to holders of units (as the deemed owners of the underlying common stock, warrants and rights that comprise the
units). This discussion applies only to securities that are held as capital assets for U.S. federal income tax purposes and is
applicable only to holders who purchased units in this offering.
This discussion is a summary only
and does not describe all of the tax consequences that may be relevant to you in light of your particular circumstances, including
but not limited to the alternative minimum tax, the Medicare tax on certain investment income and the different consequences that
may apply if you are subject to special rules that apply to certain types of investors, including but not limited to:
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certain
financial institutions; or financial services entities;
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governments
or agencies or instrumentalities thereof;
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regulated
investment companies;
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real
estate investment trusts;
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expatriates
or former long-term residents of the United States;
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persons
that actually or constructively own five percent or more of our voting stock;
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dealers
or traders subject to a mark-to-market method of accounting with respect to the securities;
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persons
holding the securities as part of a “straddle,” hedge, integrated transaction or similar transaction;
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U.S.
holders (as defined below) whose functional currency is not the U.S. dollar;
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partnerships or other pass-through entities for U.S. federal income tax purposes and any beneficial owners
of such entities; and
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This discussion is based on the Internal
Revenue Code of 1986, as amended (the “Code”), and administrative pronouncements, judicial decisions and final, temporary
and proposed Treasury regulations as of the date hereof, which are subject to change, possibly on a retroactive
basis, and changes to any of which
subsequent to the date of this prospectus may affect the tax consequences described herein. This discussion does not address any
aspect of state, local or non-U.S. taxation, or any U.S. federal taxes other than income taxes (such as gift and estate taxes).
You are urged to consult your
tax advisor with respect to the application of U.S. federal tax laws to your particular situation, as well as any tax consequences
arising under the laws of any state, local or foreign jurisdiction.
Personal Holding Company Status
We could be subject to a second
level of U.S. federal income tax on a portion of our income if we are determined to be a personal holding company, or PHC, for
U.S. federal income tax purposes. A U.S. corporation generally will be classified as a PHC for U.S. federal income tax purposes
in a given taxable year if (i) at any time during the last half of such taxable year, five or fewer individuals (without
regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain tax-exempt
organizations, pension funds and charitable trusts) own or are deemed to own (pursuant to certain constructive ownership rules)
more than 50% of the stock of the corporation by value and (ii) at least 60% of the corporation’s adjusted ordinary gross
income, as determined for U.S. federal income tax purposes, for such taxable year consists of PHC income (which includes, among
other things, dividends, interest, certain royalties, annuities and, under certain circumstances, rents).
Depending on the date and size
of our initial business combination, it is possible that at least 60% of our adjusted ordinary gross income may consist of PHC
income. In addition, depending on the concentration of our stock in the hands of individuals, including the members of our sponsor
and certain tax-exempt organizations, pension funds and charitable trusts, it is possible that more than 50% of our stock may
be owned or deemed owned (pursuant to the constructive ownership rules) by such persons during the last half of a taxable year.
Thus, no assurance can be given that we will not be a PHC following this offering or in the future. If we are or were to become
a PHC in a given taxable year, we would be subject to an additional PHC tax, currently 20%, on our undistributed PHC income, which
generally includes our taxable income, subject to certain adjustments.
Allocation of Purchase Price
and Characterization of a Unit
No statutory, administrative
or judicial authority directly addresses the treatment of a unit or instruments similar to a unit for U.S. federal income tax purposes
and, therefore, that treatment is not entirely clear. The acquisition of a unit should be treated for U.S. federal income tax purposes
as the acquisition of one share of our common stock, one warrant and one right. For U.S. federal income tax purposes, each holder
of a unit must allocate the purchase price paid by such holder for such unit among the one share of common stock, the warrant and
the right based on the relative fair market value of each at the time of issuance. The price allocated to each share of common
stock, warrant and right should be the stockholder’s tax basis in such share, warrant and right, as the case may be. Any
disposition of a unit should be treated for U.S. federal income tax purposes as a disposition of the share of common stock, the
warrant and the right comprising the unit, and the amount realized on the disposition should be allocated among the share of common
stock, the warrant and the right based on their respective relative fair market values at the time of disposition. The separation
of shares of common stock, warrants and rights comprising units should not be a taxable event for U.S. federal income tax purposes.
In addition, although we intend
to treat the rights for U.S. federal income tax purposes in a manner similar to options to acquire our shares in the future,
there is a risk that alternate characterizations of the rights could result in U.S. federal income tax consequences to the holders
of the rights that differ from those described below.
The foregoing treatment of
the shares of common stock, warrants and rights, and a holder’s purchase price allocation, are not binding on the Internal
Revenue Service (“IRS”) or the courts. Because there are no authorities that directly address instruments that are
similar to the units, no assurance can be given that the IRS or the courts will agree with the characterization described above
or the discussion below. Accordingly, each prospective investor is urged to consult its own tax advisors regarding the tax consequences
of an investment in a unit (including alternative characterizations of a unit). The balance of this discussion assumes that the
characterization of the units described above is respected for U.S. federal income tax purposes.
U.S. Holders
This section is addressed to U.S. holders of our securities.
For purposes of this discussion, you are a “U.S. holder” if you are a beneficial owner of a security that is:
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an
individual who is a citizen or resident of the United States;
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a
corporation, (
or other entity taxable as a corporation for U.S. federal income tax purposes)
organized in or under the laws of the United States, any state thereof or the District of Columbia
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an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source;
or
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a
trust, if (i) a court within the United States is able to exercise primary supervision over the administration
of the trust and one or more United States persons (as defined in the Code) have authority to control all substantial decisions
of the trust or (ii) it has a valid election in effect under Treasury Regulations to be treated as a United States person.
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Taxation of Distributions.
If we pay distributions in cash or other property to U.S. holders of shares of our common stock, such distributions generally will
constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits,
as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits
will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. holder’s adjusted
tax basis in our common stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the common
stock and will be treated as described under “U.S. Holders — Gain or Loss on Sale, Taxable Exchange or Other Taxable
Disposition of Our Securities” below.
Dividends we pay to a U.S. holder
that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied.
With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest
deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. holder
generally will constitute “qualified dividends” that will be subject to tax at preferential long-term capital gains
rates. It is unclear whether the conversion rights with respect to the common stock described in this prospectus may prevent a
U.S. holder from satisfying the applicable holding period requirements with respect to the dividends received deduction or the
preferential tax rate on qualified dividend income, as the case may be. If the holding period requirements are not satisfied, then
a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire
dividend amount, and non-corporate holders may be subject to tax on such dividend at regular ordinary income tax rates instead
of the preferential rate that applies to qualified dividend income.
Gain or Loss on Sale, Taxable
Exchange or Other Taxable Disposition of Our Securities.
Upon a sale or other taxable disposition of our securities which,
in general, would include a redemption of common stock or warrants that is treated as a sale of such securities as described below,
and including as a result of a dissolution and liquidation in the event we do not consummate an initial business combination within
the required time period, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between
the amount realized and the U.S. holder’s adjusted tax basis in the applicable security. Any such capital gain or loss generally
will be long-term capital gain or loss if the U.S. holder’s holding period for the securities so disposed of exceeds one
year. It is unclear, however, whether the conversion rights with respect to the common stock described in this prospectus may suspend
the running of the applicable holding period for this purpose. If the running of the holding period for the common stock is suspended,
then non-corporate U.S. holders may not be able to satisfy the one-year holding period requirement for long-term capital gain treatment,
in which case any gain on a sale or taxable disposition of our common stock would be subject to short-term capital gain treatment
and would be taxed at regular ordinary income tax rates. Long-term capital gains recognized by non-corporate U.S. holders will
be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Generally, the amount of gain
or loss recognized by a U.S. holder is an amount equal to the difference between (i) the sum of the amount of cash and the fair
market value of any property received in such disposition (or, if the common stock, warrants and rights are held as part of units
at the time of the disposition, the portion of the amount realized on such disposition that is allocated to the common stock, warrants
and rights based upon the then fair market values of the common stock, warrants and rights included in the units) and (ii) the
U.S. holder’s adjusted tax basis in its common stock, warrants or rights so disposed of. A U.S. holder’s adjusted tax
basis in its common stock, warrants or rights generally will equal the U.S. holder’s acquisition cost (that is, as discussed
above, the portion of the purchase price of the units allocated to the common stock, warrants or rights or, as discussed below,
the U.S. holder’s initial basis for common stock received upon exercise of warrants) less, in the case of a share of common
stock, any prior distributions treated as a return of capital.
Redemption of Common Stock.
In the event that a U.S. holder’s common stock is converted pursuant to the conversion provisions described in this prospectus
under the section of this prospectus entitled “Description of Securities — Common Stock” or if we purchase a
U.S. holder’s common stock in a tender offer or open market transaction (each of which we refer to as a “redemption”),
the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale
of the common stock under Section 302 of the Code. If the redemption qualifies as a sale of common stock, the U.S. holder will
be treated as described under “U.S. Holders — Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of
Our Securities” above. If the redemption does not qualify as a sale of common stock, the U.S. holder will be treated as receiving
a corporate distribution with the tax consequences described above under “U.S. Holders — Taxation of Distributions”.
Whether a redemption qualifies for sale treatment will depend largely on the total number of shares of our stock treated as held
by the U.S. holder (including any stock constructively owned by the U.S. holder as a result of owning warrants and possibly rights)
relative to all of our shares outstanding both before and after the redemption. The redemption of common stock generally will be
treated as a sale of the common stock (rather than as a corporate distribution) if the redemption (i) is “substantially disproportionate”
with respect to the U.S. holder, (ii) results in a “complete termination” of the U.S. holder’s interest in us
or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. holder. These tests are explained more
fully below.
In determining whether any of
the foregoing tests are satisfied, a U.S. holder takes into account not only stock actually owned by the U.S. holder, but also
shares of our stock that are constructively owned by it. A U.S. holder may constructively own, in addition to stock owned directly,
stock owned by certain related individuals and entities in which the U.S. holder has an interest or that have an interest in such
U.S. holder, as well as any stock the U.S. holder has a right to acquire by exercise of an option, which would generally include
common stock which could be acquired pursuant to the exercise of the warrants and possibly pursuant to the rights. In order to
meet the substantially disproportionate test, the percentage of our outstanding voting stock actually and constructively owned
by the U.S. holder immediately following the redemption of common stock must, among other requirements, be less than 80% of the
percentage of our outstanding voting stock actually and constructively owned by the U.S. holder immediately before the redemption.
There will be a complete termination of a U.S. holder’s interest if either (i) all of the shares of our stock actually and
constructively owned by the U.S. holder are redeemed or (ii) all of the shares of our stock actually owned by the U.S. holder are
redeemed and the U.S. holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of
stock owned by certain family members and the U.S. holder does not constructively own any other shares of our stock. The redemption
of the common stock will not be essentially equivalent to a dividend if the redemption results in a “meaningful reduction”
of the U.S. holder’s proportionate interest in us. Whether the redemption will result in a meaningful reduction in a U.S.
holder’s proportionate interest in us will depend on the particular facts and circumstances. However, the IRS has indicated
in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held
corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.” A U.S. holder
should consult with its own tax advisors as to the tax consequences of a redemption.
If none of the foregoing tests
is satisfied, then the redemption will be treated as a corporate distribution and the tax effects will be as described under “U.S.
Holders — Taxation of Distributions,” above. After the application of those rules, any remaining tax basis of the
U.S. holder in the redeemed common stock will be added to the U.S. holder’s adjusted tax basis in its remaining stock, or,
if it has none, to the U.S. holder’s adjusted tax basis in its warrants or possibly in any rights or other stock constructively
owned by it.
Exercise or Lapse of a Warrant.
Except as discussed below with respect to the cashless exercise of a warrant, a U.S. holder generally will not recognize taxable
gain or loss on the acquisition of common stock upon exercise of a warrant for cash. The U.S. holder’s tax basis in the share
of our common stock received upon exercise of the warrant generally will be an amount equal to the sum of the U.S. holder’s
initial investment in the warrant (i.e., the portion of the U.S. holder’s purchase price for a unit that is allocated to
the warrant, as described above under “—Allocation of Purchase Price and Characterization of a Unit”) and the
exercise price. It is unclear whether the U.S. holder’s holding period for the common stock received upon exercise of the
warrants will begin on the date following the date of exercise or on the date of exercise of the warrants; in either case, the
holding period will not include the period during which the U.S. holder held the warrants. If a warrant is allowed to lapse unexercised,
a U.S. holder generally will recognize a capital loss equal to such holder’s tax basis in the warrant.
The tax consequences of a cashless
exercise of a warrant are not clear under current tax law. A cashless exercise may be tax-free, either because the exercise is
not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either
tax-free situation, a U.S. holder’s basis in the common stock received would equal the holder’s basis in the warrants
exercised therefor. If the cashless exercise were treated as not being a realization event, it is unclear whether a U.S. holder’s
holding period in the common stock would be treated as commencing on the date following the date of exercise or on the date of
exercise of the warrant. If the cashless exercise were treated as a recapitalization, the holding period of the common stock would
include the holding period of the warrants exercised therefor.
It is also possible that a cashless
exercise could be treated in whole or in part as a taxable exchange in which gain or loss would be recognized. In such event, a
U.S. holder could be deemed to have surrendered a number of warrants having an aggregate fair market value equal to the exercise
price for the total number of warrants to be exercised. The U.S. holder would recognize capital gain or loss in an amount equal
to the difference between the fair market value of the common stock received in respect of the warrants deemed surrendered and
the U.S. holder’s tax basis in the warrants deemed surrendered. In this case, a U.S. holder’s tax basis in the common
stock received would equal the sum of the U.S. holder’s initial investment in the warrants exercised (i.e., the portion of
the U.S. holder’s purchase price for a unit that is allocated to the warrant, as described above under “— Allocation
of Purchase Price and Characterization of a Unit”) and the exercise price of such warrants. It is unclear whether a U.S.
holder’s holding period for the common stock would commence on the date following the date of exercise or on the date of
exercise of the warrant; in either case, the holding period would not include the period during which the U.S. holder held the
warrant.
Due to the absence of authority
on the U.S. federal income tax treatment of a cashless exercise, including when a U.S. holder’s holding period would commence
with respect to the common stock received, there can be no assurance which, if any, of the alternative tax consequences and holding
periods described above would be adopted by the IRS or a court of law. Accordingly, U.S. holders should consult their tax advisors
regarding the tax consequences of a cashless exercise.
Possible Constructive Distributions.
The terms of each warrant provide for an adjustment to the number of shares of common stock for which the warrant may be exercised
or to the exercise price of the warrant in certain events, as discussed in the section of this prospectus entitled “Description
of Securities — Redeemable Warrants” An adjustment which has the effect of preventing dilution generally is not taxable.
The U.S. holders of the warrants would, however, be treated as receiving a constructive distribution from us if, for example,
the adjustment to the number of such shares or to such exercise price increases the warrant holders’ proportionate interest
in our assets or earnings and profits (e.g., through an increase in the number of shares of common stock that would be obtained
upon exercise or through a decrease in the exercise price of the warrant) as a result of a distribution of cash or other property,
such as other securities, to the holders of shares of our common stock, or as a result of the issuance of a stock dividend to
holders of shares of our common stock, in each case which is taxable to the U.S. holders of such shares as a distribution. Such
constructive distribution would be subject to tax in the same manner as if the U.S. holders of the warrants received a cash distribution
from us equal to the fair market value of such increased interest resulting from the adjustment.
Conversion or Lapse of Rights
.
A U.S. Holder generally should not recognize gain or loss upon the acquisition of shares on the conversion of the rights,
such shares should have a tax basis equal to such holder’s tax basis in the rights, and the holding period of such
shares should begin on the day after such conversion. In addition, a U.S. Holder generally should recognize a capital loss on the
lapse of the rights equal to such holder’s tax basis in the rights.
Information Reporting and
Backup Withholding.
In general, information reporting requirements may apply to dividends paid to a U.S. holder and to the
proceeds of the sale or other disposition of our securities, unless the U.S. holder is an exempt recipient. Backup withholding
may apply to such payments if the U.S. holder fails to provide a taxpayer identification number, a certification of exempt status
or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).
Backup withholding is not an
additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a U.S.
holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.
All U.S. holders should consult
their tax advisors regarding the application of information reporting and backup withholding to them.
Non-U.S.
Holders
This section applies to you
if you are a “Non-U.S. holder.” As used herein, the term “Non-U.S. holder” means a beneficial owner of
our securities who is not a U.S. holder or a partnership for U.S. federal income tax purposes but generally does not include an
individual who is present in the United States for 183 days or more in the taxable year of disposition. If you are such an individual,
you should consult your tax advisor regarding the U.S. federal income tax consequences of the acquisition, ownership or sale or
other disposition of our securities.
Taxation of Distributions.
In general, any distributions (including constructive distributions) we make to a Non-U.S. holder of shares of our common stock,
to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles),
will constitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with
the Non-U.S. holder’s conduct of a trade or business within the United States, we will be required to withhold tax from the
gross amount of the dividend at a rate of 30%, unless such Non-U.S. holder is eligible for a reduced rate of withholding tax under
an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form
W-8BEN or W-8BEN-E). In the case of any constructive dividend, it is possible that this tax would be withheld from any amount owed
to a Non-U.S. holder by the applicable withholding agent, including cash distributions on other property or sales proceeds from
warrants or other property subsequently paid or credited to such holder. Any distribution not constituting a dividend will be treated
first as reducing (but not below zero) the Non-U.S. holder’s adjusted tax basis in its shares of our common stock and, to
the extent such distribution exceeds the Non-U.S. holder’s adjusted tax basis, as gain realized from the sale or other disposition
of the common stock, which will be treated as described under “Non-U.S. Holders — Gain on Sale, Taxable Exchange or
Other Taxable Disposition of Our Securities” below. In addition, if we determine that we are classified as a “United
States real property holding corporation” (see “Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable
Disposition of Our Securities” below), we will withhold 15% of any distribution that exceeds our current and accumulated
earnings and profits.
The withholding tax does not
apply to dividends paid to a Non-U.S. holder who provides a Form W-8ECI, certifying that the dividends are effectively connected
with the Non-U.S. holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends
will be subject to regular U.S. federal income tax as if the Non-U.S. holder were a United States resident, subject to an applicable
income tax treaty providing otherwise. A Non-U.S. corporation receiving effectively connected dividends may also be subject to
an additional “branch profits tax” imposed at a rate of 30% (or a lower applicable treaty rate).
Gain on Sale, Taxable Exchange
or Other Taxable Disposition of Our Securities.
A Non-U.S. holder generally will not be subject to U.S. federal income or
withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of our securities, which
would include a dissolution and liquidation in the event we do not complete an initial business combination, without regard to
whether those securities were held as part of a unit, unless:
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the
gain is effectively connected with the conduct of a trade or business by the Non-U.S. holder within the United States (and, under certain income tax treaties, is attributable to a United States permanent establishment or fixed base maintained by the Non-U.S. holder); or
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we
are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the Non-U.S. holder held our common stock, and, in the case where shares of our common stock are regularly traded on an established securities market, the Non-U.S. holder has owned, directly or constructively, more than 5% of our common stock at any time within the shorter of the five-year period preceding the disposition or such Non-U.S. holder’s holding period for the shares of our common stock. There can be no assurance that our common stock will be treated as regularly traded on an established securities market for this purpose.
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Unless an applicable treaty
provides otherwise, gain described in the first bullet point above will be subject to tax at generally applicable U.S. federal
income tax rates as if the Non-U.S. holder were a United States resident. Any gains described in the first bullet point above
of a Non-U.S. holder that is a foreign corporation may also be subject to an additional “branch profits tax” at a
30% rate (or lower treaty rate).
If the second bullet point
above applies to a Non-U.S. holder, gain recognized by such holder on the sale, exchange or other disposition of our securities
will be subject to tax at generally applicable U.S. federal income tax rates. In addition, a buyer of our securities may be required
to withhold U.S. federal income tax at a rate of 15% of the amount realized upon such disposition. We cannot determine whether
we will be a United States real property holding corporation in the future until we complete an initial business combination.
We will be classified as a United States real property holding corporation if the fair market value of our “United States
real property interests” equals or exceeds 50 percent of the sum of the fair market value of our worldwide real property
interests plus our other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes.
Redemption of Common Stock.
The characterization for U.S. federal income tax purposes of the redemption of a Non-U.S. holder’s common stock generally
will correspond to the U.S. federal income tax characterization of such a redemption of a U.S. holder’s common stock, as
described under “U.S. Holders — Redemption of Common Stock” above, and the consequences of the redemption to
the Non-U.S. holder will be as described above under “Non-U.S. Holders — Taxation of Distributions” and “Non-U.S.
Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of our Securities,” as applicable.
Exercise of a Warrant.
The
U.S. federal income tax treatment of a Non-U.S. holder’s exercise of a warrant, or the lapse of a warrant held by a Non-U.S.
holder, generally will correspond to the U.S. federal income tax treatment of the exercise or lapse of a warrant by a U.S. holder,
as described under “U.S. holders — Exercise or Lapse of a Warrant” above, although to the extent a cashless exercise
results in a taxable exchange, the consequences would be similar to those described above in “Non-U.S. Holders — Gain
on Sale, Taxable Exchange or Other Taxable Disposition of Our Securities.”
Possible Constructive
Distributions
. The terms of each warrant provide for an adjustment to the number of shares of common stock for which the
warrant may be exercised or to the exercise price of the warrant in certain events, as discussed in the section of this
prospectus entitled “Description of Securities — Redeemable Warrants.” An adjustment which has the effect
of preventing dilution generally is not taxable. The Non-U.S. holders of the warrants would, however, be treated as receiving
a constructive distribution from us if, for example, the adjustment to the number of such shares or to such exercise price
increases the warrant holders’ proportionate interest in our assets or earnings and profits (e.g., through an increase
in the number of shares of common stock that would be obtained upon exercise or through a decrease in the exercise price of
the warrant) as a result of a distribution of cash or other property, such as other securities, to the holders of shares of
our common stock, or as a result of the issuance of a stock dividend to holders of shares of our common stock, in each case
which is taxable to the holders of such shares as a distribution. Such constructive distribution would be subject to tax in
the same manner as if the Non-U.S. holders of the warrants received a cash distribution from us equal to the fair market
value of such increased interest resulting from the adjustment.
Information Reporting and
Backup Withholding.
Information returns will be filed with the IRS in connection with payments of dividends and the proceeds
from a sale or other disposition of our securities. A Non-U.S. holder may have to comply with certification procedures to establish
that it is not a United States person in order to avoid information reporting and backup withholding requirements. The certification
procedures required to claim a reduced rate of withholding under a treaty generally will satisfy the certification requirements
necessary to avoid the backup withholding as well.
Backup withholding is not an
additional tax. The amount of any backup withholding from a payment to a Non-U.S. holder will be allowed as a credit against such
holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information
is timely furnished to the IRS.
All Non-U.S. holders should
consult their tax advisors regarding the application of information reporting and backup withholding to them.
FATCA Withholding Taxes.
Sections
1471 through 1474 of the Code and the Treasury Regulations and administrative guidance promulgated thereunder (commonly referred
as the “Foreign Account Tax Compliance Act” or “FATCA”) generally impose withholding at a rate of 30% in
certain circumstances on dividends in respect of our securities which are held by or through certain foreign financial institutions
(including investment funds), unless any such institution (1) enters into, and complies with, an agreement with the IRS to report,
on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain
U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments,
or (2) if required under an intergovernmental agreement between the United States and an applicable foreign country, reports such
information to its local tax authority, which will exchange such information with the U.S. authorities. An intergovernmental agreement
between the United States and an applicable foreign country may modify these requirements. Accordingly, the entity through which
our securities are held will affect the determination of whether such withholding is required. Similarly, dividends in respect
of our securities held by an investor that is a non-financial, non-U.S. entity that does not qualify under certain exceptions will
generally be subject to withholding at a rate of 30%, unless such entity either (1) certifies to us or the applicable withholding
agent that such entity does not have any “substantial United States owners” or (2) provides certain information regarding
the entity’s “substantial United States owners,” which will in turn be provided to the U.S. Department of Treasury.
All prospective investors should consult their tax advisors regarding the possible implications of FATCA on their investment in
our securities.
UNDERWRITING
We are offering the units
described in this prospectus through the underwriters named below. I-Bankers Securities, Inc. is acting as representative of
the underwriters. We will enter into a firm-commitment based underwriting agreement with the representative. Subject to the
terms and conditions of the underwriting agreement, the underwriters have agreed to purchase, and we have agreed to sell to
the underwriters, the number of units listed next to each of its name in the following table:
Underwriter
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Number of
Units
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I-Bankers Securities, Inc.
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|
|
4,500,000
|
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EarlyBirdCapital, Inc.
|
|
|
4,500,000
|
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Ingalls & Snyder LLC
|
|
|
950,000
|
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B. Riley FBR, Inc.
|
|
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50,000
|
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Total
|
|
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10,000,000
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The underwriting agreement provides that the
underwriters must buy all of the units if they buy any of them. However, the underwriters are not required to purchase the
units covered by the option to purchase additional units as described below.
Our units are offered subject to a number of conditions,
including:
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receipt and acceptance of our units by the underwriters; and
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the underwriters’ right to reject orders in whole or in part.
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In connection with this offering, the underwriters or securities
dealers may distribute prospectuses electronically.
Introduction of Investors
We have agreed to introduce the underwriters in this offering to
lead investors that are interested in purchasing up to an aggregate of $15,000,000 of the units being offered hereby. An investor
will be deemed to be introduced by us to the underwriters if such investor is referred by us to the underwriters and has not previously
invested in any similarly structured blank check companies through the underwriter. However, our failure to introduce such investors
will not provide a base to relieve the underwriters from their obligation under the underwriting agreement. The underwriters’
obligation to purchase the units under the underwriting agreement is not contingent upon $15,000,000 of units offered being purchased
by investors introduced by us.
To the extent that such individuals or entities
have an interest in investing in our securities, we will introduce them to the underwriters so that they can confirm they have
not previously invested in any similarly structured blank check companies through the underwriters. If lead investors introduced
by us do not purchase the full $15,000,000 of units, the underwriters will sell the remaining amount to investors pursuant to
the terms of this prospectus.
Option To Purchase Additional Units
We have granted the underwriters an option to buy up to an
aggregate of 1,500,000 additional units. The underwriters have 30 days from the date of this prospectus to exercise this option.
If the underwriters exercise this option, they will purchase additional units approximately in proportion to the amounts specified
in the table above.
Underwriting Discount
Units sold by the underwriters to the public will initially
be offered at the initial offering price set forth on the cover of this prospectus. All investors in this offering will pay the
same price and receive the same terms. Any units sold by the underwriters to securities dealers may be sold at a discount of up
to $0.10 per unit from the initial public offering price and the dealers may reallow a concession not in excess of $0.01 per unit to other
dealers. Sales of units made outside of the United States may be made by affiliates of the underwriters. Upon execution of the
underwriting agreement, the underwriters will be obligated to purchase the units at the prices and upon the terms stated therein,
and, as a result, will thereafter bear any risk associated with changing the offering price to the public or other selling terms.
The following table shows the per unit and total underwriting
discount we will pay to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase
up to 1,500,000 additional units, assuming no units have been sold through our effort.
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No Exercise
|
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Full Exercise
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Per
Unit
(1)
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$
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0.25
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|
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$
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0.25
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Total
(1)
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$
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2,500,000
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$
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2,875,000
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(1)
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At the closing of the offering, the initial underwriting discounts and
commissions shall be equal to, in cash, (i) 0.01% of up to $15 million of gross proceeds received from investors first introduced
to the underwriters by our sponsor, and/or management, and (ii) 2.5% of all other gross proceeds in this offering.
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We estimate that the total expenses of the offering payable
by us, not including the underwriting discount, will be approximately $500,000. In addition, we have agreed to reimburse the underwriter
for its road show expenses, legal and other expenses, not to exceed in the aggregate $175,000.
We have paid I-Bankers Securities, Inc. a retainer of $40,000
against actual out-of-pocket expenses.
Lock-up Arrangements
Our initial stockholders have agreed
not to transfer, assign, sell or release from escrow 50% of the founders’ shares until the earlier of (i) six months after
the date of the consummation of our initial business combination or (ii) the date on which the closing price of our common stock
equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for
any 20 trading days within any 30-trading day period commencing after our initial business combination and the remaining 50% of
the founder shares may not be transferred, assigned or sold until six months after the date of the consummation of our initial
business combination, or earlier, in either case, if, subsequent to our initial business combination, we consummate a subsequent
liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to
exchange their common stock for cash, securities or other property (except with respect to permitted transferees as described
herein under
“Principal Stockholders”
).
Additionally, our sponsor has agreed that the private warrants
and their underlying securities (including the common stock issuable upon exercise of the private warrants) will not be transferable,
assignable or salable until after the completion of our initial business combination (except with respect to permitted transferees
as described herein under “
Principal Stockholders”
).
Indemnification
We have agreed to indemnify the underwriter against certain
liabilities, including certain liabilities under the Securities Act. If we are unable to provide this indemnification, we have
agreed to contribute to payments the underwriter may be required to make in respect of those liabilities.
Nasdaq Listing
Our units have been approved
for listing under the symbol “PAACU” and, once the common stock, warrants and rights begin separate trading,
such securities to be listed on the Nasdaq under the symbols “PAAC,” “PAACW” and “PAACR,”
respectively.
Business Combination Marketing Agreement
We will engage underwriters as
advisors in connection with our business combination to assist us in holding meetings with our stockholders to discuss the
potential business combination and the target business’ attributes, introduce us to potential investors that are
interested in purchasing our securities, assist us in obtaining stockholder approval for the business combination and assist
us with our press releases and public filings in connection with the business combination simultaneously upon the firm
commitment of this Offering. We will pay underwriters a cash fee for such services upon the consummation of our initial
business combination in an amount equal to 3.5% of the aggregate amount sold to the public in this offering that are not
redeemed by stockholders in connection with our initial business combination, provided the minimum fee shall not be less than
$1,500,000 as a result of the efforts of the underwriters (exclusive of any applicable finders’ fees which might
become payable).
Representative’s Shares of Common Stock
We
have agreed to issue to
I-Bankers Securities, Inc.
(and/or
its designees) 80,000 shares of common stock (or up to 92,000 shares if the underwriters’ over-allotment option is exercised
in full) upon the consummation of this offering.
I-Bankers Securities, Inc.
(and/or
its designees) has agreed not to transfer, assign or sell any such shares without our prior written consent until the completion
of our initial business combination. In addition,
I-Bankers Securities, Inc.
(and/or
its designees) has agreed (i) to waive its redemption rights with respect to such shares in connection with the completion of
our initial business combination and (ii) to waive its rights to liquidating distributions from the trust account with respect
to such shares if we fail to complete our initial business combination within 12 months from the closing of this offering (or
up to 18 months from the closing of this offering if we extend the period of time to consummate a business combination by the
full amount of time).
The shares have been deemed
compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness
of the registration statement of which this prospectus forms a part pursuant to FINRA Rule 5110(g)(1). Pursuant to FINRA Rule
5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would
result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective
date of the registration statement of which this prospectus forms a part, nor may they be sold, transferred, assigned, pledged
or hypothecated for a period of 180 days immediately following the effective date of the registration statement of which this
prospectus forms a part except to any underwriter and selected dealer participating in the offering and their bona fide officers
or partners.
Pursuant to the underwriting agreement, we have granted
the holders of these shares the same registration rights as described below with respect to the underwriters’ warrants.
Underwriters’ Warrants
We have agreed to grant
to I-Bankers Securities, Inc. (and/or its designees) 800,000 warrants (or 920,000 warrants if the
underwriters’ over-allotment option is exercised in full) exercisable at $12.00 per share (or an aggregate exercise
price of $9,600,000 or $11,040,000 if the underwriters’ over-allotment option is exercised in full) upon the closing of
this offering. The warrant may be exercised for cash or on a cashless basis, at the holder’s option, at any time during
the period commencing on the later of the first anniversary of the effective date of the registration statement of which this
prospectus forms a part and the closing of our initial business combination and terminating on the fifth anniversary of
such effectiveness date. Notwithstanding anything to the contrary, I-Bankers Securities, Inc. has agreed that neither it nor
its designees will be permitted to exercise the warrants after the five year anniversary of the effective date of
the registration statement of which this prospectus forms a part. The warrants and such shares purchased pursuant to the
warrants have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 360 days immediately
following the date of the effectiveness of the registration statement of which this prospectus forms a part pursuant to FINRA
Rule 5110(g)(1). Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging, short
sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for
a period of 360 days immediately following the effective date of the registration statement of which this prospectus forms
a part, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 360 days immediately following
the effective date of the registration statement of which this prospectus forms a part except to any underwriter and
selected dealer participating in the offering and their bona fide officers or partners. The warrants grant to holders demand
and “piggy back” rights for periods of five and seven years, respectively, from the effective date of
the registration statement of which this prospectus forms a part with respect to the registration under the Securities Act of
the common stock issuable upon exercise of the warrants. We will bear all fees and expenses attendant to registering the
securities, other than underwriting commissions, which will be paid for by the holders themselves. The exercise price and
number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in
the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. However, the warrants will
not be adjusted for issuances of common stock at a price below its exercise price. We will have no obligation to net cash
settle the exercise of the warrants. The holder of the warrants will not be entitled to exercise the warrants for cash unless
a registration statement covering the securities underlying the warrants is effective or an exemption from registration is
available.
Price Stabilization, Short Positions
In connection with this offering, the underwriters may engage
in activities that stabilize, maintain or otherwise affect the price of units during and after this offering, including:
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stabilizing transactions;
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purchases to cover positions created by short sales;
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imposition of penalty bids; and
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•
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syndicate covering transactions.
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Stabilizing transactions consist of bids or purchases made
for the purpose of preventing or retarding a decline in the market price of our units while this offering is in progress. Stabilization
transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
These transactions may also include making short sales of our units, which involve the sale by the underwriters of a greater number
of units than they are required to purchase in this offering and purchasing units on the open market to cover short positions created
by short sales. Short sales may be “covered short sales,” which are short positions in an amount not greater than the
underwriters’ option to purchase additional units referred to above, or may be “naked short sales,” which are
short positions in excess of that amount.
The underwriters may close out any covered short position
by either exercising their option, in whole or in part, or by purchasing units in the open market. In making this determination,
the underwriters will consider, among other things, the price of units available for purchase in the open market as compared to
the price at which they may purchase units through the over-allotment option.
Naked short sales are short sales made in excess of the over-allotment
option. The underwriters must close out any naked short position by purchasing units in the open market. A naked short position
is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the units in
the open market that could adversely affect investors who purchased in this offering.
The underwriters also may impose a penalty bid. This occurs
when a particular underwriter repays to the representative of the underwriters a portion of the underwriting discount received
by it because the representative has repurchased units sold by or for the account of that underwriter in stabilizing or short covering
transactions.
These stabilizing transactions, short sales, purchases to
cover positions created by short sales, the imposition of penalty bids and syndicate covering transactions may have the effect
of raising or maintaining the market price of our units or preventing or retarding a decline in the market price of our units.
As a result of these activities, the price of our units may be higher than the price that otherwise might exist in the open market.
The underwriters may carry out these transactions on the Nasdaq, in the over-the-counter market or otherwise. Neither we nor the
underwriters make any representation or prediction as to the effect that the transactions described above may have on the price
of the units. Neither we, nor the underwriters, make any representation that the underwriter will engage in these stabilization
transactions or that any transaction, once commenced, will not be discontinued without notice.
Determination of Offering Price
Prior to this offering, there was no public market for our
units. The initial public offering price will be determined by negotiation between us and the representative of the underwriters.
The principal factors to be considered in determining the initial public offering price include:
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the information set forth in this prospectus and otherwise available to the representative;
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our history and prospects and the history and prospects for the industry in which we compete;
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our past and present financial performance;
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our prospects for future earnings and the present state of our development;
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the general condition of the securities market at the time of this offering;
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the recent market prices of, and demand for, publicly traded units of generally comparable companies; and
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other factors deemed relevant by the underwriters and us.
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Neither we nor the underwriters
can assure investors that an active trading market will develop for our units, warrants, rights or common stock or that the
units will trade in the public market at or above the initial public offering price.
Affiliations
I-Bankers Securities, Inc. and its affiliates are full service
financial institutions engaged in various activities, which may include securities trading, commercial and investment banking,
financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities.
I-Bankers Securities, Inc. and its affiliates may from time to time in the future engage with us and perform services for us or
in the ordinary course of their business for which they will receive customary fees and expenses. In the ordinary course of their
various business activities, the underwriters and their respective affiliates may also make or hold a broad array of investments
and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans)
for their own account and for the accounts of their customers, and such investment and securities activities may involve securities
and/or instruments of us. The underwriters and its affiliates may also make investment recommendations and/or publish or express
independent research views in respect of these securities or instruments and may at any time hold, or recommend to clients that
they acquire, long and/or short positions in these securities and instruments.
Additional Future Arrangements
The underwriters may introduce us to potential target businesses
or assist us in raising additional capital in the future. If any of the underwriters provide services to us after this offering,
we may pay such underwriter fair and reasonable fees that would be determined at that time in an arm’s length negotiation;
provided that no agreement will be entered into with any underwriter and no fees for such services will be paid to any underwriter
prior to the date that is 90 days from the date of this prospectus, unless FINRA determines that such payment would not be deemed
underwriter’s compensation in connection with this offering.
Electronic Distribution
A prospectus in electronic format may be made available on
the Internet sites or through other online services maintained by the underwriters participating in this offering, or by their
affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter,
prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of
units for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters
on the same basis as other allocations. Other than the prospectus in electronic format, the information on any underwriter’s
website and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration
statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity
as underwriter and should not be relied upon by investors.
Selling Restrictions
Canada
Resale Restrictions
We intend to distribute our securities
in the Province of Ontario, Canada (the “Canadian Offering Jurisdiction”) by way of a private placement and exempt
from the requirement that we prepare and file a prospectus with the securities regulatory authorities in such Canadian Offering
Jurisdiction. Any resale of our securities in Canada must be made under applicable securities laws that will vary depending on
the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary
exemption granted by the applicable Canadian securities regulatory authority. Canadian resale restrictions in some circumstances
may apply to resales of interests made outside of Canada. Canadian purchasers are advised to seek legal advice prior to any resale
of our securities. We may never be a “reporting issuer”, as such term is defined under applicable Canadian securities
legislation, in any province or territory of Canada in which our securities will be offered and there currently is no public market
for any of the securities in Canada, and one may never develop. Canadian investors are advised that we have no intention to file
a prospectus or similar document with any securities regulatory authority in Canada qualifying the resale of the securities to
the public in any province or territory in Canada.
Representations of Purchasers
A Canadian purchaser will be required to represent to us
and the dealer from whom the purchase confirmation is received that:
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the purchaser is entitled under applicable provincial securities laws to purchase our securities without the benefit of a prospectus qualified under those securities laws;
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where required by law, that the purchaser is purchasing as principal and not as agent;
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the purchaser has reviewed the text above under Resale Restrictions; and
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the purchaser acknowledges and consents to the provision of specified information concerning its purchase of our securities to the regulatory authority that by law is entitled to collect the information.
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Rights of Action — Ontario Purchasers
Only
Under Ontario securities legislation, certain purchasers
who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for
damages, or while still the owner of our securities, for rescission against us in the event that this prospectus contains a misrepresentation
without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later
than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and
three years from the date on which payment is made for our securities. The right of action for rescission is exercisable not later
than 180 days from the date on which payment is made for our securities. If a purchaser elects to exercise the right of action
for rescission, the purchaser will have no right of action for damages against us. In no case will the amount recoverable in any
action exceed the price at which our securities were offered to the purchaser and if the purchaser is shown to have purchased the
securities with knowledge of the misrepresentation, we will have no liability. In the case of an action for damages, we will not
be liable for all or any portion of the damages that are proven to not represent the depreciation in value of our securities as
a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or
remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser.
Ontario purchasers should refer to the complete text of the relevant statutory provisions.
Enforcement of Legal Rights
All of our directors and officers as well as the experts
named herein are located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon us or those persons. All of our assets and the assets of those persons are located outside of Canada
and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained
in Canadian courts against us or those persons outside of Canada.
Collection of Personal Information
If a Canadian purchaser is resident in or otherwise subject
to the securities laws of the Province of Ontario, the Purchaser authorizes the indirect collection of personal information pertaining
to the Canadian purchaser by the Ontario Securities Commission (the “OSC”) and each Canadian purchaser will be required
to acknowledge and agree that the Canadian purchaser has been notified by us (i) of the delivery to the OSC of personal information
pertaining to the Canadian purchaser, including, without limitation, the full name, residential address and telephone number of
the Canadian purchaser, the number and type of securities purchased and the total purchase price paid in respect of the securities,
(ii) that this information is being collected indirectly by the OSC under the authority granted to it in securities legislation,
(iii) that this information is being collected for the purposes of the administration and enforcement of the securities legislation
of Ontario, and (iv) that the title, business address and business telephone number of the public official in Ontario who can answer
questions about the OSC’s indirect collection of the information is the Administrative Assistant to the Director of Corporate
Finance, the Ontario Securities Commission, Suite 1903, Box 5520, Queen Street West, Toronto, Ontario, M5H 3S8, Telephone: (416)
593-8086, Facsimile: (416) 593-8252.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement
or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in
relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document
under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required
for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to
persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8)
of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act)
or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer
the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must
not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances
where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section
708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D
of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does
not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain
any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether
the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert
advice on those matters.
Notice to Prospective Investors in the Dubai International
Financial Centre
This prospectus relates to an Exempt Offer in accordance
with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for
distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied
on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers.
The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility
for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale.
Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the
contents of this prospectus you should consult an authorized financial advisor.
Notice to Prospective Investors in the European Economic
Area
In relation to each member state of the European Economic
Area that has implemented the Prospectus Directive (each, a “relevant member state”), with effect from and including
the date on which the Prospectus Directive is implemented in that relevant member state (the “relevant implementation date”),
an offer of units described in this prospectus may not be made to the public in that relevant member state prior to the publication
of a prospectus in relation to the units that has been approved by the competent authority in that relevant member state or, where
appropriate, approved in another relevant member state and notified to the competent authority in that relevant member state, all
in accordance with the Prospectus Directive, except that, with effect from and including the relevant implementation date, an offer
of our units may be made to the public in that relevant member state at any time:
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to any legal entity which is a qualified investor as defined in the Prospectus Directive;
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to fewer than 100, or, if the relevant member state has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the issuer for any such offer; or natural or legal persons (other than qualified investors as defined below) subject to obtaining the prior consent of the underwriter for any such offer; or
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in any other circumstances that do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive.
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Each purchaser of units described in this prospectus located
within a relevant member state will be deemed to have represented, acknowledged and agreed that it is a “qualified investor”
within the meaning of Article 2(1)(e) of the Prospectus Directive.
For the purpose of this provision, the expression an “offer
to the public” in any relevant member state means the communication in any form and by any means of sufficient information
on the terms of the offer and the units to be offered so as to enable an investor to decide to purchase or subscribe for the units,
as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state,
and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the PD 2010
Amending Directive to the extent implemented by the relevant member state) and includes any relevant implementing measure in each
relevant member state, and the expression 2010 PD Amending Directive means Directive 2010/73/EU. We have not authorized and do
not authorize the making of any offer of units through any financial intermediary on their behalf, other than offers made by the
underwriters with a view to the final placement of the units as contemplated in this prospectus. Accordingly, no purchaser of the
units, other than the underwriters, is authorized to make any further offer of the units on behalf of us or the underwriters.
Notice to Prospective Investors in Switzerland
The shares may not be publicly offered in Switzerland and
will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in
Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a
or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX
Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document
nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made
publicly available in Switzerland.
Neither this document nor any other offering or marketing
material relating to the offering, the Company, the shares have been or will be filed with or approved by any Swiss regulatory
authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial
Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal
Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective
investment schemes under the CISA does not extend to acquirers of shares.
Notice to Prospective Investors in the United Kingdom
This prospectus is only being distributed to, and is only
directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus
Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully
be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as a “relevant
person”). The units are only available to, and any invitation, offer or agreement to purchase or otherwise acquire such units
will be engaged in only with, relevant persons. This prospectus and its contents are confidential and should not be distributed,
published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person
in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
Notice to Prospective Investors in France
Neither this prospectus nor any other offering material relating
to the units described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés
Financiers or by the competent authority of another member state of the European Economic Area and notified to the Autorité
des Marchés Financiers. The units have not been offered or sold and will not be offered or sold, directly or indirectly,
to the public in France. Neither this prospectus nor any other offering material relating to the units has been or will be:
|
•
|
released, issued, distributed or caused to be released, issued or distributed to the public in France; or
|
|
•
|
used in connection with any offer for subscription or sale of the units to the public in France.
|
Such offers, sales and distributions will be made in France
only:
|
•
|
to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with, Article L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier;
|
|
•
|
to investment services providers authorized to engage in portfolio management on behalf of third parties; or
|
|
•
|
in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne).
|
The units may be resold directly or indirectly, only in compliance
with Articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.
Notice to Prospective Investors in Hong Kong
The units may not be offered or sold in Hong Kong by means
of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies
Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and
Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result
in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and
no advertisement, invitation or document relating to the units may be issued or may be in the possession of any person for the
purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to
be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect
to units which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors”
within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Japan
The units have not been and will not be registered under
the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold,
directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or
indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines
promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this
paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized
under the laws of Japan.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with
the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer
or sale, or invitation for subscription or purchase, of the units may not be circulated or distributed, nor may the units be offered
or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore
other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the
“SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance
with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of,
any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Where the units are subscribed or purchased under Section
275 of the SFA by a relevant person which is:
|
•
|
shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
|
|
•
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to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;
|
|
•
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where no consideration is or will be given for the transfer; or
|
|
•
|
where the transfer is by operation of law.
|
LEGAL MATTERS
Ellenoff Grossman & Schole LLP,
New York, New York, is acting as our counsel. Legal matters as to Nevada law, as well as the validity of the issuance of the units,
shares of common stock, warrants and rights offered in this offering, will be passed upon for us by Bauman & Associates Law
Firm, Las Vegas, Nevada. Schiff Hardin LLP, Washington, DC, is acting as counsel to the underwriters.
EXPERTS
The financial
statements at September 30, 2018 and for the period from July 27, 2018 (inception) through September 30, 2018 included in this
Prospectus have been audited by Malone Bailey LLP, independent registered public accounting firm, as set forth in their report,
thereon (which contains an explanatory paragraph relating to substantial doubt about the ability of Proficient Alpha Acquisition
Corp. to continue as a going concern as described in Note 1 to the financial statements), appearing elsewhere in this prospectus,
and are included in reliance on such report given upon such firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form
S-1 under the Securities Act with respect to the securities we are offering by this prospectus. This prospectus does not contain
all of the information included in the registration statement. For further information about us and our securities, you should
refer to the registration statement and the exhibits and schedules filed with the registration statement. Whenever we make reference
in this prospectus to any of our contracts, agreements or other documents, the references are materially complete but may not include
a description of all aspects of such contracts, agreements or other documents, and you should refer to the exhibits attached to
the registration statement for copies of the actual contract, agreement or other document.
Upon completion of this offering,
we will be subject to the information requirements of the Exchange Act and will file annual, quarterly and current event reports,
proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over
the Internet at the SEC’s website at
www.sec.gov
.
PROFICIENT ALPHA ACQUISITION CORP.
Index to Financial Statements
|
|
Pages
|
|
|
|
Unaudited Financial Statements
|
|
|
|
|
|
Condensed Balance Sheets as of March 31, 2019 and September 30, 2018
|
|
87
|
|
|
|
Condensed Statement of Operations for the Three and Six Months Ended March 31, 2019
|
|
88
|
|
|
|
Condensed Statement of Cash Flows for the Six Months Ended March 31, 2019
|
|
89
|
|
|
|
Condensed Statement of Stockholders’ Equity for the Six Months Ended March 31, 2019
|
|
90
|
|
|
|
Notes to Condensed Financial Statements
|
|
91 – 95
|
|
|
|
Audited Financial Statements
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
96
|
|
|
|
Condensed Balance Sheet as of September 30, 2018
|
|
97
|
|
|
|
Condensed Statement of Operations for the Period from July 27, 2018 (Inception) through September 30, 2018
|
|
98
|
|
|
|
Condensed Statement of Cash Flows for the Period from July 27, 2018 (Inception) through September 30, 2018
|
|
99
|
|
|
|
Condensed Statement of Stockholders’ Equity for the Period from July 27, 2018 (Inception) through September 30, 2018
|
|
100
|
|
|
|
Notes to Condensed Financial Statements
|
|
101
- 104
|
|
|
|
PROFICIENT
ALPHA ACQUISITION CORP.
|
Condensed
Balance Sheets
|
As
of March 31, 2019 and September 30, 2018
|
|
|
|
|
|
|
|
March
31, 2019
|
|
September
30, 2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
269,181
|
|
|
$
|
302,362
|
|
Total
current assets
|
|
|
269,181
|
|
|
|
302,362
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
269,181
|
|
|
$
|
302,362
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
19,333
|
|
|
$
|
19,333
|
|
Accrued expenses
- related parties
|
|
|
13,176
|
|
|
|
21,323
|
|
Total
current liabilities
|
|
|
32,509
|
|
|
|
40,656
|
|
|
|
|
|
|
|
|
|
|
Preferred stock,
$.001 par value, 1,000,000 shares authorized, none issued and outstanding as of March 31 2019 and September 30 2018 respectively
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Common stock,
$.001 par value, 150,000,000 shares authorized, 2,875,000 shares issued and outstanding as of March 31 2019 and September
30 2018 respectively
|
|
|
2,875
|
|
|
|
2,875
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in
capital
|
|
|
561,014
|
|
|
|
554,347
|
|
Subscription receivable
|
|
|
(16,250
|
)
|
|
|
(182,500
|
)
|
Accumulated
deficits
|
|
|
(310,967
|
)
|
|
|
(113,016
|
)
|
Total
Shareholders’ Equity
|
|
|
236,672
|
|
|
|
261,706
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Shareholders’ Equity
|
|
$
|
269,181
|
|
|
$
|
302,362
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited financial statements
|
PROFICIENT ALPHA ACQUISITION
CORP.
|
Condensed Statement of Operations
|
For the Three and Six Months Ended March 31, 2019
|
(Unaudited)
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019
|
|
For the Six Months Ended March 31, 2019
|
|
|
|
|
|
Operating expense
|
|
|
|
|
|
|
|
|
Audit fee
|
|
$
|
2,000
|
|
|
$
|
10,000
|
|
Officers compensation
|
|
|
65,852
|
|
|
|
137,519
|
|
Legal fees
|
|
|
—
|
|
|
|
25,000
|
|
General and administrative expenses
|
|
|
24,999
|
|
|
|
25,432
|
|
Total operating expense
|
|
|
92,851
|
|
|
|
197,951
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
|
(92,851
|
)
|
|
|
(197,951
|
)
|
|
|
|
|
|
|
|
|
|
Net (loss) per share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited financial statements
|
PROFICIENT
ALPHA ACQUISITION CORP.
|
Condensed
Statement of Cash Flows
|
For
the Six Months Ended March 31, 2019
|
(Unaudited)
|
|
|
|
|
|
|
|
|
For
the Six Months Ended March 31, 2019
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
Net
(loss)
|
|
$
|
(197,951
|
)
|
Adjustments
to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
Common
stock issued for service
|
|
|
6,667
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
Accrued
expenses - related parties
|
|
|
(8,147
|
)
|
Net cash (used
in) operating activities
|
|
|
(199,431
|
)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Collection
of subscription receivable
|
|
|
166,250
|
|
Net cash provided
by financing activities
|
|
|
166,250
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
|
|
(33,181
|
)
|
|
|
|
|
|
Cash
and cash equivalents at the beginning of the period
|
|
|
302,362
|
|
|
|
|
|
|
Cash
and cash equivalents at the end of the period
|
|
$
|
269,181
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
|
|
|
Cash
paid for interest
|
|
$
|
—
|
|
Cash
paid for income taxes
|
|
$
|
—
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited financial statements
|
PROFICIENT
ALPHA ACQUISITION CORP.
|
Condensed
Statement of Changes in Stockholders' Equity
|
For
the Six Months Ended March 31, 2019
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In Capital
|
|
Subscription
Receivable
|
|
Accumulated
Deficits
|
|
Total
|
Balance,
September 30, 2018
|
|
|
—
|
|
|
$
|
—
|
|
|
|
2,875,000
|
|
|
$
|
2,875
|
|
|
$
|
554,347
|
|
|
$
|
(182,500
|
)
|
|
$
|
(113,016
|
)
|
|
$
|
261,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,334
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collection of subscription
receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
166,250
|
|
|
|
—
|
|
|
|
166,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(105,100
|
)
|
|
|
(105,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2018
|
|
|
—
|
|
|
$
|
—
|
|
|
|
2,875,000
|
|
|
$
|
2,875
|
|
|
$
|
557,681
|
|
|
$
|
(16,250
|
)
|
|
$
|
(218,116
|
)
|
|
$
|
326,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,333
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(92,851
|
)
|
|
|
(92,851
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
2,875,000
|
|
|
$
|
2,875
|
|
|
$
|
561,014
|
|
|
$
|
(16,250
|
)
|
|
$
|
(310,967
|
)
|
|
$
|
236,672
|
|
|
|
|
|
|
|
|
|
|
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The
accompanying notes are an integral part of these unaudited financial statements
|
PROFICIENT ALPHA ACQUISITION CORP.
Notes to Condensed Financial Statements
Note 1 — Organization and Business
Operations
Proficient Alpha Acquisition Corporation
(the “Company”) is a newly incorporated blank check company incorporated on July 27, 2018, under the laws of the State
of Nevada for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization
or other similar business combination with one or more businesses or entities (a “Business Combination”). The Company
has not selected any potential business combination target, and the Company has not, nor has anyone on its behalf, initiated any
substantive discussions, directly or indirectly, with any potential business combination target with respect to an initial business
combination with the Company. While the Company may, subject to certain limitations, pursue a business combination target with
operations or prospects in the financial services sector in China, including Hong Kong, Macau and mainland China.
As of March 31, 2019, the Company
had not yet commenced any operations. All activity through March 31, 2019 relates to the Company’s formation and the Proposed
Public Offering (as defined below). The Company has selected September 30 as its fiscal year end.
Going Concern Consideration
As of March 31, 2019, the Company
had $269,181 in cash, accumulated deficit of $310,967, and the cash flow used in operation during the six months ended March 31,
2019 was $199,431. The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and
acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Management plans to address this uncertainty through a Proposed Offering and Private Placement of Warrants as discussed in Note
7. There is no assurance that the Company’s plans to raise capital or to consummate a Business Combination will be successful
within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Note 2 — Significant Accounting
Policies
Basis of Presentation
The accompanying unaudited interim
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial
statements and notes thereto of the Company contained elsewhere herein the Company’s Form S-1.
In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results
of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially
duplicate the disclosures contained in the audited financial statements of the Company for the period ended September 30, 2018
as reported in this Form S-1 have been omitted.
Emerging Growth Company Status
The Company is 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 of 2012, (the “JOBS Act”), and it may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
Further, Section 102(b)(1) of the
JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have
a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that
apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out
of such extended transition period which means that when a standard is issued or revised and it has different application dates
for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with
another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using
the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly
liquid investments with an original maturity of three months or less to be cash equivalents.
Net Loss per Common Share
The Company complies with accounting
and disclosure requirements ASC Topic 260, “Earnings per Share.” Net loss per common share is computed by dividing
net loss by the weighted average number of common shares issued and outstanding for the period, excluding common shares subject
to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 375,000 common shares that are subject to
forfeiture by the sponsor if the over-allotment option is not exercised by the underwriters. As of March 31, 2019, the Company
did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common shares
and then share in the earnings (loss) of the Company. As a result, diluted loss per common share is the same as basic loss per
common share for the period.
|
|
|
|
|
For
the Three Months ended March 31, 2019
|
|
For
the Six Months ended March 31, 2019
|
|
|
|
|
|
Numerator:
|
|
$
|
(92,851
|
)
|
|
|
(197,951
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings per share - Weighted-average common shares issued and outstanding during the period
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
Denominator
for diluted earnings per share
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
Basic loss
per share
|
|
$
|
(0.04
|
)
|
|
|
(0.08
|
)
|
Diluted
loss per share
|
|
$
|
(0.04
|
)
|
|
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Stock based compensation
The Company recognizes compensation
costs to employees under FASB Accounting Standards Codification 718 “Compensation - Stock Compensation” (“ASC
718”). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements
based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees
are required to provide services. Share based compensation arrangements include stock options and warrants. As such, compensation
cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective
vesting periods of the option grant.
On July 27, 2018, the inception
date, the Company adopted ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation
(which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods
or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.
Income Taxes
The Company accounts for income
taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the
expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in
interim period, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant
uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated
on July 27, 2018, the evaluation was performed for upcoming 2018 tax year which will be the only period subject to examination.
The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments
that would result in a material changes to its financial position. The Company’s policy for recording interest and penalties
associated with audits is to record such items as a component of income tax expense.
The Company’s deferred tax
asset at September 30, 2018 consists of net operating loss carry forwards calculated using federal and state effective tax rates
equating to approximately $24,000, less a valuation allowance in the amount of approximately $24,000. Because of the Company’s
lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance in the year ended September 30,
2018.
Related
parties
The Company follows subtopic 850-10
of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the
related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required,
absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted
for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts
that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company;
f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating
policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate
interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties
or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that
one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements
shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and
other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation
of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature
of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts
were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary
to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for
each of the periods for which income statements are presented and the effects of any change in the method of establishing the
terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet
presented and, if not otherwise apparent, the terms and manner of settlement.
Recent Accounting Pronouncements
Management does not believe that
any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
financial statements.
Note 3 — Related Party
Transactions
Accrued expenses - related parties
As of March 31, 2019, the Company
had $13,176 due to related parties in connection with the accrued compensation to the Company’s management and directors.
Pursuant to the executed Offer Letters, the Company agreed to pay the Company’s Co-Chief Executive Officer and Chief Financial
Officer, $2,000 and $5,000 in cash per month starting from February 1, 2019 and August 1, 2018, respectively, and 50,000 founder
shares each, and agreed to pay the Company’s Director $2,000 in cash per month starting from August 1, 2018, plus 100,000
shares of common stock, which will be issued within 10 days after the completion date of initial acquisition. The fair value of
this stock issuance was determined by the fair value of the Company’s Common Stock on the grant date, at a price of
$0.20 per share. Accordingly, the Company calculated the stock-based compensation of $40,000 at its fair value and amortized pro
rata within 18 months. Total 100,000 founder shares to Co-Chief Executive Officer and Chief Financial Officer were issued and
the 100,000 shares to Director are not issued within 10 days after the completion date of initial acquisition.
On March 20, 2019, the Company entered
into an Offer Letter with our President, pursuant to which, the Company agreed to pay the Company’s President 50,000 shares
of common stock for his services during a period of 18 months starting from March 20, 2019. The 50,000 shares will be issued within
10 days after the completion date of initial acquisition. The fair value of this stock issuance was determined by the fair value
of the Company’s Common Stock on the grant date, at a price of $0.20 per share. Accordingly, the Company calculated
the stock-based compensation of $10,000 at its fair value and amortized pro rata within 18 months.
For the three and six months ended
March 31, 2019, the Company recognized stock-based compensation of $3,333 and $6,667, respectively, to the statement of operations.
The unrecognized stock-based compensation was $11,111 as of March 31, 2019.
Note 4 — Accrued Expenses
As of March 31, 2019, the Company
had accrued expenses of $19,333 in connection with the accrued compensation to the Company’s independent directors. Pursuant
to the executed Offer Letters, the Company agreed to pay the Company’s Independent Directors, respectively, $2,000 in cash
per month starting from August 1, 2018, plus 25,000 - 50,000 shares of common stock, which will be issued within 10 days after
the completion date of initial acquisition. The fair value of this stock issuance was determined by the fair value of the Company’s
Common Stock on the grant date, at a price of $0.20 per share. Accordingly, the Company calculated the stock-based compensation
of $30,000 at its fair value and amortized pro rata within 18 months. Total 150,000 shares of common stock to Independent Directors
are not issued within 10 days after the completion date of initial acquisition. Accordingly, the Company recorded $19,333 as accrued
expenses.
Note 5 — Stockholder’s
Equity
Preferred Shares
-
The Company is authorized to issue a total of 1,000,000 preferred shares, par value of $0.001 each. As of March 31, 2019, none
was issued and outstanding.
Common Shares
- The
Company is authorized to issue a total of 150,000,000 common shares, par value of $0.001 each. As of March 31, 2019, 2,875,000
shares were issued and outstanding, of which 375,000 shares held by the sponsor are subject to forfeiture to the extent that the
underwriters’ over-allotment option is not exercised in full or in part, so that the Company’s Founders will own 20%
of the issued and outstanding shares after the Proposed Public Offering.
Founder Shares
As of March 31, 2019, 2,875,000
shares of the Company were issued to the stockholders prior to the date of the prospectus (“Founders”) for an aggregate
amount of $575,000, including cash of $555,000 and $20,000 prepaid expenses to the management of the Company. The 2,875,000 Founder
Shares include an aggregate of up 375,000 shares held by the sponsor subject to forfeiture to the extent that the underwriters’
over-allotment is not exercised in full or in part, so that the Founders will own 20% of the Company’s issued and outstanding
shares after the Proposed Public Offering. During the six months ended March 31, 2019, the Company received $166,250 from 831,250
previously issued Founder Shares, and recorded subscription receivable of $16,250 as of March 31, 2019.
Simultaneously upon the closing
with the proposed public offering
, the Founder Shares will be placed into an escrow
account maintained in New York, New York by American Stock Transfer & Trust Company, acting as escrow agent. Subject to certain
limited exceptions, 50% of these shares will not be transferred, assigned, sold or released from escrow until the earlier of (i)
six months after the date of the consummation of our initial business combination or (ii) the date on which the closing price
of our common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing after our initial business combination and the remaining 50%
of the Founder Shares may not be transferred, assigned or sold until six months after the date of the consummation of our initial
business combination, or earlier, in either case, if, subsequent to our initial business combination, we consummate a subsequent
liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to
exchange their common stock for cash, securities or other property. The limited exceptions include transfers, assignments or sales
(i) to our officers, directors, consultants, advisors or their affiliates, (ii) to an entity’s members, (iii) to relatives
and trusts for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a
qualified domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial
business combination, or (vii) by private sales made at or prior to the consummation of a business combination at prices no greater
than the price at which the shares were originally purchased, in each case (except for clause (vi) or with our prior consent)
where the transferee agrees to the terms of the escrow agreement and to be bound by these transfer restrictions.
Our Founders will enter into
a letter agreement with us, pursuant to which they will agree to (i) waive their redemption rights with respect to their Founder
Shares and public shares in connection with the completion of our initial business combination, (ii) waive their redemption rights
with respect to their Founder Shares and public shares in connection with a stockholder vote to approve an amendment to our amended
and restated articles of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares
if we do not complete our initial business combination within 12 months from the closing of this offering (or up to 18 months
from the closing of this offering if we extend the period of time to consummate a business combination by the full amount of time)
or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity
and (iii) waive their rights to liquidating distributions from the trust account with respect to their Founder Shares if we fail
to complete our initial business combination within 12 months from the closing of this offering (or up to 18 months from the closing
of this offering if we extend the period of time to consummate a business combination by the full amount of time), although they
will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to
complete our initial business combination within the prescribed time frame.
Note 6 — Underwriter Agreement
The Company has engaged I-Bankers
Securities, Inc. (“I-Bankers”) as to act as underwriter (the “Underwriter”) on the proposed public offering
of
10,000,000 units at $10.00 per unit (or 11,500,000 units if the underwriters’ over-allotment
option is exercised in full) (“Units”), which is discussed in Note 7 and the sale of 5,000,000 warrants (or 5,375,000
warrants if the underwriters’ over-allotment option is exercised in full) (the “Private Warrants”) at a price
of $1.00 per warrant in a private placement to
Mr. Shih-Chung Chou
(the “Sponsor”),
that will close simultaneously with the proposed public offering of $100 million,
and a simultaneous listing on NASDAQ
Capital Market (the “Offering”). This will be an Initial Public Offering for the purpose of merging with or acquiring
a company, otherwise known as a Special Purpose Acquisition Company or SPAC. During the term of the Agreement, I-Bankers will
provide the Company with financial services and assistance with respect to the Offering pursuant to the Registration Statement
for the agreed upon number of the Company’s newly issued Shares, plus an over-allotment option equal to 15% of the number
of shares being offered (exercisable for a period of up to thirty (30) days from the date the Offering is priced). The Company
will pay I-Bankers a transaction fee equal to 2.5% of the gross proceeds raised in the offering for such services upon the consummation
of the offering, provided that the 2.5% will be reduced to 0.1% with respect to up to $15,000,000 of the gross proceeds from investors
first introduced to the underwriters by the Company through its own efforts.
Upon the closing of the Offering,
the Company will issue to I-Bankers (a five year) warrant to purchase a number of Common Shares equal to 8.0% of the Common Shares
issued in the Offering. The exercise price of such warrant will be 120% of the offering price of the Company’s common shares
in the Offering. In addition, I-Bankers shall be issued 80,000 shares of common stock (or 92,000 shares if I-Bankers’ overallotment
option is exercised in full) upon the consummation of this offering.
The Company will also reimburse
I-Bankers for the full amount of its accountable out-of-pocket expenses actually incurred to such date (which shall include, but
shall not be limited to, all fees and disbursements of the I-Bankers’ counsel, travel, lodging and other “road show”
expenses, mailing, printing and reproduction expenses, and any expenses incurred by I-Bankers in conducting its due diligence,
including background checks of the Company’s officers and directors), up to an aggregate amount of $150,000, less the amounts
previously paid and any amounts previously paid to I-Bankers in reimbursement for such expenses.
Note 7 — Subsequent Events
In the Proposed Public Offering,
the Company will offer for sale 10,000,000 Units, (or 11,500,000 Units if I-Bankers’ over-allotment option is exercised
in full) at a purchase price of $10.00 per Unit. Each Unit will consist of one common share, one redeemable warrant (“Public
Warrant”) and one right. Each whole warrant entitles the holder to purchase one common share at an exercise price of $11.50
and is redeemable at a price of $0.01 per warrant at any time during the exercise period, upon a minimum of 30 days’ prior
written notice of redemption, if, and only if, the last sales price of our shares of common stock equals or exceeds $18.00 per
share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a
30 trading day period ending three business days before we send the notice of redemption; and if, and only if, there is a current
registration statement in effect with respect to the shares of common stock underlying such warrants. Each right entitles the
holder thereof to receive one-tenth (1/10) of one share of common stock upon consummation of our initial business combination.
We have granted the underwriters a 30-day option to purchase up to an additional 1,500,000 units to cover over-allotments, if
any.
In April 2019, Mr. Shih-Chung Chou
(the “Sponsor”) entered into a
private placement warrants purchase agreement,
pursuant to which the Sponsor has committed to purchase from us an aggregate of 5,000,000 warrants, or “private warrants,”
at $1.00 per warrant (for a total purchase price of $5,000,000) in a private placement that will close simultaneously with the
closing of this offering. Our Sponsor has also agreed that if the over-allotment option is exercised by the underwriters in full
or in part, it will purchase from us additional private warrants (up to a maximum of 375,000 private warrants) at a price of $1.00
per private warrant in an amount that is necessary to maintain in the trust account at $10.00 per unit sold to the public in this
offering. The private warrants are identical to the warrants underlying the units sold in this offering, subject to certain limited
exceptions as described in this prospectus. In addition, our Sponsor has also agreed not to transfer, assign or sell any of the
private warrants or shares of common stock issuable upon exercise of the private warrants (except in connection with the same
limited exceptions that the founders’ shares may be transferred as described above), until after the completion of our initial
business combination.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Proficient Alpha Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying
balance sheet of Proficient Alpha Acquisition Corp. (the “Company”) as of September 30, 2018, and the related statements
of operations, stockholders’ equity, and cash flows for the period from July 27, 2018 (inception) through September 30, 2018,
and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of September 30, 2018, and the results of its
operations and its cash flows for July 27, 2018 (inception) through September 30, 2018, in conformity with accounting principles
generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable
basis for our opinion.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company's auditor
since 2018.
Houston, Texas
February 7, 2019
PROFICIENT ALPHA ACQUISITION CORP.
|
Condensed Balance Sheet
|
As of September 30, 2018
|
|
|
|
|
|
|
September 30, 2018
|
|
|
|
Assets
|
|
|
|
|
|
Cash
|
|
$ 302,362
|
Total current assets
|
|
302,362
|
|
|
|
Total assets
|
|
$ 302,362
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
Accrued expenses
|
|
$ 19,333
|
Accrued expenses - related parties
|
|
21,323
|
Total current liabilities
|
|
40,656
|
|
|
|
Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued and outstanding as of September 30, 2018
|
|
-
|
Common stock, $.001 par value, 150,000,000 shares authorized, 2,875,000 shares issued and outstanding as of September
30, 2018
|
|
2,875
|
Additional paid-in capital
|
|
554,347
|
Subscription receivable
|
|
(182,500)
|
Accumulated deficits
|
|
(113,016)
|
Total Stockholders’ Equity
|
|
261,706
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$ 302,362
|
|
|
|
The accompanying notes are an integral part of these financial statements
|
|
|
|
PROFICIENT ALPHA ACQUISITION
CORP.
|
Condensed Statement of Operations
|
For the Period from July 27,
2018 (Inception) through September 30, 2018
|
|
|
|
|
|
|
For
the Period from
July 27, 2018 (Inception) through September 30, 2018
|
|
|
|
Operating
expense
|
|
|
|
|
Offering
cost
|
|
$
|
40,000
|
|
Officers
compensation
|
|
|
47,778
|
|
Legal fees
|
|
|
25,000
|
|
General
and administrative expenses
|
|
|
238
|
|
Total
operating expense
|
|
|
113,016
|
|
|
|
|
|
|
Net
(loss)
|
|
|
(113,016
|
)
|
|
|
|
|
|
Net (loss) per share:
|
|
|
|
|
Basic
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
Basic
|
|
|
2,500,000
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these financial statements
|
PROFICIENT ALPHA ACQUISITION CORP.
|
Condensed Statement of Cash Flows
|
For the Period from July 27, 2018 (Inception) through September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period from
July 27, 2018 (Inception) through September 30, 2018
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Net (loss)
|
|
|
|
$ (113,016)
|
Adjustments to reconcile net income to net cash
|
|
|
|
|
provided by (used in) operating activities:
|
|
|
|
|
Common stock issued for service
|
|
|
|
2,222
|
Changes in operating assets and liabilities:
|
|
|
|
|
Accrued expenses
|
|
|
|
19,333
|
Accrued expenses - related parties
|
|
|
|
21,323
|
Net cash provided by operating activities
|
|
|
|
(70,138)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Common stock issued for cash
|
|
|
|
372,500
|
Net cash used in financing activities
|
|
|
|
372,500
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
|
302,362
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the year
|
|
|
|
-
|
|
|
|
|
|
Cash and cash equivalents at the end of the year
|
|
|
|
$ 302,362
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
Cash paid for interest
|
|
|
|
$ -
|
Cash paid for income taxes
|
|
|
|
$ -
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
|
PROFICIENT ALPHA ACQUISITION CORP.
|
Condensed Statement of Changes in Stockholders' Equity
|
For the Period from July 27, 2018 (Inception) through September 30, 2018
|
|
|
|
|
Additional
|
|
|
|
|
Common Stock
|
Paid-In
|
Subscription
|
Accumulated
|
|
|
Shares
|
Amount
|
Capital
|
Receivable
|
Deficits
|
Total
|
Balance, July 27, 2018 (Inception)
|
-
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
|
|
|
|
|
|
|
Common stock issued for cash
|
2,775,000
|
2,775
|
552,225
|
(182,500)
|
-
|
372,500
|
|
|
|
|
|
|
|
Common stock issued for services
|
100,000
|
100
|
2,122
|
-
|
-
|
2,222
|
|
|
|
|
|
|
|
Net (loss)
|
-
|
-
|
|
|
(113,016)
|
(113,016)
|
|
|
|
|
|
|
|
Balance, September 30, 2018
|
2,875,000
|
$ 2,875
|
$ 554,347
|
$ (182,500)
|
$ (113,016)
|
$ 261,706
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
|
PROFICIENT ALPHA ACQUISITION CORP.
Notes to Condensed Financial Statements
Note 1 — Organization and Business
Operations
Proficient Alpha Acquisition Corporation
(the “Company”) is a newly incorporated blank check company incorporated on July 27, 2018, under the laws of the State
of Nevada for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization
or other similar business combination with one or more businesses or entities (a “Business Combination”). The Company
has not selected any potential business combination target, and the Company has not, nor has anyone on its behalf, initiated any
substantive discussions, directly or indirectly, with any potential business combination target with respect to an initial business
combination with the Company. While the Company may, subject to certain limitations, pursue a business combination target with
operations or prospects in the financial services sector in China, including Hong Kong, Macau and mainland China.
As of September 30, 2018, the Company
had not yet commenced any operations. All activity through September 30, 2018 relates to the Company’s formation and the
Proposed Public Offering (as defined below). The Company has selected September 30 as its fiscal year end.
Going Concern Consideration
As of September 30, 2018, the Company
had $302,362 in cash, accumulated deficit of $113,016, and the cash flow used in operation during the period ended September 30,
2018 was $70,138. The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition
plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management plans
to address this uncertainty through a Proposed Offering as discussed in Note 7. There is no assurance that the Company’s
plans to raise capital or to consummate a Business Combination will be successful within the Combination Period. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 — Significant Accounting
Policies
Basis of Presentation
The accompanying financial statements
are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the rules and regulations of US Securities and Exchange Commission (“SEC”).
Emerging Growth Company Status
The Company is 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 of 2012, (the “JOBS Act”), and it may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Net Loss per Common Share
The Company complies with accounting
and disclosure requirements ASC Topic 260, “Earnings per Share.” Net loss per common share is computed by dividing
net loss by the weighted average number of common shares issued and outstanding for the period, excluding common shares subject
to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 375,000 common shares that are subject to
forfeiture by the sponsor if the over-allotment option is not exercised by the underwriters. At September 30, 2018, the Company
did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common shares
and then share in the earnings (loss) of the Company. As a result, diluted loss per common share is the same as basic loss per
common share for the period.
|
|
|
|
|
|
For the period from July 27, 2018 (Inception) to September 30, 2018
|
|
|
|
|
|
Numerator:
|
|
$
|
(113,016
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Denominator for basic earnings per share - Weighted-average common shares issued and outstanding during the period
|
|
|
2,500,000
|
|
Denominator for diluted earnings per share
|
|
|
2,500,000
|
|
Basic loss per share
|
|
$
|
(0.05
|
)
|
Diluted loss per share
|
|
$
|
(0.05
|
)
|
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Stock based compensation
The Company recognizes compensation
costs to employees under FASB Accounting Standards Codification 718 “Compensation - Stock Compensation” (“ASC
718”). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based
on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required
to provide services. Share based compensation arrangements include stock options and warrants. As such, compensation cost is measured
on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods
of the option grant.
On July 27, 2018, the inception date,
the Company adopted ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently
only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services.
Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.
Income Taxes
The Company accounts for income taxes
under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for
both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance
to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant
uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated on
July 27, 2018, the evaluation was performed for upcoming 2018 tax year which will be the only period subject to examination. The
Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments
that would result in a material changes to its financial position. The Company’s policy for recording interest and penalties
associated with audits is to record such items as a component of income tax expense.
The Company’s deferred tax asset
at September 30, 2018 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating
to approximately $24,000, less a valuation allowance in the amount of approximately $24,000. Because of the Company’s lack
of earnings history, the deferred tax asset has been fully offset by a valuation allowance in the year ended September 30, 2018.
Related
parties
The Company follows subtopic 850-10
of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related
parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent
the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted
for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts
that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f.
other parties with which the Company may deal if one party controls or can significantly influence the management or operating
policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate
interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties
or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that
one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements
shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and
other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation
of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature
of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts
were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to
an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each
of the periods for which income statements are presented and the effects of any change in the method of establishing the terms
from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
Recent Accounting Pronouncements
Management does not believe that any
recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
financial statements.
Note 3 — Related Party Transactions
Accrued expenses - related parties
As of September 30, 2018, the Company
had $21,323 due to related parties in connection with the accrued compensation to the Company’s management and directors.
Pursuant to the executed Offer Letters, the Company agreed to pay the Company’s Chief Executive Officer and Chief Financial
Officer, respectively, $5,000 in cash per month and 50,000 founder shares starting for August 1, 2018, and agreed to pay the Company’s
Director $2,000 in cash per month starting from August 1, 2018, plus 100,000 shares of common stock, which will be issued within
10 days after the completion date of initial acquisition. The fair value of this stock issuance was determined by the fair value
of the Company’s Common Stock on the grant date, at a price of $0.20 per share. Accordingly, the Company calculated
the stock based compensation of $40,000 at its fair value and amortized pro rata within 18 months. Total 100,000 founder shares
to Chief Executive Officer and Chief Financial Officer were issued and the 100,000 shares to Director are not issued within 10
days after the completion date of initial acquisition. For the period ended September 30, 2018, the Company recognized stock based
compensation of $2,222 to the statement of operations. The unrecognized stock based compensation was $17,778 as of September 30,
2018.
Note 4 — Accrued Expenses
As of September 30, 2018, the Company
had accrued expenses of $19,333 in connection with the accrued compensation to the Company’s independent directors. Pursuant
to the executed Offer Letters, the Company agreed to pay the Company’s Independent Directors, respectively, $2,000 in cash
per month starting from August 1, 2018, plus 25,000 - 50,000 shares of common stock, which will be issued within 10 days after
the completion date of initial acquisition. The fair value of this stock issuance was determined by the fair value of the Company’s
Common Stock on the grant date, at a price of $0.20 per share. Accordingly, the Company calculated the stock based compensation
of $30,000 at its fair value and amortized pro rata within 18 months. Total 150,000 shares of common stock to Independent Directors
are not issued within 10 days after the completion date of initial acquisition and the monthly payment of $2,000 to each Independent
Director was not made as of September 30, 2018. Accordingly, the Company recorded $19,333 as accrued expenses.
Note 5 — Stockholder’s
Equity
Preferred Shares
- The
Company is authorized to issue a total of 1,000,000 preferred shares of a par value of $0.001 each. As of September 30, 2018, none
was issued and outstanding.
Common Shares
- The
Company is authorized to issue a total of 150,000,000 common shares of a par value of $0.001 each. As of September 30, 2018, 2,875,000
shares were issued and outstanding, of which 375,000 shares held by the sponsor are subject to forfeiture to the extent that the
underwriters’ over-allotment option is not exercised in full or in part, so that the Company’s Founders will own 20%
of the issued and outstanding shares after the Proposed Public Offering.
Founder Shares
On September 30, 2018, 2,875,000
shares of the Company were issued to the stockholders prior to the date of the prospectus (“Founders”) for an aggregate
amount of $575,000, including cash of $555,000 and $20,000 prepaid expenses to the management of the Company. The 2,875,000 Founder
Shares include an aggregate of up 375,000 shares held by the sponsor that are subject to forfeiture to the extent that the underwriters’
over-allotment is not exercised in full or in part, so that the Founders will own 20% of the Company’s issued and outstanding
shares after the Proposed Public Offering. As of September 30, 2018, the Company received cash proceeds of $372,500 from 1,862,500
founder shares, and recorded subscription receivable of $182,500, of which $166,250 was received in October 2018.
The Founders have agreed not to
transfer, assign or sell any of the Founder Shares (except to certain permitted transferees) until one year after the date of
the consummation of the Business Combination, or earlier, in either case, if, subsequent to the Business Combination, the Company
consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having
the right to exchange their common shares for cash, securities or other property.
Note 6 — Underwriter Agreement
The Company has engaged I-Bankers Securities,
Inc. (“I-Bankers”) as to act as underwriter (the “Underwriter”) on the proposed public offering of the
Company’s ordinary shares (“Shares”), par value $0.001 per share, of the Company, and a simultaneous listing
on NYSE or NASDAQ Capital Market(the “Offering”) with a proposed public offering of $100 million. This will be an Initial
Public offering for the purpose of merging with or acquiring a company, otherwise known as a Special Purpose Acquisition Company
or SPAC. During the term of the Agreement, I-Bankers will provide the Company with financial services and assistance with respect
to the Offering pursuant to the Registration Statement for the agreed upon number of the Company’s newly issued Shares, plus
an over-allotment option equal to 15% of the number of shares being offered (exercisable for a period of up to thirty (30) days
from the date the Offering is priced). The Company will pay I-Bankers a transaction fee equal to 2.5% of the gross proceeds raised
in the offering for such services upon the consummation of the offering, provided that the 2.5% will be reduced to 0.1% with respect
to up to $15,000,000 of the gross proceeds from investors first introduced to the underwriters by the Company through its own efforts.
Upon the closing of the Offering, the Company
will issue to I-Bankers (a five year) warrant to purchase a number of Common Shares equal to 8.0% of the Common Shares issued in
the Offering. The exercise price of such warrant will be 120% of the offering price of the Company’s common shares in the
Offering. In addition, I-Bankers shall be issued 80,000 shares of common stock (or 92,000 shares if I-Bankers’ overallotment
option is exercised in full) upon the consummation of this offering.
The Company will also reimburse I-Bankers for
up to $35,000 of its reasonable costs and expenses incurred by it (including reasonable fees and disbursements of counsel) in connection
with the performance of its services.
Note 7 — Subsequent Events
In the Proposed Public Offering, the Company will offer for sale
10,000,000 Units, (or 11,500,000 Units if I-Bankers’ over-allotment option is exercised in full) at a purchase price of $10.00
per Unit. Each Unit will consist of one common share and one redeemable warrant (“Public Warrant”). Each whole redeemable
warrant entitles the holder to purchase one common share at an exercise price of $11.50.
10,000,000 Units
Proficient Alpha Acquisition Corp.
PROSPECTUS
May 29, 2019
Sole Book-Running Manager
I-Bankers Securities, Inc.
Co-Manage
r
EarlyBirdCapital, Inc.
Until June 23, 2019 (25 days after
the date of this prospectus), all dealers that buy, sell or trade our common stock, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
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