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Item1A.
Risk Factors.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on us and our operations:
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| we are a blank check company and an early stage company with no revenue or basis to evaluate our ability to select a suitable business target; |
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| we may not be able to complete the DePalma Business Combination or any other business combination in the Combination Period; |
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| our expectations around the performance of a prospective target business or businesses, such as DePalma, may not be realized; |
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| we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination, including the DePalma Business Combination; |
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| our officers and directors may have difficulties allocating their time between the Company and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination; |
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| we may not be able to obtain additional financing to complete our initial business combination, including the DePalma Business Combination, or reduce the number of stockholders requesting redemption; |
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| we may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time; |
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| our stockholders may not be given the opportunity to choose the initial business target or to vote on the initial business combination; |
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| trust account funds may not be protected against third party claims or bankruptcy; |
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| an active market for our public securities may not develop and our stockholders will have limited liquidity and trading; |
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| our financial performance following a business combination with an entity may be negatively affected by their lack of an established record of revenue, cash flows and experienced management; |
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| there may be more competition to find an attractive target for an initial business combination, which could increase the costs associated with completing our initial business combination and may result in our inability to find a suitable target; |
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| changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination; |
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| we may engage one or more of our underwriters or one of their respective affiliates to provide additional services to us after the initial public offering, which may include acting as a financial advisor in connection with an initial business combination or as placement agent in connection with a related financing transaction. Our underwriters are entitled to receive deferred underwriting commissions that will be released from the trust account only upon a completion of an initial business combination. These financial incentives may cause them to have potential conflicts of interest in rendering any such additional services to us after the initial public offering, including, for example, in connection with the sourcing and consummation of an initial business combination; |
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| if we do not consummate the DePalma Business Combination, we may attempt to complete our initial business combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all; |
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| our warrants are accounted for as derivative liabilities and are recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock or may make it more difficult for us to consummate an initial business combination; |
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| since our initial stockholders will lose their entire investment in us if our initial business combination is not completed (other than with respect to any public shares they may acquire during or after the initial public offering), and because our sponsor, officers and directors may profit substantially even under circumstances in which our public stockholders would experience losses in connection with their investment, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination; |
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| the value of the founder shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our common stock at such time is substantially less than $1 |
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| resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business combination within the Combination Period, our public stockholders may receive only approximately $1 |
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| we may not be able to complete an initial business combination with certain potential target companies if a proposed transaction with the target company may be subject to review or approval by regulatory authorities pursuant to certain U.S. or foreign laws or regulations, including the Committee on Foreign Investment in the United States; |
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| recent |
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| investments in entities that have undergone restructurings are subject to additional risks; |
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| a 1% U.S. federal excise tax may be imposed on us in connection with our redemptions of shares in connection with a business combination or other stockholder vote pursuant to which stockholders would have a right to submit their shares for redemption; |
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| there is substantial doubt about our ability to continue as a going concern; |
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| adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations, or our prospects |
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| we may seek to further extend the Combination Period, which could have a material adverse effect on the amount held in our trust account and other adverse effects on our Company; |
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| military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of potential target companies, which could make it more difficult for us to consummate an initial business combination; |
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| market conditions, economic uncertainty or downturns could adversely affect our business, financial condition, operating results and our ability to consummate a business combination; |
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| cyber incidents or attacks directed at us or third parties could result in information theft, data corruption, operational disruption and/or financial loss; |
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| changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations; and |
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| if we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination. |
We or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of potential target chave received notice from Nasdaq stating that the Companies, which could make it more difficult for us to consummate an initial business y is not in combination.
Military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of potentpliance with Listing Rule IM-5101-2, which requires that a special target companies, and to other company or industry-specific, national, regional or internatpurpose acquisitional economic disruptions and economic uncertainty, any of which could make it more difficult for us to identify a business combination target and consummate an initial company complete one or more business combination on acceptable commercial terms, or at all.
Market conditions, economic uncertainty or downturns could adversely as within 36 months of the effect our busiiveness, financial condition, operating of the results and our ability to consummate a business combination.
In recent years, the United Stgistration states and other markets have experienced cyclical or episodic downturns, and worldwide economicment filed in conditions remain uncertain, including as a result of supply chain disruptions, the Ukraine-Russia conflict, conflict in the Middle East,nection with its instability in the U.S. and global banking systems, rising fuel prices, increasing interest rates or foreign exchange rates and high inflation and the possibility of a recessionitial public offering. A significant downturn in economic conditions may make it more diffics a result for us to consummate a business combination.
We cannot predict the timing, strength, or duration of any future economic slowdown or any subsequent recovery generally, or in any industry. If the conditions in the general econom, our securities will be delisted and the liquidity and the markets in which wtrading price operate worsen from present levels, f our business, financial condition, operating results and our ability to consummate a usinesssecurities combination could be adversely affected.
We may seek to further extend the Combination Period, which could have a material adverse effect on the amount held in our trust account and other adverse effects on our Company.
We may seek to further extend the Combination Period. Such an extension would require the approval of our public stockholders , who will be provided the opportunity to redeem all or a porOn October 1, 2024, we received a notice from the Listing Qualification their public shares. Such redemptions will likely have a material adverse effect on the amount held in our trust account, our capitalization, principal stockholders and other impacts on our Company or management team, such as our ability to maintain our listing on Nasdaq.
If we seek to further extends Department of The Nasdaq Stock Market LLC (Nasdaq) stating that the Combination Period, such extension would not be pany was not in compliance with Nasdaq rules, and unless Nasdaq were to grant us an exemptionListing Rule IM-5101-2 (the Rule), will likely lead Nasdaq to suspend trading in or delist our securities.
Our securities are listed hich requires that a special purpose acquisition the Nasdaq Capital Market. Nasdaq IM-5101-2 requires that a company (SPAC) complete one or more business combinations within 36 months of the effectiveness of its initial public offeringthe registration statement, which, in our case, would be September 30, 2024 (the Nasdaq Deadline). If we were to seek to further extend the Combination Period beyond October 5, 2024, our Combination Period would extend beyond the Nasdaq Deadline. Consequently, further extension of our Combination Period does not comply with Nasdaq rules. There is a risk that, even if an extension were approved by our stockholders, trading in our securities may be suspended and we may be subject to delisting by Nasdaq. We cannot assure you that (i) Nasdaq will not delist our securities in the event such an extension were approved and we do not filed in connection with its initial public offering. Since the Companys registration statement became effective on September 30, 2021, it was required to complete one or more an initial business combinations by the Nasdaq Deadline, (ii) we will bno later than September 30, 2024. The Rule able to obtain a hearing with Nasdaqs Hearings Panellso provides that failure to appeal the delisting determination, or (iii) our securities comply with this requirement will not be suspended pendingresult in the Hearing Panels decision.
If Nasdaq delists any of our securities from trading and we are unable to list our securities on another national securities exchange, we expect our securities could potentially be quoted on an over-the-countListing Qualifications Department issuing a Staff Delisting Determination under market. However, if this were to occur, we could face significant material adverse consequences.
Cyber incidents or attacks directed at us or third parties couldRule 5810 to delist the Companys securities.
The Company timely result in information theft, data corruption, operational disruptionquested a hearing before and/or financial loss.
We independ on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with whom we may deal. Sophisticated and delient Hearings Panel (the Panel) and the hearing was held on Novemberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or 19, 2024. On December 13, 2024, the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early-stage company without significant investments in data security protection, we may not be suCompany received notice from the Nasdaq Officiently protected against such occurrences. We also lack sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. Any of e of General Counsel that the Panel had granted these occurrences, or a combination of them, could have material adverse consequences Companys request to continue its listing on our business and lead to financial loss.
Changes in laws or regulations, or a failure to comply with any laws and regulatNasdaq through March 31, 2025. The Panels decision (Decisions, may adversely affect our business, including our ability) was subject to negotiate and complete our initial businesscertain combinandition, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to s, including that the Company will have comply with certain SEC and oeted ther legal requirements and numerous complex tax laws. DePalma Business Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations anbination on or before March 31, 2025 and their interpretation and application may also change from time to time and those changes couldat the combined company will have a material adverse effect on our business, investments and results of operations. In addition, a failure to demonstrated comply with applicable laws or regulations, as interpreted andiance with all applied, could have a material adverse effect on our business, including our ability to negotiate and complete oucable requirements for initial business combination, and results of operationslisting on Nasdaq.
On January 24April 2, 20245, the SEC adopted the 2024 SPAC Rules requiring, among other matters, (i) additional disclosures relating to SPAC business combination transactions; (ii) additional disclosures relating to dilution and to conflicts of interest involving sponsors and their affiliates in both SPAC initial public offerings and business combination transactions; (iii) additional disclosures regarding projections included in SEC filings in connection with proposed business combinCompany received a further notice from the Panel, station transactions; and (iv) the requirement that bothng that, due to the SPAC and its target cCompany be co-registrants for business combination registrs failure to sation statements
In addition,sfy the terms of the SECs adopting release provided guidance describing circumstances in which a SPAC could become subject to regulation under the Investment Company ActPanels Decision, including its duration, asset composition, business purpose, and the activities of the SPAC and its management team in furtherance of such goals.
the requirement that the Complianceany with the 2024 SPAC Rules and related guidance may (i) increase the costs of anll have completed the time needed to negotiate and complete an initial bDePalma Business cCombination and (ii) constrain our ability to complete an initial business combination.
If we are deemby March 31, 2025, the Panel has determined to be an investment company under delist the Investment Company Act, we may be required to institute burdensome compliance requirementss securities from Nasdaq, and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
The SECs adopting releaNasdaq will suspend trading in those with respect to the 2024 SPAC Rules provided guidance relating tosecurities effective at the potential status open of SPACs as investment companies subject to regulation under thebusiness on April 4, 2025. Investment Company Act and the regula connections thereunder. Whe with ther a SPAC is an investment company is de delisting and suspendent on specific facts and circumstancesion, Nasdaq has and we can give no assurancedvised that a claimit will not be made that we have been operating as an unregistered investment company
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, includcomplete the delisting by filing (i) restrictions on the nature of our investments; and (ii) restrica Notifications on the issuance of securities, each of which may make it difficult for us to complete our initial business combination.
In addition, we may have imposed upon us burdensome requirements, including: (i) regi of Removal from Listing and/or Registration as an investment company; (ii) adoption of a specific form of corporate structure; and (iii) reporting, record keeping, voting, proxy and disclosure requirements and ounder Section 12(b) of the Exchange Act on Form 25 with ther rules and regulations.
In ord SEC after not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trathe applicable Nasdaq review and appeal periods have lapsed. Notwithstanding in securities and that our activities do not include invethe delisting, reinvesting, owning, holding or trading investment of the Companys securities constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We are mindfulfrom Nasdaq, it remains the intention of the SECs investment cCompany definition and guidance and intend to coto complete an initial bthe DePalma Business cCombination with an operating business, and not with an investment company, or to acquire minority interests in other businesses exceedingas described in the permitted threshold.
We do not believe that our business activities will subject us to the Investment Company Act. To this end, the proceeds held in the trust account were initially invested only in U.S. governDePalma Registration Statement treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in diras soon as practicable. In connect U.S. government treasury obligations;ion the holding of these assets in this form is intended to be temporary rewith, the Company, New MAC and for the sole purpose of facilitating the intended business combination. To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, which risk increases the longer that we hold investments in DePalma Companies have applied to have the trust account, in November 2023, we instructcombined Continental, as trustee of the trust account, to liquidate the investments held icompanys securities listed on the trust account and instead to hold the funds inNasdaq following the trust account in cash or in an interest bearing demand deposit account at a bank.
Pursuant toconsummation of the Investment Management Trust Agreement, dated September 30, 2021, by and between the Company and ContDePalma Businental, as trustee,ss Continental is not permitted to invest in securitiesmbination.
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If or assets other than as described above. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and sellNasdaq delists our securities from trading businesses in the manner of a meron its exchant bank or private equity fund),ge and we intended to avoid being deemed an investment company within the meaning of the Investment Company Act. Our initial public offering was are not able to list our securities on anot intended for persons who were seeking a return on investments in governmenther national securities or investment securities. The trust account is intended solely as a temporary depository for funds pending the earliest to occur of: (i) theexchange, we expect our securities completion of our initial business combination; (ii) the redemptiuld be quoted on of any public shares properly submitted in connection with a stockholdan over-the-counter vote to amend our amended and restated certificate of incorporation (x) in a manner that would affect 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 Combination Pmarket. If this were to occur, we could face significant materiod; or (y) with respect to any other provision relating to the rights of holdal advers of shares of our Class A common stock or pre-initial business combination activity; or (iii) absent an initial business combie consequences, including:
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| appearing to be less attractive to potential target companies than an exchange listed SPAC; |
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| a limited availability of market quotations for our securities; |
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| reduced liquidity for our securities; |
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| a determination that our Class A common stock is a penny stock, which will require brokers trading in Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
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| a limited amount of news and analyst coverage; and |
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| a decreased ability to issue additional securities or obtain additional financing in the future. |
Ination within the Combination Period, addition, if our return of the funds held in the trust account to our public stockholders as part of our redemption of the public shares.
We are aware of litigation claiming that certain SPACs should be considered investment companies. Although we believe that these claims are without merit, we cannot guarantee that we will not be deemed to be an investment company and thsecurities are delisted from Nasdaq, offers and sales of our securities by us subject to the Investment Company Act. If we were deemed to may be subject to the Investment Company Act, compliance with these addstate securitionales regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete an initial business combination or may result in our liquidation. If we are unable to ion and additional complete our initial business combination, our public stockholders may receive only approximately $10.63 (as of December 31, 2023) per public share upon the liquidation of our trust account and our warrants will expire worthlessiance costs.
For additional of risks relating to our operations, other than the above, see the section titled Risk Factors contained in our (i) IPO Registration Statement, (ii) Annual Reports on Form 10-K for the fiscal years ended December 31, 2021 , December 31, 2022 and December 31, 20223, filed with the SEC on April 1, 2022 , April 3, 2023 and April 31, 20234, respectively, (iii) quarterly reports on Form 10-Q for the quarters ended September 30, 2021, March 31, 2022, June 30, 2022. September 30, 2022 and March 31, 2023, filed with the SEC on November 11, 2021, May 13, 2022, August 12, 2022, November 10, 2022 and May 15, 2023, respectively, and (vi) Definitive Proxy Statements on Schedule 14A filed the SEC on November 9, 2022, June 6, 2023 and , November 28, 2023 and August 26, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
For additional risk factors relating to DePalma and the DePalma Business Combination, see the DePalma Registration Statement once publicly filed with the SEC.
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